Pharma: A World Preview of 2017 and the Outlook for 2022

The Trump Effect, Brexit & tumultuous times

No preview of the pharma industry in 2017 could start without calling out the elephant in the room: Donald Trump. His shock victory in the US general election sent markets reeling at the end of ‘16, and pharma was no different. And when you blend in a shot of Brexit, a splash of meagre economic growth, and a dash of continuous pressure on drug prices, 2017 was always going to feel a slight strain.

It is this very tightening of pricing that is causing the industry to lose some of its, until now, formidable traction. While “The Donald” hasn’t officially started meddling with US drug costs, the danger still lingers, and this has led to some pharmaceuticals taking evasive action by publicly declaring limits to price rises.

These pressures are real, and have even led to the first downgrade being projected for worldwide drug sales in 2022, from $1.12trn being forecast in 2016, dropping to $1.06trn as of this year (2017).

Another prospective buffer to the pharma industry’s momentum is the $194bn worth of sales that are forecast to be at risk due to their patents expiring. The speed and level of degradation to the sales of some of pharma’s biologics behemoths – whom are also seeing market share losses to biosimilars – have still not been confirmed. The result: many foresee the arrival of pharma’s second “patent cliff”.

Are the big boys still playing together?

The current pharma climate means that the desire to restock pipelines to counteract the loss of sizeable franchises will carry on driving deal making. A large fall in the number of drug approvals in the US last year – from 56 in 2015 to 27 in 2016 – helps showcase the scarcity value of new medicines. While the drop in FDA activity likely highlights a return to more maintainable approval rates following the overabundance in 2015, if the decrease continues, large-scale mergers may no longer be mute points.

What is currently holding back the seriously big deals from being brokered? The common view is that the US tax reform plans must be released before pharma boardrooms are ready to negotiate amongst themselves. That said, pressure is already mounting on players like Sanofi, Pfizer and Gilead to stabilise their pipelines. The only way this industry consolidation can take place is if companies can identify the right prospects at the right price. And once these bumper deals start, we could see a serious shift at the top of pharma’s food chain.

Who will be the Pharma Don by 2022?

As it stands, there is no single behemoth that is set to reign supreme over the rest – in fact, the top three players are all likely to be neck and neck by 2022. Novartis is forecasted to return to pole position with sales of $49.8bn in 2022, closely followed by Pfizer with $49.7bn and Roche with $49.6bn. However, one major blip from either of these giants, and rankings could easily be flipped on their heads.

And the industry may well face other obstacles. In addition to clinical disappointments, matters like increasing R&D costs could take a toll: the average spend per NME was $4bn over the previous ten years. Also, pharma leaders are beginning to change from volume-driven strategies to value-driven in order to get market access. This is mainly due to the increasing buyer need for evidence of long-term value.

Don’t go to ground just yet

However, despite all these apparent setbacks, the long-term prognosis for the industry is generally healthy. The Evaluate World Preview for 2017 indicates that prescription drug sales are set to grow at a robust annual aggregate rate of 6.5%, and will, as already cited, hit a nonetheless impressive $1.06trn by 2022.

So, where is this growth originating from? Predominantly from some of pharma’s most sort-after therapies such as new cancer immunotherapies like Keytruda and Opdivo, while more risky initiatives like Biogen’s Alzheimer’s aducanumab will also play a part in this upturn. And what should be deduced here is that orphan drugs are predicted to comprise a third of this increase in sales – an increase that is still expected even in light of the aforementioned pricing pressures that are likely to afflict these very niche medicines.

To conclude, one key area that is often pigeonholed as an affliction to pharma is actually a booster: technology. While some believe it is overtaking pharma innovation itself, areas like remote monitoring & care, artificial intelligence and, of course, machine learning are all likely to have a highly positive impact on pharma companies. For these very changes shouldn’t be ignored but warmly welcomed by the industry – they are, potentially, the drivers that will enable it to reach these very growth goals.

Pharma: A World Preview of 2017 and the Outlook for 2022 was last modified: July 27th, 2017 by Admin