Home > Market Research > Biotechnology > Niche therapies drive future drugs growth and incentivize R&D investment over sales spending

For 25 years, blockbusters have played a key role in driving strong drug market growth. However, pressure on blockbusters is increasing, as both regulators and payers are shifting away from me-too drugs, which in the past have been fertile ground for blockbusters. Furthermore, blockbusters attract significant generic competition and may also stifle R&D innovation.

• Overview of the role that blockbusters have played in shaping and driving market growth
• Identification of which niche disease markets to target, to maximize value from the nichebuster model
• Examination of how a range of different drivers such as regulatory initiatives are incentivizing the nichebuster model
• Identification of trends underlying R&D collaborations or licensing deal activity in allowing Big Pharma to access novel technologies and markets

To successfully capitalize on the nichebuster model, drugs companies should focus on characterizing the target market, and use targeted marketing spend to access specialist physicians to drive clinical trial progression, approval and successful uptake

Dependence on blockbuster-generated revenue is set to fall from 2004-2010 as the industry turns to a nichebuster strategy, utilizing increased licensing activity, R&D collaborations and small-scale M&A deals to harness innovation and provide access to niche markets with a high unmet need

The shift into niche markets is helping drive a more personalized approach to therapy. Central to the development of the nichebuster model is the raised importance of personalized therapies, which is being driven by increased used of diagnostics. This trend is helping to clarify market segmentation and will boost the size of the total drug industry

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Table of Contents

CHAPTER 1 EXECUTIVE SUMMARY	4
Introduction	4
Scope and coverage of this report	4
Key findings from this report	5
CHAPTER 2 IS THE CHANGING R&D LANDSCAPE HASTENING THE END OF THE BLOCKBUSTER?	10
The R&D landscape is changing	10
Does a blockbuster-driven growth strategy stifle innovation?	11
Return on R&D investment plummets while drug sales soar	11
But is R&D productivity really falling?	12
Big Pharma's R&D spending clout can shape the industry's R&D focus	13
Why has the drug industry relied on blockbuster growth strategies?	14
Investors require double-digit growth	15
Blockbuster revenues are needed to help fund soaring drug development costs	16
The blockbuster growth model has weakened	18
Blockbuster-driven companies are open to significant risk	18
The market disincentivizes me-too development	19
Blockbusters face significant generic threat	19
Blockbusters have a tougher time when they reach the market	20
Is there a relationship between company size and R&D productivity?	20
There is still a role for blockbusters, but only as one of a drugs company's growth strategies	21
CHAPTER 3 MARKET CHARACTERISTICS AND THE REGULATORY ENVIRONMENT IMPACT THE SUCCESS OF THE NICHEBUSTER	23
Approval pathways are accelerated for innovative therapies	23
The US provides a fertile market for innovator drugs	24
The US regulatory environment supports innovation	24
Effective use of the 'Orphan Drug Act' drives nichebuster development	25
The oncology market is the archetypal niche market target	26
There are a range of strategies that are important in gaining a foothold in the selected niche market	27
CHAPTER 4 NICHEBUSTERS CHANGE DRUG MARKET DYNAMICS	28
Drugs companies turn to licensing to capture innovation and avoid stagnation	28
Dependence on blockbusters falls	28
Drugs companies turn to licensing, R&D collaborations and small-scale M&A to gain access to external sources of innovative technology and drugs	29
Dependence on licensing to drive future sales is set to rise	30
Targeting niche markets also encourages greater small-scale M&A activity	31
A study of recent collaborations shows that big Pharma is using early-stage R&D collaborations for capturing innovation	31
A greater number of drugs need to be approved to support revenue generation: the pressure on regulatory bodies grows	33
Nichebusters help to drive the emergence of targeted therapies	33
A burst of targets and the emergence of technologies that accelerate lead drug development are driving targeted therapies	34
Nichebuster development impacts the dominance of specific therapy areas	34
Targeted therapies have fewer side effects than traditional therapies	36
The use of diagnostics drives clearer market segmentation, which has a number of advantages	37
Personalized medicine requires greater health informatics	38
Business model evolution is required to capitalize on the nichebuster model	38
Different sales and marketing strategies are required for nichebusters: prioritizing cost-effective targeting of specialist physicians is needed for successful niche sales and marketing	38
The switch towards making marketing strategies customer-focused will help niche drug marketing	39
Fully-integrated pharma companies move into niche targeting: a case study on Baxter's strategy to penetrate the haemophilia market	39
Companies developing nichebusters also need to modify R&D strategies	40
Big Pharma is adopting a range of strategies to harness innovation to support the transition towards the nichebuster model	42
CHAPTER 5 APPENDIX : BIBLIOGRAPHY	44
References	44
Publications and online articles	44
Datamonitor resources	46
Conference information	46
List of Figures
Figure 1: The bias towards a blockbuster growth strategy contributes to the inverse correlation between R&D productivity and sales	11
Figure 2: The number of priority approvals has risen consistently over the last 40 years	13
Figure 3: Merck has gone from needing no blockbusters in 1991 to maintain double-digit sales growth to needing the equivalent of more than two by 2005	15
Figure 4: A variety of different studies have shown that the cost of R&D has increased over time	17
Figure 5: There is an inverse correlation between company size (defined by sales) and R&D productivity	21
Figure 6: Early-stage collaboration type split by therapeutic focus, October 2002 - September 2004	26
Figure 7: Dependence on blockbusters generated by top-5 drugs companies is set to fall significantly from 2004-2010	29
Figure 8: Discovery-stage licensing by both top-5 and top-55 companies is set to generate a greater percentage of forecast sales than later-stage licensing	30
Figure 9: Early-stage collaboration deals are focused on lead product and/or target identification and/or validation, October 2002-September 2004	32
Figure 10: Therapy areas dominated by targeted therapies are the leading market growth drivers	35
Figure 11: Immune disorders and inflammation dominate R&D focus, based on a snapshot of the current patent situation	36
Figure 12: Advate successfully becomes market leader in France	40
Figure 13: GSKs CEDD model is designed to mimic smaller-scale biotech companies	41
Figure 14: Roche has a strong 'Networked Pharma' model	42

For full details, please email jenniferc@cmsinfo.com

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