FirstWord Lists: Who faces the biggest generic threat over the next five years?

Big Pharma’s exposure to the patent cliff may have peaked in 2011/12, but the impact of generic competition will continue to have a profound effect on the performance of some players over the next five years.

Looking at US-specific sales and pending expiries across small molecule products (as this is where loss of patent exclusivity for key brands has the most significant impact on sales erosion), AstraZeneca faces the highest level of exposure to generic competition among its Big Pharma peers by some margin.

A staggering 68 percent of the revenues generated by AstraZeneca in the US market during 2012 will be exposed to generic competition over the next five years, by virtue of loss of exclusivity for the Nexium, Symbicort, Crestor and Seroquel XR franchises. This outlook provides some justification for the company’s recent efforts to bolster its late stage pipeline via a series of bolt-on acquisitions.

Eli Lilly, Novartis and Bristol-Myers Squibb also face considerable exposure to sizeable patent expiries in the US market over the next five years (43 percent, 40 percent and 32 percent of 2012 sales, respectively). However, this must be considered in context of the company’s broader performance. For example, Novartis also generated 10.7 percent of its global 2012 sales from products launched since 2007 – the highest ratio among the peer set. Similarly, Bristol-Myers Squibb appears better positioned to counter its generic threat, having generated 8.5 percent of its 2012 sales from 'new' products.

By comparison, AstraZeneca faces a particularly challenging period; in addition to its high patent exposure over the next five years, the company generated just 1.6 percent of its 2012 sales from products launched since 2007 (also a contributory factor to its heightened generic threat).

At the other end of the spectrum, Johnson & Johnson and Sanofi appear to have moved well beyond the patent cliff, with just 6.7 percent and 8.5 percent of 2012 sales generated by products that are exposed to patent expiry in the US market over the next five years. Again, for Johnson & Johnson it is pertinent to note that 10.3 percent of its global 2012 sales were generated by products launched since 2007 – demonstrating a favourable mix of growth impetus from new launches and lack of mid-term expiry drag.

Illustrating the role that biologics play in terms of insulating topline performance from typical small molecule generic competition, just 9.4 percent of Roche’s 2012 US market sales were generated by products set to lose US market exclusivity over the next five years.

A significant number of biologics will lose US patent exclusivity over the next five years, including Roche’s three market leading cancer products Avastin, Herceptin and Rituxan. Whether biosimilar competitors will launch in the US market during this period remains conjecture at this point, as does an accurate idea as to how much market share originator products will lose as a result (it is fairly safe to assume not comparable to small molecule-levels of revenue erosion). However, the European Medicine Agency’s decision to recommend approval of the first biosimilar monoclonal antibody products in the region at the end of last week is clear demonstration that the landscape is changing.

Inclusion of biologic expiries changes the level of 'generic' exposure notably for a number of companies. For example, by this criteria Abbott generated 69 percent of its 2012 US sales from products set to expire over the next five years – by virtue of inclusion of Humira, which recorded US sales of 4.4 billion last year.

Similarly, with biologics included Sanofi has an exposure ratio of around 65 percent (due to the inclusion of its $5.1 billion insulin brand Lantus), while Roche has an exposure ratio of around 62 percent (due to the inclusion of Avastin, Herceptin and Remicade). Eli Lilly and Johnson & Johnson also see their exposure ratios increase notably as a result of including the likes of Humalog (Eli Lilly) and Remicade (J&J).

By looking at the difference in non-biologic/biologic exposure rates across the peer set it is Sanofi that will potentially be provided the most insulation from its biologic portfolio in the US market over the next five years – shaped by the scale of Lantus revenues and Sanofi’s very limited small molecule exposure. Unsurprisingly, Big Pharma’s most biologic-orientated player Roche will derive a similar level of biologic insulation from generic expiries over the next five years.

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