FirstWord Lists: Big Pharma/Biotech lead product dependency rates

A number of recent high-profile events make it an opportune time to reassess the level of dependency leveraged by the industry's largest players on their flagship product franchises.

Across the typical Big Pharma peer set, manufacturers on average derive around 23 percent of their prescription pharmaceutical sales (or 19 percent of their total revenues) from their biggest selling product.

Against this benchmark, AbbVie's dependency on the Humira franchise – which accounts for 67 percent of sales – is a notable outlier and presumed to be one of the key drivers for the company's recent (but ultimately abandoned) efforts to acquire Shire.

AbbVie has some time to make good its efforts to diversify, announcing on Friday that Q3 sales of Humira grew by a staggering 17.5 percent to reach $3.3 billion, with even more impressive year-on-year growth of 25.3 percent recorded in the US. To put this growth performance into context, and demonstrate the longevity of Humira, it was first launched 11 years ago.

Humira clearly shows that the growth trajectories of these flagship brands is equally important as the proportion of total sales (and profits) they account for. Sanofi's basal insulin Lantus is a case in point; accounting for 26 percent of the company's prescription pharmaceutical sales the product has not only become incrementally more important to Sanofi's topline over the past five years (in 2008 it accounted for around 10 percent of sales), but has consistently acted as one of the industry's biggest growing products in recent years.

Like AbbVie's Humira franchise, Lantus has also acted as significant growth driver for Sanofi in recent years, fuelled in part by aggressive price increases in the US. The firestorm that enveloped the French company this week was partially caused by the suggestion that this growth will come to an abrupt end in 2015 due to a more competitive pricing environment.

The third Big Pharma player with a higher than average flagship product dependency, GlaxoSmithKline, has also run into difficulties in recent months due to increased US pricing pressure on its asthma and COPD therapy Advair (which accounted for 27 percent of the company's Q3 pharma sales). This has occurred despite Advair's lack of dynamic growth in recent years, but is poised to have longer-term implications by potentially weakening GlaxoSmithKline's ability to launch follow-up products in the same market.

At the other end of the spectrum, Bristol-Myers Squibb and Pfizer command the smallest revenue leverage to their biggest selling franchises (both 11 percent, tied to Lyrica and Abilify, respectively), with both companies having borne the brunt of patent expirations in recent years.

Their respective paths ahead appear very different, however; while Bristol-Myers Squibb is poised to see its growth rate accelerate as a result of its leading position in cancer immunotherapy (where it runs the 'risk' of over-dependency on its core nivolumab franchise), the ability of Pfizer to build critical mass for a singular brand appears more challenging given both its much larger size and relative lack of attractive pipeline compounds. No wonder CEO Ian Read has frequently suggested spinning out the innovative pharma division to allow more value to be ascribed to emerging products.

Hoping to mirror Bristol-Myers Squibb's success in immuno-oncology is Merck & Co., partly due to a growing dependency on its Januvia diabetes franchise. Unlike a biologic such as Humira (or Johnson & Johnson's Remicade, which accounts for 21 percent of its pharma sales), Januvia not only faces a closer event horizon via typical generic competition stemming from patent expiration, but is positioned in a disease area where sales growth expectations may decline significantly as a result of increased pricing competition. Furthermore, Bernstein analyst Tim Anderson also recently cited pending data from Januvia's cardiovascular outcomes trial (TECOS study) as an additional overhang.

Across the large-cap biotech peer set, lead product dependency is unsurprisingly higher, at an average ratio of 38 percent. Gilead Sciences has built a rapid dependency on Sovaldi, which will be 'enhanced' by the recent approval of Harvoni, and given continued debate over the longevity of the hepatitis C market, will likely prompt increased discussion over the next 12 months as to where management will take the company next. Celgene's dependency on the Revlimid franchise, despite its best efforts to diversify the revenue base in recent years, remains on a par with AbbVie's relationship with Humira. Hence great interest in the highly promising Crohn's disease drug mongerson, which analysts have suggested could be a multi-billion dollar franchise (Physician Views Poll Results: Celgene's mongersen continues to impress in Crohn's – is it too good to be true?).

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