Pharma's alternatives. New CBI products. Uninsured opportunity.
VIP Clientele
First, some client stuff. We’ve released two awesome new products.
The CBI mobile app lets you see all of our research on your phone and quickly get all the relevant data about a company you’re trying to understand.
Our new Notes functionality let’s you drop comments anywhere on the CBI platform. This is a great way to keep important thoughts, updates on process, and institutional knowledge in one place instead of it existing in random parts of your email, slack channels, etc.
Finally, make sure you’re reading our Client Note. Last week we dove into patent application trends among the tech giants and looked into their areas of interest based on topics mentioned. You can do this yourself with our patent analytics tool.
Pharma’s new groove
The pharma industry is going through a bit of a shake up. It’s becoming harder and more expensive to find blockbuster drugs, dropping the IRR of R&D. There are quite a few analyses out there about this — personally, I liked this one the best. Sure there’s a lot of extrapolation, but we can debate the methodologies another time.
If the return on R&D investment is dropping, there are a few ways the pharma industry can react.
1) Keep increasing the price of drugs. According to a Leerink report, 61% of the growth in US sales for top 45 drugs over the past 3 years was attributed to price hikes.
2) Find ways to improve R&D. This can happen at the drug discovery stage, which is the bet that many of the AI + drug discovery companies are making. It can also happen by improving the clinical trial itself and reducing costs, which we talked about in our AI + clinical trials brief. Or finally, find areas where a drug can get to market faster (e.g. an FDA pathway to speed things up like using real world evidence or targeting specific diseases). We put together a periodic table of orphan diseases, where companies can get certain tax benefits and vouchers to speed up a later FDA review. See the full graphic/report here.
Many pharma companies are also trying to find more direct touch points with patients to better capture the real world evidence they need or reduce the cost of recruiting to clinical trials. Roche acquired Flatiron Health and released an app called FloodLight for multiple sclerosis patients, Novartis released FocalView to do clinical trials at home for ophthalmology patients, GSK partnered with 23andMe for access to their database, etc.
Private markets are becoming not only a place for outsourced R&D, but for outsourced patient data streams and touch points as well. We analyzed where pharma giants were looking in a new research brief.
3) Find new business lines. One example is de-commoditizing the commodity products that are no longer IP protected (e.g. what Hims is doing for finasteride and sildenafil). This can also be done by introducing complementary products that make the core product more valuable. Otsuka using Proteus’ digital pill to complement Abilify or other digital therapeutics companies are one example. New distribution avenues that are more direct-to-consumer like asynchronous telemedicine platforms (Nurx, Lemonaid, etc.) can capture more value from the product by going through less middlemen.
Or it can be totally unrelated products in areas like CPG or consumer products. We talked about this in the women’s health and feminine care products. Also, tons of companies in the microbiome space are straddling the line between science and product. For expert clients we analyzed patents and startups in the microbiome space.
All in all, if pharma’s existing core business model and advantages are slowly eroding, they’re going to have to figure out how to react. These are just some of the ways to think about it.
