NEW YORK (Reuters) - A pickup in new drug approvals, the promise of faster regulatory decisions and more targeted medicines have quickened the pulse of the pharmaceutical industry as a big wave of patent expiries recedes.
Manufacturers are producing more targeted medicines, designed to treat very specific groups of patients, thanks to a new understanding of the genetic basis of many diseases - most notably cancer.
“It’s a very exciting time in terms of advances in science and technology,” Margaret Hamburg, head of the Food and Drug Administration (FDA), told the Reuters Health Summit this week.
“That’s reflected in products that are really targeted to the underlying mechanism of disease and really make a difference. That also means the development time and review time is getting shortened because when a drug works, our job is easy.”
After approvals last year from the FDA for 39 novel medicines - a record only beaten in 1996 - the healthy pace has continued into 2013.
So far this year, the U.S. watchdog has cleared nine so-called new molecular entities, compared with 11 at the same stage last year, while the European Medicines Agency (EMA) has recommended 13 new drugs against eight a year ago.
And drugmakers are getting further help from a new FDA program to accelerate life-saving therapies designated as a “breakthrough,” opening to door to earlier approval based on quicker studies, where clinical data is compelling.
The EMA also has a scheme to allow conditional approval based on good interim clinical trial results.
Hamburg said the system would make a “real difference” by increasing dialogue between industry and the FDA, adding that experience over the past two years showed the approval process was 3-5 years faster when there was early consultation.
This year’s haul of new drugs includes several that analysts see as major sellers, like Biogen Idec Inc’s (BIIB.O) multiple sclerosis pill Tecfidera; the first of a new class of diabetes drugs called Invokana from Johnson & Johnson (JNJ.N); and a new type of “armed antibody” from Roche Holding AG ROG.VX that delivers a toxin directly to breast cancer cells.
Still, more than a quarter of 2012’s new drugs were niche products for rare diseases - a far cry from the one-size-fits-all blockbusters that drugmakers traditionally banked on.
The shift means the value added to companies’ portfolios is not as great as the headline numbers might suggest.
Credit ratings agency Moody’s said last month that drugs in late-stage tests or just launched represented, on average, 18.5 percent of big drug firms’ existing sales, up from 14.9 percent two years ago, but still down from the 20.8 percent seen in 2005.
Getting a decent return on research dollars remains tough and the industry as a whole has been curbing its spending, with many companies nowadays opting to give cash back to shareholders that might have been spent in the lab.
“The output is not improving enough to warrant current investment - and that is a worry,” Lars Sorensen, the chief executive of Danish drugmaker Novo Nordisk (NOVOb.CO), told the summit meeting.
Fred Hassan, former CEO of drugmakers Schering-Plough Corp and Pharmacia, now a partner at private equity firm Warburg Pincus, said the industry still needed to do better, although the situation was “slowly turning.”
“Twelve years ago about half the value of the stock price was in the pipeline ... (today) it could be 20 percent,” he told Reuters.
Inevitably, not everything has gone smoothly when it comes to getting new medicines approved by regulators. There have been surprise setbacks this year for Novo Nordisk’s new insulin Tresiba in the United States and Pfizer Inc’s (PFE.N) new rheumatoid arthritis pill Xeljanz in Europe.
Overall, however, investors are showing renewed confidence in a sector that was long shunned - especially now the worst of patent expiries that have savaged sales of past top-sellers like Pfizer’s cholesterol drug Lipitor are in the rearview mirror.
As result, drug companies, on average, trade at nearly 15 times expected earnings, against a low point of under 10 in 2010, though still very far from the peak of more than 30 back in 1999. (link.reuters.com/hup77t)
The improvement in research productivity has not been universal. Some companies, such as AstraZeneca Plc (AZN.L), are still struggling to get new drugs out the door.
Those on a hot streak include Pfizer, Bristol-Myers Squibb Co (BMY.N), GSK (GSK.L), Novartis AG NOVN.VX, Roche and Eli Lilly & Co (LLY.N) - the last of which now has more drugs in late-stage testing than at any one time in its history.
Additional reporting by Bill Berkrot and Ransdell Pierson; Editing by Phil Berlowitz