Can ‘new science’ cure biopharma’s ‘compressive disruption’ problem?

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A new report by Accenture suggests that over the next three years, 54 percent of biopharma industry revenues could come from new advancements in medical science and technology – and combinations of the two.

New advancements in medical science and technology – as well as combinations of the two – will drive the majority of drug industry revenue over the next three years, according to a new research report.

The report, released Thursday by New York-based Accenture, found that 54 percent of biopharma growth through 2022 will be driven by what it called “new science.” The term means science that solves for an unmet medical need through a new mechanism, modality or technology – such as genomics or biomarkers – often requires a companion technology such as a diagnostic or device or could involve a standalone technology such as a mobile diagnostic. Companies adopting such approaches, the report said, are up to 50 percent more likely to obtain probability of technical and regulatory, or PTRS, meaning that “new science” is more likely to reach and receive regulatory approval.

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Recent years have seen significant growth in therapies that fit the description of the “new science” that Accenture describes. In November, the Food and Drug Administration approved Loxo Oncology – now Eli Lilly – and Bayer’s Vitrakvi (larotrectinib), a TRK inhibitor that targets NTRK fusions in the small percentage of cancers that harbor them. Because NTRK fusions are spread so thin across cancers, genomic testing is crucial to the drug. A similar story is that of Merck & Co.’s Keytruda (pembrolizumab), which was approved in 2017 for any solid tumor that carries the MSI-H or dMMR biomarker.

An even better example is Abilify MyCite, developed as a combination of Otsuka Pharmaceutical’s schizophrenia drug Abilify (aripiprazole) and sensor technology from Proteus Digital Health that allows for monitoring whether or not the pill was taken. That’s an important capability in mental illnesses like schizophrenia and bipolar disorder, where medical adherence is especially essential. The FDA approved the drug in November 2017.

The report states that “new science” is an antidote to what it calls “compressive disruption,” whereby a series of new innovations, macroeconomic factors and other changes combine to squeeze profits over a decade or more. While distinct from major, abrupt disruptions, it can be equally disruptive. Signs of compression include a decline in future value, gradual decline in the amount of time a treatment retains its leading position in the market and a struggle by the industry to compensate for lost revenue due to patent expiries.

For example, the 25 leading drug companies are expected to see a 50 percent decline in the three-year average pipeline replenishment ratio from the period of 2012 to 2022. Meanwhile, although the average amount of time that their treatments retain their leading positions has seen dips and rises, it has gone from 10.5 years in 2001 to slightly more than five years in 2017 – a 51 percent decline.

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The therapeutic areas where “new science” is likely to have the biggest effect on sales for the period of 2017-2022 compared with 2012-2017 include dermatology, respiratory diseases, cardiovascular disease and gastrointestinal disease. While it is not expected to decline in any therapeutic area, only a slight change is anticipated in central nervous system diseases, while no change is expected in genitourinary disease or oncology.

Among companies investing in “new science,” Roche leads the pack, scoring high in terms of percentage of revenue invested and investment in digital, data and genomics. This comes as no surprise, given major recent investments by the Swiss drugmaker such as its $2.4 billion purchase last year of the remainder of shares in Foundation Medicine that it didn’t own already and its $1.9 billion acquisition of Flatiron Health.

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