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Large drug firms narrow their therapeutic interests
World Report
Large drug firms narrow their therapeutic interests
The drug industry is in a perpetual state of restructuring. Buffeted by poor drug discovery productivity and expiring patents for blockbuster pills, firms have been merging with competitors and jettisoning underperforming divisions for decades. In the latest round of re-organisation, two companies decided to test out a novel variation on this theme: Novartis is trading its vaccine business for GlaxoSmithKline’s (GSK) oncology drugs. “There is robust logic behind this deal”, says Ulrik Schulze, senior partner at the Boston Consulting Group. Many companies have been too broad in their setup, he explains, and with the transaction both Novartis and GSK are moving to concentrate on what they already do well. “You need to have depth in what you do”, he says. “The science has just become too complicated for everyone to dig equally into each therapeutic area.” “I think you are going to see more of this type of deal in the future”, he adds. Novartis and GSK are not alone in streamlining their therapeutic interests. Bristol-Myers Squibb sold its stake in diabetes drugs to AstraZeneca for US$4 billion earlier this year. AstraZeneca is considering selling its neuroscience and infectious disease divisions. Even Pfizer, despite a recent failed $119 billion bid to acquire AstraZeneca, could break-up into separate generic and innovative product businesses in 2017. Several large drug developers have also recently divested their animal health and consumer health units, narrowing their focus on pharmaceuticals. Not everybody is sold on such restructuring, however. “Consolidations are creating oligopolies that encourage anti-competitive www.thelancet.com Vol 383 May 31, 2014
markets and high cancer drug prices”, says Hagop Kantarjian, of the MD Anderson Cancer Center, TX, USA. Kantarjian was the lead author on a commentary signed by more than 100 oncologists and published in Blood last year criticising the high cost of cancer drugs.
“‘The science has just become too complicated for everyone to dig equally into each therapeutic area.’” But the asset-swap solution is at least less destructive than the traditional restructuring options, which are often designed primarily to save costs. Mergers—and the associated job cuts and pipeline pruning decisions—tend to have devastating effects on research and development productivity. And when companies have simply shuttered their deprioritised divisions in the past, the accumulated expertise and experimental assets are lost to all. With the asset swap, Novartis will pay up to $16 billion for GSK’s approved cancer drugs, which earned $1·6 billion in sales in 2013, and for one phase 2 candidate (GSK is holding on to the bulk of its experimental oncology pipeline). The tyrosine kinase inhibitor pazopanib, BRAF inhibitor dabrafenib, and MEK inhibitor trametinib were key drivers behind the deal, with Novartis earmarking these drugs as future $1 billion per year drugs. Novartis, already one of the biggest oncology companies by sales, will also mix and match the new acquisitions with its legacy candidates as it hunts for better combination therapies, better efficacy, and better financial returns. With so many companies
working on oncology drugs, the deal will not affect the overall cancer drug development landscape. GSK will pay up to $7·1 billion for Novartis’s approved and experimental vaccines, with the exception of its influenza vaccines. Last year, the swapped vaccines earned around $900 million in sales. GSK noted in particular its excitement in acquiring meningococcal group B vaccine Bexsero. GAVI Alliance CEO Seth Berkley points to experimental respiratory syncytial virus vaccines, meningococcal vaccines, and group B streptococcus vaccines as the most important assets from the global health perspective. With this deal the number of large multinational firms who develop vaccines drops to four, however, prompting some hand wringing. “There certainly is a concern that less money is being spent on vaccine research and development”, says Berkley. Although academics and biotech firms do much of the basic discovery and early stage development work, reduced interest from deeppocketed pharmaceutical players could pose a problem when it comes to funding expensive later-stage development. “What really matters is what GSK’s vaccine spend is now going to be”, says Berkley. If their spend goes up, then the swap could have little effect on overall vaccine research and development. If GSK opts not to expand its research or merger and acquisition budget, however, the consequences could be dire. “I am not concerned about this particular transfer”, says Berkley. “But I would not want to see the number of large vaccine companies continue to contract.”
Wladimir Bulgar/Science Photo Library
Novartis traded its vaccine business for GlaxoSmithKline’s oncology portfolio in a recent multibillion dollar deal. Asher Mullard reports on this latest round of pharmaceutical restructuring.
Published Online May 29, 2014 http://dx.doi.org/10.1016/ S0140-6736(14)60798-4 For the commentary in Blood see Blood 2013; 121: 4439–42
Asher Mullard 1873
Large drug firms narrow their therapeutic interests
The drug industry is in a perpetual state of restructuring. Buffeted by poor drug discovery productivity and expiring patents for blockbuster pills, firms have been merging with competitors and jettisoning underperforming divisions for decades. In the latest round of re-organisation, two companies decided to test out a novel variation on this theme: Novartis is trading its vaccine business for GlaxoSmithKline’s (GSK) oncology drugs. “There is robust logic behind this deal”, says Ulrik Schulze, senior partner at the Boston Consulting Group. Many companies have been too broad in their setup, he explains, and with the transaction both Novartis and GSK are moving to concentrate on what they already do well. “You need to have depth in what you do”, he says. “The science has just become too complicated for everyone to dig equally into each therapeutic area.” “I think you are going to see more of this type of deal in the future”, he adds. Novartis and GSK are not alone in streamlining their therapeutic interests. Bristol-Myers Squibb sold its stake in diabetes drugs to AstraZeneca for US$4 billion earlier this year. AstraZeneca is considering selling its neuroscience and infectious disease divisions. Even Pfizer, despite a recent failed $119 billion bid to acquire AstraZeneca, could break-up into separate generic and innovative product businesses in 2017. Several large drug developers have also recently divested their animal health and consumer health units, narrowing their focus on pharmaceuticals. Not everybody is sold on such restructuring, however. “Consolidations are creating oligopolies that encourage anti-competitive www.thelancet.com Vol 383 May 31, 2014
markets and high cancer drug prices”, says Hagop Kantarjian, of the MD Anderson Cancer Center, TX, USA. Kantarjian was the lead author on a commentary signed by more than 100 oncologists and published in Blood last year criticising the high cost of cancer drugs.
“‘The science has just become too complicated for everyone to dig equally into each therapeutic area.’” But the asset-swap solution is at least less destructive than the traditional restructuring options, which are often designed primarily to save costs. Mergers—and the associated job cuts and pipeline pruning decisions—tend to have devastating effects on research and development productivity. And when companies have simply shuttered their deprioritised divisions in the past, the accumulated expertise and experimental assets are lost to all. With the asset swap, Novartis will pay up to $16 billion for GSK’s approved cancer drugs, which earned $1·6 billion in sales in 2013, and for one phase 2 candidate (GSK is holding on to the bulk of its experimental oncology pipeline). The tyrosine kinase inhibitor pazopanib, BRAF inhibitor dabrafenib, and MEK inhibitor trametinib were key drivers behind the deal, with Novartis earmarking these drugs as future $1 billion per year drugs. Novartis, already one of the biggest oncology companies by sales, will also mix and match the new acquisitions with its legacy candidates as it hunts for better combination therapies, better efficacy, and better financial returns. With so many companies
working on oncology drugs, the deal will not affect the overall cancer drug development landscape. GSK will pay up to $7·1 billion for Novartis’s approved and experimental vaccines, with the exception of its influenza vaccines. Last year, the swapped vaccines earned around $900 million in sales. GSK noted in particular its excitement in acquiring meningococcal group B vaccine Bexsero. GAVI Alliance CEO Seth Berkley points to experimental respiratory syncytial virus vaccines, meningococcal vaccines, and group B streptococcus vaccines as the most important assets from the global health perspective. With this deal the number of large multinational firms who develop vaccines drops to four, however, prompting some hand wringing. “There certainly is a concern that less money is being spent on vaccine research and development”, says Berkley. Although academics and biotech firms do much of the basic discovery and early stage development work, reduced interest from deeppocketed pharmaceutical players could pose a problem when it comes to funding expensive later-stage development. “What really matters is what GSK’s vaccine spend is now going to be”, says Berkley. If their spend goes up, then the swap could have little effect on overall vaccine research and development. If GSK opts not to expand its research or merger and acquisition budget, however, the consequences could be dire. “I am not concerned about this particular transfer”, says Berkley. “But I would not want to see the number of large vaccine companies continue to contract.”
Wladimir Bulgar/Science Photo Library
Novartis traded its vaccine business for GlaxoSmithKline’s oncology portfolio in a recent multibillion dollar deal. Asher Mullard reports on this latest round of pharmaceutical restructuring.
Published Online May 29, 2014 http://dx.doi.org/10.1016/ S0140-6736(14)60798-4 For the commentary in Blood see Blood 2013; 121: 4439–42
Asher Mullard 1873