Although blockbusters have powered strong industry growth
for the last 20 years, the halcyon days of relying on
blockbusters to drive sales growth are numbered. An increasing
number of pressures are pushing the blockbuster-driven
growth strategy out of favour and companies are instead
turning towards targeting niche indications to secure
strong future growth.
dramatic shift in thinking is changing the dynamics of
R&D activity, company strategy and the focus of sales
and marketing spend, according to From blockbuster to
niche-buster - Niche therapies drive future drugs growth
and incentivize R&D investment over sales spending
a new report by independent market analyst Datamonitor.
Blockbusters have been central to powering market growth,
however are beginning to fall out of favour
For at least two decades, blockbusters (drugs with more
than $1 billion in sales annually) have played a central
role in driving the very strong growth of the pharmaceutical
/ biotech market. These drugs have supported massive company
expansion and have incentivised significant investment
in the industry. From a drug company's perspective, utilising
blockbusters to drive growth has been an attractive strategy
because it helps companies achieve investor demand for
double-digit sales growth and pays for spiralling drug
However, blockbusters are now facing increasing generic
incursion, stronger pressure to justify reimbursement,
and accusations that they are stifling R&D innovation.
Therefore, dependence on blockbuster-generated revenue
is set to fall through to 2010, says Datamonitor healthcare
strategy analyst, Dr Mark Belsey. "The industry is
turning increasingly to a niche-buster strategy by utilising
increased licensing, R&D collaborations and small-scale
M&A deals to harness innovation and provide access
to markets with high unmet need."
Companies turning to niche indications for future sales
growth- changing market dynamics
Drugs for niche indications have historically been less
of a focus for the industry, because smaller patient numbers
were thought to restrict revenue generation possibilities.
However, drug companies are beginning to awaken to the
substantial sales potential from these markets because
of lower marketing costs, limited competition and greater
support from regulators, Dr Belsey says. "Furthermore,
niche markets tend to be less attractive to generics manufacturers,
and so generic incursion following patent expiry is unlikely
to be as rapid."
With this switch from blockbuster to niche-buster, the
dynamics of R&D activity and company strategy are
changing. With greater focus on niche drugs, the industry
is becoming increasingly R&D focused, Dr. Belsey says.
"Rather than being centred around sales and marketing,
which has driven the success of many current blockbusters,
much greater emphasis is being placed upon R&D because
it has to generate a greater number of drug candidates."
The more R&D-intensive focus on niche indications
will also help power a more personalized approach to treatment,
he says. "Central to the development of the niche-buster
model is the raised importance of personalized therapies,
which is being driven by increased use of diagnostics.
This trend is helping to clarify market segmentation and
will boost the size of the total drug industry."
The way that sales and marketing is carried out is also
set to change. Unlike the direct-to-consumer dominated
blockbuster strategy of the past, the success of the niche-buster
depends on prioritising cost-effective targeting of specialist
physicians, using targeted marketing spend to access specialist
physicians to drive clinical trial progression, approval
and successful uptake.
Targeting right markets integral to generating strong
To maximize value from the niche-buster model, it is important
for 'big pharma' to select the right geographical and
disease markets to target. The US provides fertile ground
for innovative therapies and should be prioritised as
an optimal launch market for nichebuster developers. The
targeted therapy-focused biotechnology market is dominated
by oncology, which is the leading focus of R&D collaborations
and licensing deals. With a range of relatively low-incidence
markets characterized by a high unmet need, oncology represents
a leading focus for niche drug developers, Dr. Belsey
says. "A classic example of a niche-buster drug is
Novartis' cancer drug Glivec, which was initially approved
for chronic myeloid leukaemia (CML) in 2001."
"Despite the fact that this was a niche indication
with a small patient population, it generated $2.2 billion
in annual global sales by 2005. Part of its success is
that it has since been approved for other oncological
diseases as well, even though these are also niche indications."
As the industry begins to realize that a blockbuster-driven
growth strategy is not in itself sufficient to drive growth
in the future, drug companies are beginning to move away
from the 'one size fits all' approach towards more personalized
medicine, as they focus on the nichebuster model and smaller
markets characterized by a high unmet need. Regulatory
authorities and market dynamics are helping to drive this
transition, Dr. Belsey says. "However, to maximise
value from the niche-buster model, 'big pharma' must take
into account a number of important considerations, in
terms of the geographical market and indication selected,
and it must also be flexible enough to adapt its strategy
to harness greater innovation."