labels: industry - general, pharmaceuticals
Drug makers turn from blockbusters to ''niche-busters'' for future growthnews
03 November 2006

Mumbai: 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.

This 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 development costs.

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 nichebuster sales
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."

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Drug makers turn from blockbusters to ''niche-busters'' for future growth