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The Architecture Of A Blockbuster

Blockbuster status has long been the heultimate goal of drug development, defined as a sales potential of more than $1bn. The economics of drug development, and in fact of the entire biopharma industry, very much rely on these few gems that provide the returns to compensate for the long development pathway and often several billion dollars of investment per new molecular entity.

Mega blockbusters (in this study defined as >$10bn) such as Keytruda (pembrolizumab) or Humira (adalimumab) can completely determine the fate of even the largest big pharma. According to analyst consensus Keytruda is roughly responsible for two-thirds of Merck & Co., Inc.’s share price. And even though the key patents on Humira have run out and biosimilars are available, the drug still makes up 28% of AbbVie Inc.’s share price. Also, Celgene as a company was built largely on the back of one mega blockbuster, Revlimid (lenalidomide), and though Celgene is now part of Bristol Myers Squibb Company and generics are expected in 2022, the drug is still responsible for one-fifth of its share price.

As important as blockbusters may be, they are also exceedingly rare. In fact, only 0.5% of drugs that were launched after the 1980s until now have achieved blockbuster status. There are numerous stories that are often shared between senior executives on how the biggest blockbusters were completely underestimated within their organizations until very late in the game, but it would be equally interesting to know how many of the >99% that failed to achieve that status were actually predicted to do so. Having participated in many portfolio reviews, the authors would put that number at much greater than 0.5%.

Systematic Review Of Blockbuster Success Since 1960s

In this study Catenion wanted to better understand the drivers and challenges behind the outsized success of blockbusters. The group established a database of blockbusters going back to the 1960s (n=484, of which 340 are historical, and 144 are forecast to achieve that status). The real first wave of blockbusters took off in the 1980s, but it took until the mid-90s until the first mega blockbusters appeared such as Warner Lambert’s/Pfizer Inc.’s Lipitor (atorvastatin).

Lipitor is an interesting case as it has racked up more than $160bn in lifecycle sales since launch (making it number one according to that metric). What many people may not realize is that, in spite of US loss of exclusivity in Nov 2011, it still is a blockbuster brand for Pfizer with 2019 sales of $1.9bn, driven largely by its “second life” in emerging markets.

Since 2010 there has been a significant increase in blockbuster drugs. In order to distill insights specific to blockbuster success we have also established a timematched random control group of drugs that have not achieved that status (n=413).

Perhaps surprisingly, the number one category for historical blockbusters in terms of sheer numbers is systemic anti-infectives, including vaccines, HIV drugs (and combinations), hepatitis C (hep C) drugs (and combinations) as well as anti-bacterials. A hotly debated drug in this field has been Gilead Sciences, Inc.’s Sovaldi (sofosbuvir), which went in record breaking speed from launch in 2013 to >$10bn sales within a year. It quickly became a victim of its own success when Gilead found that it was rapidly shrinking its own patient pool through curing hep C. When it comes to lifecycle sales the hep C drugs are surpassed by Gilead’s HIV blockbusters, led by quadruple combo product Biktarvy that is expected to peak at >$10bn.

The global COVID-19 crisis has also created an unprecedented opportunity among anti-virals for blockbuster success, as the market for vaccines alone is expected to be >$10bn, providing room for multiple blockbusters. However, it is also not a chronic therapy and the market will begin to shrink with successful vaccination.

However, when one looks at the overall sales rankings of blockbusters (see Exhibit 1), oncology leads with $112bn in 2019 and an expected $168bn in 2024 (number one in total count with 35 products). Musculoskeletal is a distant second with $56bn in 2019, a category containing many historical blockbusters such as Humira, Enbrel and Remicade (number six in total count with 15 products), followed by systemic anti-infectives ($52bn, number three in total count with 20). Perhaps surprisingly endocrine is in fourth place with $44bn in sales, reflecting the impact of the global diabetes epidemic (second in total count with 22), with GLP-1 agonists, Victoza (liraglutide), Ozempic (semaglutide) and Trulicity (dulaglutide) leading the charge. The latter two GLP-1 agonists are expected to peak at >$8.5bn and are responsible for 20% of Eli Lilly and Company’s and Novo Nordisk A/S’s share prices. CNS is number five in total blockbuster sales and fourth in total count with 19. While there are no mega-blockbusters in CNS there is still a large number of small to mid-sized blockbusters, several in multiple sclerosis (MS). In fact, the biggest CNS product in 2019 was MS drug Tecfidera (dimethyl fumarate; $4.4bn), followed by another MS drug Ocrevus (ocrelizumab; $3.7bn, peak expected at >$8bn). MS alone accounts for five of the top 10 CNS drugs in 2019.

Blockbusters Dominate Markets

In oncology only 12% of the marketed drugs contributed to 80% of total sales in 2019 and the 34 blockbusters accounted for ca. 77% of total sales. Most drug developers in that field get attracted by the potential to achieve blockbuster status, however the median sales in oncology between 2000-2020 was only $269m. This is roughly what a developer needs at the beginning of Phase II to generate a positive return (eNPV), implying that half of the drugs in oncology stayed below that benchmark.

There is one mega blockbuster in oncology with Merck’s programmed cell death protein 1 (PD-1) inhibitor Keytruda ($11.1bn, forecast of $26.2bn), its main competitor BMS’ Opdivo is also expected to achieve $10.9bn in 2026, and AstraZeneca PLC’s EGFR tyrosine kinase inhibitor Tagrisso is close on their heels ($9.6bn). The dominance of blockbusters is also visible in musculoskeletal (accounting for 74% of 2019 therapeutic area [TA] sales) or in endocrine (70%). In CNS and systemic anti-infectives, blockbusters are important, but less dominant as TA sales drivers (47% and 52%, respectively).

Our definition of a mega blockbuster is sales of >$10bn. This outsized success has only been achieved by six drugs so far, four current blockbusters are expected to reach that status in the coming years (see Exhibit 2).

The first antibody to reach mega-blockbuster status was Humira. It peaked at just above $20bn in 2018. It has a long and interesting history as it originated at Cambridge Antibody Technologies and was licensed to German pharmaceutical company Knoll (a daughter of chemicals conglomerate BASF) in 1993. Apparently, Knoll did not realize they had a gold nugget in their portfolio and in what must have been one of the best deals in pharma history Abbott acquired Knoll for $6.9bn in cash in 2001. Not bad for an asset that even today in the face of biosimilars (loss of exclusivity in 2023) still has an NPV of ca. $44bn.

Blockbusters Come In All Shapes And Forms

Small molecule (SMOLs) drugs have been the dominant blockbuster category, followed by recombinant proteins and monoclonal antibodies (MAbs; 70%, 11%, 10%, respectively). However, the MAb share is expected to increase to 23% for the forecasted blockbusters, reflecting the increasing relevance of antibodies, cf. the low share of MAbs among our control group of non-blockbusters (2%). In addition, novel modalities are coming up such as cell therapy (4%), RNA/DNA based drugs (3%) and gene therapy (3%).

Among gene therapy, Novartis AG’s Zolgensma (onasemnogene abeparvovec) for spinal muscular atrophy (SMA) is the biggest already launched product (expected peak at $ 2.5bn), whereas Sarepta Therapeutics, Inc.’s Duchenne muscular dystrophy (DMD) drug SRP-9001 is expected to be the largest product by 2026 ($3.5bn). Looking at today’s blockbusters, Biogen, Inc.’s antisense drug Spinraza (nusinersen; licensed from IONIS) is the largest at $2bn. But one should not lose sight of the fact that in spite of the rise of novel modalities and MAbs, the dominant category is still small molecules – even among forecasted blockbusters SMOLs retain a share of 49%.

Mega blockbusters typically achieve $1bn in sales within the first two years, whereas normal blockbusters take two to six years. There are some notable exceptions of drugs that took decades to achieve >$1bn. For example, Premarin, conjugated equine estrogens, originally isolated from pregnant mare’s urine was launched back in 1942 by Wyeth. It achieved blockbuster status 56 years later, IP played a limited role as the precise mixture of the estrogens was kept confidential and hard to duplicate. Finally, in 1999 a similar version was approved, but Pfizer’s original brand still sold $734m in 2019.

Interestingly, the share of first in class drugs among blockbusters is 42%, identical to the share in the control non-blockbuster group. This implies that novelty status alone is not a driver of blockbuster success in contrast to the widely held belief that the order of entry determines the market share of novel drugs. It seems that differentiation is more relevant than novelty, and differentiation can have many flavors, the most straightforward is a better efficacy/safety profile (eg. Alecensa [Alectinib] taking over the ALK-fusion market as a late comer in non-small cell lung cancer from Xalkori [crizotinib] with peak estimate of >$2bn) but it could also be convenience (cf. success of fixed dosed combos such as Harvoni in hep C, peaking at $13.8bn in 2013).

Sixty-four percent of all blockbusters have originated within labs of pharmaceutical companies, perhaps contrary to common perception that most innovation stems from small biotech companies or academia. Academia (8%) has started to show up in blockbuster origination in the 1990s, one of the most prolific organizations was Emory University that contributed to a number of HIV blockbuster drugs in collaboration with Gilead. Both emtricitabine and lamivudine were discovered at Emory, which sold off the royalty rights to emtricitabine to Royalty Pharma plc and Gilead for $540m, at that time it was the biggest such deal. GSK and Shire licensed the rights to lamivudine from Emory, the molecule is part of five FDA approved HIV drugs.

The largest deal of a nonprofit organization was struck in 2016 when the Cystic Fibrosis foundation sold off its royalty rights to CF drugs from Vertex Pharmaceuticals Incorporated(including Kalydeco that peaked at $1bn in 2018) for $3.3bn to Royalty Pharma. The second largest deal happened when UCLA sold off its rights to large blockbuster Xtandi for $1.1bn to Royalty Pharma (2019 sales $3.7bn). Another well-known institution that is directly linked to two multiple sclerosis blockbusters is Israel’s Weizmann Institute (Teva’s Copaxone and Merck KG’s Rebif, peaking at $4.3bn and $2.5bn in 2013).

Outside of the US/EU/UK many blockbusters were discovered in Japan (n=33), 18% of those in systemic anti-infectives, while 15% in both CNS and oncology (see Exhibit 3). Among them is BMS´s oncology drug Opdivo, which originated at and is marketed by Ono Pharmaceuticals (one of the largest pharmaceutical companies in Japan). Opdivo constitutes the biggest Japanese blockbuster with over $1bn sales achieved only one year after launch (expected mega blockbuster). The second largest Japanese blockbuster is AstraZeneca´S Crestor (rosuvastatin), which historically peak $7bn sales in 2011, it was originated and launched by Shionogi & Co. Ltd. which is currently co-marketing the drug in Japan. Finally, the Japanese academic institutions, The Nagoya University and The Research Foundation for Microbial Diseases of Osaka University (BIKEN), have contributed to the oncology and systemic anti-infective space with two historical blockbusters, Sanofi´s Eloxatin (oxaliplatin; peak-sales $2.3bn in 2007) and Merck & Co.´s varicella zoster virus vaccine, Varivax (peak-sales $1.1bn in 2009).

Biotech and small companies originated 27% of blockbusters while launching only 11%. Historically this made perfect sense as the predominant model had been biotech and small companies taking risks early and then, once proof-of-concept had been achieved, large or big pharma would then take over. This has changed due to the rise of oncology and rare diseases where both development and commercial spend are (sometimes) within reach of smaller players. As a result, the share of forecast blockbusters still owned by small companies and biotechs is 34% (of course, this figure could turn out be smaller due to future deals).

Top 10 Blockbuster Owners Versus Originators

The number one company in blockbuster origination is Eli Lilly (12), followed by Merck & Co. (10) whereas the third place is shared by Boehringer Ingelheim GmbH, Emory University and Genentech, Inc. (8; see Exhibit 4). The picture changes somewhat when looking at ownership, there GSK is number one (27), followed by Novartis (21) and Johnson & Johnson in third place with 19. Note that the ranking also includes the predecessor organizations for companies that have gone through multiple rounds of mergers (such as GSK).

Most blockbusters change holders (61%) through multiple deals. However, some originators also manage to bring drugs to the market as owners (39%). While most of these are large companies there are a few notable exceptions of biotech companies that have at partly commercialized blockbuster drugs: Seattle Genetics launched lymphoma antibody-drug conjugate Adcetris (rrentuximab vedotin) in 2001, Incyte launched myeloproliferative disorders drug Jakafi (ruxolitinib) in 2011, and Exelixis launched renal cancer drug Cabometyx (cabozantinib) in 2016. All three companies have commercialization partners but were still able to build fully integrated companies on the back of their successes, something that investors appreciate more than just banking a royalty stream.

Primary care cardiovascular drugs made the first big category of blockbuster drugs in our study (before 1970), whereas oncology started appearing in the second half of the 1980s and slowly became the biggest category. The increasing emphasis of the biopharma industry on specialty care versus primary care is reflected by the rise of blockbusters in rare diseases.

Forty-one percent of all blockbuster drugs in our survey were orphan drugs, versus just 27% in our time matched control group of non-blockbuster drugs. The popularity of orphan drugs is reflected in the increasing share over the last decades (a record number of nine orphan blockbusters were launched each in 2003 and 2013), and the percentage of forecasted orphan drugs among blockbusters is expected to further increase to 57%. The economics behind these blockbusters is one of the reasons why the average profitability of pharma has increased since the 70s/80s in spite of escalating R&D spending. It now stands at 14% net profit margin (based on a March 2020 JAMA paper by Ledley et al who reviewed large pharma 2000-2018), already higher than most industries, and in extreme cases can go as high as 45%. One of the drivers of this is the comparably lower spending on development and commercialization for specialty and orphan indications. Once a certain cost base has been covered the effect of huge gross margins fully kick in (according to the JAMA paper the gross profit of pharma is 76%, much higher than any other industry in the S&P 500), and incremental revenue flows through to the bottom line.

Blockbuster R&D – A Virtuous Circle?

The fascination of the biopharma industry with blockbuster drugs is well justified by their disproportionate profitability leading to higher market valuations and allowing to attract more capital and talent to re-invest into internal and external innovation. This virtuous circle has propelled the growth of many biopharma companies either seeking outperformance or in the case of smaller biotech an independent growth path.

We were especially interested to find out whether the share of blockbuster sales of companies (of total sales) correlates with R&D productivity and corporate growth performance.

In fact, the R&D productivity of top 30 pharma companies shows a small but significant correlation (r2=0.3, p-value < 0.045) whereas corporate growth performance shows a strong correlation (r2=0.7, p-value < 0.0013) underlining the existence of a virtuous circle of blockbuster R&D. Of course, there are downsides to a strategy focusing only on blockbuster drugs: it leads to a comparably high commercial risk as the chances are low (<1% of marketed drugs) and once you have a blockbuster you are exposed to the loss of exclusivity risk more so than spreading the same sales over various assets launched in different years.

Despite the risk, many companies and investors remain focused on outsized returns as part of their business model and ambition. The consequence of the popularity of areas with a high density of potential blockbusters is that we now have hyper-competitive spaces such as oncology in which one-third of all development projects concentrate – and 35 blockbusters were responsible for 77% of sales in 2019. Inevitably this means that the majority of those who are currently chasing blockbuster dreams will fall short even if they eventually make it to market. But the few that make it can reap great rewards, and surely the next Genentech or Celgene is already in the making somewhere.

Methodology

To retrieve the list of blockbuster (BB) drugs, a search in Evaluate Pharma was performed with manual curation going through every product launched from 1986 to 2024 (as far back as sales information goes within Evaluate Pharma). The raw list included all products that have been equal or over $1bn sales in at least one year. The list was also supplemented with those products that are estimated to hit $1bn between 2020 to 2026. Generic drugs were not included in the analysis. The peak-sales were manually calculated based on total year sales from 1995 to 2026. Historical-BBs (withdrawn or marketed drugs that have reached $1bn worldwide sales before 2019) and forecasted- BBs (currently in phase II, III, approved, filed, or marketed drugs predicted to reach more than $1bn worldwide sales after 2020) were also manually classified.

To randomly obtain the control group of drugs, the maximum lifetime value was used to find those that had a peak in between $200-500m in sales. This group was restricted to only marketed products within the time windows analyzed for historical BBs, and those that are NMEs, New Derivatives or NDAs to limit the number of assets.

To analyze trends over time, 10 drug-clusters for historical and control drugs were organized based on timeperiods of 6 years for drugs launched before 1970, and 5 year-periods for drugs launched from the year 1980 onwards as follows: A: Before 1970, B: 1980 to 1984, C: 1985 to 1989, D: 1990 to 1994, E: 1995 to 1999, F: 2000 to 2004, G: 2005 to 2009, H: 2010 to 2014, I: 2015 to 2019

Annual company revenues were used to assign “company types” to originators in the year of discovery (around 10 years before drug launch) and owners in the year of drug launch. Company types were set as follows: big pharma: revenues ≥ $10bn, mid pharma: revenues between $0.5-0bn, small pharma: revenues ≤ $0.5bn, biotech: revenues = 0 and academy: research institution, universities.

The classification of drugs according to TA in the primary indication for all products holds a 1-to-1 relationship with the TA, i.e. they will only be classified into one TA.

Data analysis, statistics and visualization were performed in R (R Core Team, 2019). Statistical analyses were carried out by pair-wise Wilcoxon-Mann-Whitney test, a p-value < 0.05 was considered statistically significant (p-value < 0.001***, 0.01**, 0.05*). Figures were produced using the R package ggplot2 (Wickham, 2016) and think-cell software.

Data grouping: Vaccine: Bioengineered vaccine and vaccine; Cell therapy: Cell therapy and Gene modified cell therapy; mAb: mAb and mAb conjugated

Acknowledgments

The authors thank the members of the Evaluate Pharma team, Alex Barker and Stephen Wilson for supporting on the provision of data and fruitful discussions about our assessment

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Catenion Arno Heuermann 2

Arno Heuermann

Arno Heuermann is a founding Partner of Catenion who lives in Berlin, Germany. Arno has ten years of experience as CEO and COO. He has managed companies in Germany, France and Luxemburg.

While working on his degrees, Arno founded a technical engineering office in 1994. He continued to follow the entrepreneurial path in 1998 by founding Biopsytec GmbH, a DNA diagnostics company focused on agriculture, heading the company for more than five years as Managing Director.

In 1999, he co–founded Epigenomics AG, a public biotech company focused on DNA methylation, later remaining as an advisor and member of the firm’s Supervisory Board.

In August 2000, Arno orchestrated the founding and financing of Biopsytec Holding AG, thus merging Genious SA and the QTL AG and Biopsytec GmbH. He managed Biopsytec Holding AG for the next three years before helping launch Catenion in 2003. Since that time, he has been Catenion’s chief operating officer.

Arno holds a diploma degree in process engineering from the Technical University of Applied Sciences in Berlin. In addition, Arno attended the Berlin business school for Industrial Engineering and Management.

He is experienced in the diverse practices of patent management and has made numerous successful inventions.

Arno Heuermann is married and has two children. He is a lover of classical music, country life and horseback riding.

Catenion Matthias Krings

Dr. Matthias Krings

Matthias Krings is a founding Partner of Catenion.

He has worked for international pharma, biotech and medtech organizations on a variety of topics. Matthias works with clients on developing corporate and R&D strategies, identifying new areas of opportunity, tailoring asset and company searches for BD&L and M&A, maximizing the value of existing assets through therapeutic expansion, and prioritizing R&D portfolios. Matthias is also resposible for the creation and delivery of bespoke client education programs in the Catenion Academy.

Before co-founding Catenion in 2003, Matthias was a consultant at Mercer Management Consulting (now Oliver Wyman) and later joined a strategy consulting boutique, Theron.

Matthias holds a diploma and a doctorate degree in Biology from the Ludwig-Maximilians University in Munich. His PhD work was supported by a scholarship from the Boehringer Ingelheim Fonds, Foundation for Basic Research in Medicine. Matthias made significant scientific contributions to the field of human evolution (Krings et al., Cell 1997: Neandertal DNA Sequences and the Origin of Modern Humans).

Matthias lives in Munich & Berlin. He enjoys cooking, gardening, watersports and traveling.

Matthias co-authored Catenion’s Commentaries “Elements of Winning Strategies in R&D” and “Recombinant Portfolio Management – Recognizing and Enabling Innovation”. They are part of Catenion’s “Shaping Pharmaceutical Strategy” series that focuses on high-profile issues for the industry.

Catenion Christian Elze

Christian Elze

Christian Elze is a founding partner of Catenion and has been developing the company’s business in Japan since 2008. He holds a BSc from the London School of Economics and an MBA from Columbia University.

Christian is working with companies, universities and governments in the field of biomedical innovation. In his work, Christian is focusing on how emerging technologies and translational research are re-shaping the respective roles of funding agencies, investors, biopharma companies and academia in the research and development of new drugs.

Besides his consulting work, Christian frequently speaks about Emerging Technologies, Healthcare Reform, Pricing & Reimbursement,  Biomedical Innovation, as well as Translational Research at industry conferences and universities in Japan, the US and Europe.

Christian is a fluent speaker of English, French, German, Italian, Portuguese, Russian and Spanish and lives with his family in London.

Catenion Markus Thunecke compressed

Dr. Markus Thunecke

Markus has written several Catenion Commentaries including “Risk Profiles of Corporate Portfolio Strategies” as well as “Elements of Winning Strategies in R&D”, “Recombinant Innovation Management (RIM) – How to Stimulate Breakthrough Innovation within Large R&D Organisations”, “Recombinant Portfolio Management – Recognising and Enabling Innovation”. He also co–authored “Zero Base R&D” and “The Challenge for Japan’s Pharmaceutical Top Twenty”. All of them are part of Catenion’s “Shaping Pharmaceutical Strategy” series that focuses on high-profile issues for the industry.

Markus Thunecke is a founding Senior Partner of Catenion who lives in Berlin, Germany. Markus started his consulting career in 1997 at Mercer Management Consulting before joining a strategy consulting boutique, Theron, and setting up Catenion in 2003.

Markus has helped numerous clients around the globe in the pharmaceutical and medical products industries create competitive advantage. In addition to his work on strategy, Markus specialises in developing leading–edge analytical tools and combining them with organisational development capabilities. Markus is the developer of a number of Catenion’s proprietary tools for portfolio management and risk assessment. In recent engagements, Markus has helped clients develop and realign their R&D strategies, review their discovery and development portfolios, and create organisational models that foster innovation.

Markus is a frequent speaker at conferences on R&D strategy and portfolio management.

He holds a PhD in biochemistry from the University of Heidelberg, where he generated transgenic animal models for Alzheimer’s disease. He also has three years of research experience within the CNS field at Schering AG.