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An ominous trend resurfaces as new drug approvals plunge in 2013

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The wave of new drug approvals that had been building at the FDA has broken. According to the official tally of new drug and biologics approvals at the agency, the biopharma industry registered only 27 OKs for new entities in 2013--a sharp plunge from 2012's high of 39 that once again raises big questions about the productivity and sustainability of the world's multibillion-dollar R&D business.

After 2012 some experts boasted that the industry had turned a corner, with the agency boasting that it was outstripping the Europeans in the speed and number of new drug approvals. But for 2013 the numbers look a lot closer to the bleak average of 24 new approvals per year seen in the first decade of the millennium than the 35 per year projected by McKinsey through 2016.

The agency says it was hampered by a sharp drop in the number of new drug applications, forcing a sudden plunge in the annual total--even after starting the year with a new breakthrough therapy designation (BTD) designed to speed the arrival of major therapeutic advancements.

The FDA's BTD program played only a marginal role in terms of new drug approvals this year, most notably cutting several months off the regulatory pathway for Imbruvica (ibrutinib) while keeping a promise alive that in years to come favored products can find a short cut to an approval. But even though the roster of approvals slid back to a three-year low, rivaling the bad years that inspired a complete rethinking in the way most Big Pharmas develop new products, there's a gold lining around this dark cloud. Even as the biggest companies like Eli Lilly ($LLY) continued their long losing streaks in the clinic, innovative biotechs like Biogen Idec ($BIIB) and Gilead ($GILD) were pushing through new franchise therapies with enormous potential.

In Biogen's case, Tecfidera (BG-12) quickly established itself as a new standard of care in multiple sclerosis. Gilead's Sovaldi (sofosbuvir) is likely to reap a multibillion-dollar windfall, stealing a march on a whole new slate of breakthrough hepatitis C therapies that will soon dominate the fast-growing field. Some of the most notable Big Pharma players distinguished themselves as well. Johnson & Johnson ($JNJ) partnered with Pharmacyclics ($PCYC) to get its hands on a big share of the market for Imbruvica for blood cancer, while Roche ($RHHBY) continued a tradition of pioneering important new cancer therapies with Kadcyla and Gazyva.

Deep-seated innovation problems, though, continue to plague a number of the biggest companies. GlaxoSmithKline ($GSK), for example, scored a series of new approvals in 2013, heralding the advances as a clear sign that its own reorganization four years ago was paying off. But later in the year it suffered a series of setbacks, with failures for its most innovative new drugs, such as a new cancer vaccine, a therapy for Duchenne muscular dystrophy and the heart drug darapladib.

Eli Lilly went another year without an approval, vowing yet again that its internal pipeline would see it through--and losing patent protection on Cymbalta. Merck ($MRK) finally threw in the towel, abandoning its long-held position that a long tradition of innovative development work would see it through a blockbuster drought and triggering a restructuring that's following some very familiar themes.

From the FDA's perspective, there was no way regulators could sustain the momentum that the industry believed it had working in its favor. In 2012, when new drug approvals reached a level not seen since 1997, the FDA had 41 applications to work with. This year, the number of applications shriveled to 32.

The numbers tell an important story, says InnoThink's Bernard Munos, who prefers to drop the three imaging agents on the FDA's list and add three other biologics approved last year to reach the same number of innovative therapies for the year. Perhaps most importantly, he says in a message to FierceBiotech, the total "suggests that the dynamics that have driven innovation continue to apply, and did not change last year."

Big Pharma's contributions to the new drug approval list have remained steady over the last few years, he adds: "That spike (in 2012) was entirely attributable to a surge in small pharma approvals." This past year Big Pharma accounted for 13 of the new approvals. For three of the past 5 years the number has been 12, and that could be very bad news for the least innovative of the bunch.

"Twelve NMEs per year is not enough to carry 12 large companies forward, especially in an environment where peak sales are declining despite--or perhaps because of--extreme prices for many new drugs," notes Munos, a longtime advocate for major change in the way companies handle their pipeline work. "So we can expect further consolidation, or a significant shrinkage for some of the big pharma."

Look over the past 5 years, he adds, and the most productive organizations like J&J, GSK, Roche and Novartis ($NVS) stand out. Even some of the least productive, including Merck and AstraZeneca ($AZN), have at least switched R&D chiefs, while the lackluster AbbVie ($ABBV), with its potential breakthrough ABT-450, has also managed to distinguish itself.

Says Munos: "Lilly remains an oddity--the most vocal company about innovation, yet one which produces the least of it--despite its commitment back in 2010 to produce two new drugs per year, beginning in 2013."

"The top half of the industry seems to be on the mend, although still facing challenges," he adds. "The most worrisome one is the two unsustainable trends mentioned above: declining peak sales and extreme prices. As some companies are about to find out, registering drugs is not the end of the tunnel, as it used to be. The drugs have to recoup their costs."

This year we've listed all of the new drugs of 2013 in chronological order. Check it out.

-- John Carroll, Editor-in-Chief. Email me at john@fiercemarkets.com.