CHICAGO - In his state of the industry talk, Steven Burrill outlined the steps biopharma companies are taking as they recognize that their biggest growth years are behind them. Sales growth has leveled off dramatically since the 1990s and organic growth is all but gone. Like other mature industries, Big Pharma expands its business now by acquiring smaller companies and laying off redundant employees.
But consolidation can only carry pharma so far, which leaves us with one question: What will pharma look like in the future?
It will be global. Companies are moving aggressively in emerging markets because growth has leveled off in the U.S., Europe and Japan. Opportunities to grab market share are found in other nations, like the BRIC countries and other emerging markets. GlaxoSmithKline, Pfizer, Novartis and many others have all made aggressive moves in this space. But selling drugs there isn't enough. Pharmas have to take a non-U.S-centric approach to drug development if they want to succeed in emerging countries, where the most prevalent diseases may be relatively unimportant markets in the U.S. and Europe.
Beyond emerging markets, expect the biotech buying spree to continue. Big Pharma needs to cherry-pick the best, most innovative science from smaller developers to boost their pipelines. And expect to pay a premium when those drugs hit the market. Some of the recent revenue increases have come from a dramatic increase in drug prices, especially specialty drugs.
Generics are booming. As Burrill noted, 76 percent of prescriptions written in the U.S. are for generic drugs. Next year an additional $32 billion in patents will be lost, with a further $24 billion gone in 2012. That represents a huge opportunity for companies not willing to give up the back-end revenue after a patent expires. As a result, we've already seen a number of Big Pharma companies execute major generic drug deals.
Finally, in some cases, Pharma sales growth won't come from human drugs at all, but from consumer products and animal health. After selling off consumer units, many pharma companies are looking to get back into the space to insulate themselves from highs and lows of prescription drug sales. And animal drug sales are on the rise as Americans fork out big money for their beloved companions. In fact, animal health sales have increased fivefold since 2003, when the U.S. spent just $11 billion on pet drugs.