4. Novartis


R&D budget: $9.1 billion
Change from 2017: -1%
Total 2018 revenue: $51.9 billion
R&D budget as percentage of revenue: 17.5%

As usually happens with a change at the top, Novartis—perennially one of the biggest R&D spenders in the industry—underwent a major revamp of its R&D operations last year when Vas Narasimhan took the CEO role from Joe Jimenez.

That included a cull of pipeline programs spearheaded by R&D chief Jay Bradner, M.D., with the company cutting around 20% of the total—some 90 programs—in an attempt to focus on only the most cutting-edge medicines.

Bradner went on record last year for questioning redundant investment in the biotech sectorparticularly in cancerwith billions being spent on “fast followers, narrow differentiators and distracting hype,” but said that the 90 cut programs included some gems that would benefit from licensing to other companies.

The year saw 20 approvals, albeit mainly line extensions for already-marketed therapies, with Amgen-partnered Aimovig (erenumab) for migraine prevention the highlight among new molecular entities (NMEs) as the first CGRP inhibitor to reach the market. That partnership is now under strain, however, with allegations of contract breaches heading for the courts.

2019 is shaping up to be a much bigger year for NME approvals, with four due before the end of the year. That includes much-anticipated gene therapy Zolgensma for spinal muscular atrophy (SMA)potentially a one-shot rival to drugs like Ionis/Biogen’s blockbuster Spinraza—as well as bispecific antibody brolucizumab for wet age-related macular degeneration and PI3K inhibitor alpelisib, which could be the first treatment specifically for patients with the PIK3CA mutation.

That mutation is present in about 40% of HR-positive/HER2-negative advanced breast cancer patients and is unfortunately associated with a very poor prognosis. The fourth NME—S1P receptor modulator Mayzent (siponimod) for secondary progressive multiple sclerosis—was approved by the FDA in March.

Among 2018’s divested programs was Novartis’ infectious disease portfolio, sold off to Boston Pharma, which follows similar exits by AstraZeneca, Roche, Bristol-Myers Squibb and Eli Lilly, dwindling still further the number of big pharma companies operating in this area.

The downsizing came amid a broader restructuring that also saw the Swiss drugmaker hive off its consumer health joint venture with GlaxoSmithKline, sell its oral solid dose business to Aurobindo, and start the spinout of eye-care unit Alcon, which has just been completed. Rumors that generics unit Sandoz may also be divested as Novartis morphs into an innovative medicines pure play won’t go away either.

Those divestments were balanced by a series of bolt-on deals, and Narasimhan is planning more, saying: “We want to be consistently trying to do M&A in the range of up to 5% of our market cap which would really be in that up to $10 billion range.”

Novartis is already an established player in cell therapies with the approval and rollout of its pioneering CAR-T cancer treatment Kymriah. Last year, it consolidated its position in gene therapy with the acquisition of AveXis for $8.7 billion, which brought in Zolgensma, as well as licensing rights to Spark’s blindness treatment Luxturna outside the U.S. in a $170 million deal. Its gene therapy pipeline includes a range of therapies for eye diseases, neurological disorders and hearing loss.

Novartis also constructed a radioligand business from scratch last year, closing a $3.9 billion acquisition of Advanced Accelerator Applications early in the year to give it cancer therapy Lutathera, and following that up with a $2.1 billion takeover of Endocyte, claiming rights to first-in-class prostate cancer therapy PSMA-617. It is expecting to have seven radioligand programs in the clinic over the next year across a range of solid tumors.

Along with the pipeline downsizing, 2018 also saw the usual crop of failed and discontinued projects. Among these was Ilaris (canakinumab), which failed a phase 3 trial in secondary prevention of cardiovascular events that would have expanded the market for the drug considerably.

There were also setbacks for Conatus-partnered nonalcoholic steatohepatitis therapy emricasan, while Novartis handed back rights to Aveo Pharmaceuticals’ GDF15-targeting cachexia drug AV-380 and PI3K inhibitor buparlisib for blood cancers.

Among other culled projects were myostatin/activin blocker bimagrumab for hip fracture recovery and sarcopenia, EGFR inhibitor nazartinib for non-small cell lung cancer (NSCLC), neprilysin inhibitor LHW090 for hypertension, and SGLT1/2 blocker LIK066 for weight loss.

2019 should also see a string of readouts and filings as Novartis continues what looks like a particularly productive couple of years for its R&D engine. Filings are scheduled for relapsing MS therapy ofatumumab, crizanlizumab for sickle cell disease, capmatinib for NSCLC and PD-1 inhibitor spartalizumab, Novartis’ first immuno-oncology drug which is being developed in combination with its successful Tafinlar/Mekinist pairing in melanoma.

Fevipiprant, a first-in-class CRTh2 antagonist for eosinophilic asthma, should have a phase 3 readout in the back half of this year.

Bradner has also said that he would like to pay more attention to developing drugs that prevent diseases like cancer, although he acknowledges that introduces a whole new paradigm in drug development and treatment reimbursement.

Check out Novartis’ pipeline here.

4. Novartis

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