Despite the growth of the world’s population and the increasing demand for drugs, the pharmaceutical industry has traditionally not innovated at the same pace. According to the BBC, Dr. Kees de Joncheere from the World Health Organization stated, “The system [pharmaceutical industry] has served us well in terms of developing good new medicines, but in the past 10–20 years there has been very little breakthrough in innovation.” From 2006-2015, the average number of approved new molecular entities (NME) and new biologic license application (BLA) filings by the FDA was approximately 32, and research (via the Washington Post) indicates that 78% of patents approved by the FDA correspond to medications already in the market.

Over the past couple of years, we have seen a shift. In 2017 and 2018, the number of approved NMEs and BLAs increased to 46 and 59 respectively, compared to 45 in 2015. In 2018, 19 of the 59 novel approved drugs were considered first-in-class, 34 received orphan designation for treating rare diseases, and 24 received fast-track designation as they are intended for serious conditions with unmet medical needs. While this is encouraging, it is important to note that a 2019 IQVIA Institute report found that 64% of FDA-approved drugs in 2018 (via Fierce Biotech) originated from emerging biopharma companies.

Looking forward, I predict that it will become increasingly important for the industry to continue to develop breakthrough treatments that offer greater benefits beyond incremental improvements and discover novel treatments for unmet medical needs, including rare and orphan diseases. As the president and CEO of a biotech company, I believe that much of the innovation of these new breakthrough treatments will be spearheaded by emerging biotech companies. (While some make distinctions between biotech and biopharma, biotech in this context refers to companies that are not considered large pharmaceutical companies, irrespective of their modality.) As a result, the industry will likely experience disintegration, a new balance of power among stakeholders and a greater focus on personalized medicines.

Industry Transformation And Disintegration

With the advancements in technology provided by biotech companies and others, pharma may experience an industry-wide disintegration. Large pharma companies, traditionally responsible for all aspects of the drug discovery pipeline, will continue to outsource these processes to smaller, disruptive companies with simple and affordable alternatives. As Clayton Christensen in The Innovator’s Prescription explains, this disintegration will allow large pharma companies to curb investments from less profitable activities within their business and refocus efforts to result in greater profits and productivity. In a recent article published by Endpoints News (registration required), the authors suggest growing competition and decreased return on investment of R&D as key reasons for the cutting-back of non-core business processes. Often this disintegration involves outsourcing aspects of the pharmaceutical supply chain to specialist companies like contract research organizations (CROs), as well as contract development and manufacturing organizations (CDMOs). I’ve also seen large pharma look to small biotech companies for in-licensing drugs. According to the IQVIA Institue report, emerging biopharma companies “patented almost two-thirds of new drugs launched in 2018,” although large pharma stills plays an important role. Overall, from discovery to clinical trials, it seems disintegration is well underway in pharma.

A New Balance Of Power

The disintegration of the drug discovery, development and distribution pipeline could result in a new balance of power in the industry and provide entrants with an opportunity to succeed in an industry previously saturated with substantial barriers to entry. There continues to be a growing number of early stage, well-funded biotech companies — and companies focused on artificial intelligence for drug discovery and development — rapidly emerging on the global stage, such as Nimbus Therapeutics, Puma Biotech, Blueprint Medicines and Recursion Pharmaceuticals. As the CEO of one of these companies, I’ve seen investors, both traditional and corporate, flocking. We are seeing big moves in the M&A space; according to The New York Times (paywall), the value of deals for both biotech and pharmaceutical companies reportedly approaching $146 billion within the first two months of 2019 in the U.S. — more than what was announced in all of 2018, 2017, or 2018. The New York Times article noted that “acquisitions of American biotech companies are surging, and so are the prices that buyers are willing to pay.” As a result, large pharma companies may look to hold onto their position by overpaying for high-potential biotech companies, which could provide a great opportunity to other new entrants.

An Emphasis On Prevention And Precision

In my experience, pharma has traditionally been attracted to large, profitable markets and developing drugs that are of “blockbuster status” — usually at the expense of smaller markets with less reimbursement, and less opportunity to drive return on investment. It is hard to imagine a shift focused on prevention given the industry’s appetite for large markets. However, with the catalytic effect of entirely new therapies, advances in technology and the consumerization of health, I expect more targeted drugs that will prevent disease and address the needs of specific groups of patients in other global markets. With the emergence of preventive medicine and precision medicine (an approach that my company and others, such as Verge Genomics and the Beijing Genomics Institute, use), valuable drugs will arise because of this diagnostic precision.

According to a recent article in Science Daily, “Sequencing of the human genome and the development of powerful and affordable DNA sequencing technologies has ushered in a new era of precision oncology, in which patients are treated with customized therapies designed to target the specific mutations within their tumor.” Companies that can design drugs that target disease at the molecular level while minimizing off-target side effects and consider structural pharmacogenomics could transform the structure of the pharmaceutical industry and cure diseases with a significant level of precision.

The challenges are bigger than ever, but the future of pharma looks promising. Biotech companies could lead the charge in scientific and business model innovation and will be responsible for much of these shifts in pharma. And while consolidation of biotech by large pharma companies is likely to occur, a new class of biotech companies that rival large pharma will emerge. I believe the pharmaceutical industry will reinvent itself and will play a significant role in improving the health of billions of people around the world.

Source: https://www.forbes.com/sites/forbestechcouncil/2019/05/29/the-future-of-pharma-the-role-of-biotech-companies/#6f174ba36bb3