Adapt or die

The two largest sectors for drugs targeting infectious disease – antibiotics and antifungals – have seen significant decline over 2005-06. A glut of recent and imminent patent expiries of major products has upset the apparent market stability seen between 2002 and 2006 in this $38billion sector. It has left nearly all of the top players with some tough decisions about what sort of presence they should maintain in the market, or even if they should remain involved at all.

According to a new report* by independent market analyst Datamonitor, even growth sectors like small molecule antivirals have seen a slowdown and the HIV market is witnessing its first patent expiries. “At best, the pharmaceutical companies involved in the market will be seriously re-thinking their core-competencies to find means of re-invigorating sales”, says Datamonitor infectious disease senior analyst Jonathan Angell, “and we can expect to see a few decide that their resources are best spent elsewhere.”

Antibiotics and antifungal patent expiries drag sector down

The $38bn market for anti-infectives can be readily subdivided into the antibiotic, antifungal, antiviral and HIV sectors. Loosely speaking, although antibiotic sales dwarf those of the antifungals market, the sectors can be divided into two high volume markets (antibiotics and antifungals) and two lower volume markets (HIV and antivirals). The high volume sectors have witnessed the highest levels of revenue decline over the 2005–06 period, with antibiotic sales falling by 8%, and antifungals' sales falling by 7%, upsetting the relative stability that existed between 2002 and 2006.

Given that the $19.8bn antibiotics market accounts for such a large proportion (52%) of total market sales, its influence over total market values is naturally high. Indeed, although the antivirals market has seen a substantial decline from an 8% compound annual growth rate (CAGR) between 2002 and 2006 to flat sales for 2005-06, it has been the smaller volume sectors that have pushed market values over recent years. That said, in the light of its first patent expiries, even the HIV market has seen growth rates fall over the 2005-06 period.

Diverse disease sectors – clinically and commercially

The clinical diversity seen across the sectors is matched by substantial differences in the nature and structure of the commercial markets that serve them. For example, the antibiotics market is heavily saturated by generics, which accounted for just under one third of sector sales values, but two thirds of sales volumes in 2006.

The antivirals sector (which tackles diseases as diverse as coughs and colds through to herpes and hepatitis), meanwhile, is characterised by the highest domination by leading products – the top ten selling molecules account for 84% of value sales, and 54% of volume sales, Angell says. “In the newest sector, HIV, however, corporate dominance is the most striking characteristic: the top ten companies account for 99% of volume sales, and 98% of value sales.”

Volume versus value – adapt or die

These sector-specific characteristics, combined with the underlying financial dynamics of the infectious disease market have been caused by, and will continue to shape, some very divergent company strategies to portfolio management. For example, Johnson & Johnson has serially introduced next generation products from established classes to corner markets before they become mainstream targets.

This allows it to capitalise on prescriber familiarity with established predecessors, whilst also offering a step-wise shift to an innovative alternative that addresses pertinent and well-understood unmet need. The company has in-licensed EU rights for the most advanced developmental protease inhibitor (PI) for hepatitis C (HCV), and in HIV the company has the best of the next generation PIs and two next generation non-nucleoside reverse transcriptase inhibitors (NNRTIs), one of which will be the first of its kind to get to market.

Honing the model used with Tarivid and Levaquin, Doribax and ceftobiprole are anticipated to yield Johnson & Johnson the early advantage of an either/or sales proposition in the gram-negative sector while other companies struggle to realise their products' potential due to over crowding in the gram positives arena, Angell says. “By contrast, Novartis has moved with the antibiotics market. Its branded pharmaceutical business has produced two key low-volume, high-value niched products (Cubicin and Tobi), while Sandoz' capabilities are perfectly suited to making the most of the tidal wave of antibiotic patent expiries,” he says.

Core competencies: What's yours?

The majority of the 11 companies that comprise the top five players in each sector display a very high degree of specialisation in one context or another: Schering Plough, BMS, Astellas, Gilead and Roche are all now renowned for expertise in a specific arena.

Following a de-escalation of its other infectious disease operations, Roche is now purely focusing on its antivirals portfolio, allowing other interests to slip away. Gilead (which as a company focuses almost solely on anti-infectives) has focused on the highest value and growth sectors – HIV and antivirals – and staunchly reserved its sales and marketing efforts to the geographies in which it knows it can play to a home advantage.

Astellas, meanwhile, has built up a very focused offering for critical care, spanning transplant products, antifungals and antibiotics. BMS have focused interests in HIV, and Schering Plough in HCV. This is a stark comparison to the big-hitters GSK and Pfizer. GSK in particular appears to be offering a portfolio of anti-infectives that may not be as cutting edge as it used to be, but in a wide enough range of products and applications that has enabled the company to maintain an even keel in revenues over recent years. Whilst the company may not have exhibited the strength of growth seen by some of the smaller companies in the market, neither has it suffered the losses seen across the seven major markets** (7MM) in infectious diseases as a whole.

Pfizer, meanwhile, has provided textbook case studies that run from the micro level of product lifecycle management tactics through to macro-scaled portfolio lifecycle management strategies, Angell says. “Good examples come from the company's antibiotic and antifungal franchises, which have frequently featured exceptionally well timed launches of successor products with subtle elements of indication overlap and disparity.

“This has facilitated prescription switching but minimised cannibalisation risk from generic copies of the older drug, and Pfizer has reduced generic incursion further through Greenstone, its own generic subsidiary,” he says.

* Commercial Insight: Infectious Diseases Overview
** The seven major pharmaceutical markets are France, Germany, Italy, Japan, Spain, the UK and the US.

Datamonitor's report Commercial Insight: Infectious Diseases Overview examines the four major components of the chemotherapeutic anti-infectives market: Antibacterials, antifungals, antivirals and HIV. The report provides analysis of portfolio management strategies that have led to the successes and failures of key players in each area.