Innovation is on a roll with the sector establishing a record of 59 new molecular entities (NMEs) gaining U.S. approval last year, a 22 percent increase over the 46 medicines approved in 2017, and six more than the previous industry high-water mark for the number of NMEs approved in one year in the U.S. established back in 1996. In addition, for the first time ever, the FDA approved more orphan drugs than non-orphans and the number of big pharma approvals fell.

The focus of these new medicines away from mass markets to more targeted patient populations are signs that there is a significant shift taking place in the research investments that are being made in product development. According to a new report published by Clarivate Analytics, only seven of the new drugs to hit the market are likely to achieve more than $1 billion in annual sales by 2023. (See BioWorld, March 20, 2019.)

The FDA noted that 58 percent of the approved 2018 drugs are indicated for rare or orphan diseases that affect 200,000 or fewer Americans. It is only a comparatively recent phenomenon for pharmaceutical companies to have put rare disease on their radar screens. Previously, the limited market for therapies designated for any single rare disease discouraged any major investment effort. However, this attitude has changed dramatically and the industry has started to shift the strategic focus of its research to embrace rare diseases and other niche areas. This has been catalyzed in part by the slowing down in growth due to patent expirations, generic competition, thinning product pipelines, and increasingly stringent regulatory guidelines.

For example, New York-based Pfizer Inc. is involved in several orphan drug projects and in January it said the FDA had accepted for filing its NDAs for tafamidis for the treatment of transthyretin amyloid cardiomyopathy (ATTR-CM). The target Prescription Drug User Fee Act (PDUFA) action date for an agency decision is in July this year.

Shifting away

The shift away from larger market drugs to more niche indications reflects the change in R&D focus of biopharma companies, Roger Humphrey, executive managing director and leader of JLL's Life Sciences group, told BioWorld Insight.

With research focused mainly on blockbuster drugs slowing down, going forward pharma companies will now need to adopt agile real estate strategies and more nimble approaches as they reinvent their research and development strategies and compete with mid-tier companies that are doubling down on product innovation and delivery.

"All of our clients are looking carefully at how laboratory space should be configured going forward," Humphrey explained.

This is one of the insights that JLL, a professional services and investment management company specializing in commercial real estate, gleaned from interviews with executives at 15 leading biopharmaceutical and medical device companies and published in its Journey to the next gen lab report.

Flexibility

More flexible facilities are now required to accommodate the increasing use of data science in bioscience research. "A traditional R&D facility would consist of mostly lab space and a small proportion of office space," Humphrey explained. There is evidence that, the increasing importance of computational biology and artificial intelligence (AI) in drug development is exerting an influence on how lab space is now being utilized.

Today's scientists need space that can be easily reconfigured to accommodate different kinds of research and facilitate interaction with colleagues, the report observes. "Mobile benches and unassigned workspaces, for example, allow for fast changes in personnel and the type of work being performed."

The traditional 75-25 split between lab and office and computational space is now giving way to an equal allocation.

"We also see continuing investment in hot markets," added Humphrey. Not only are companies looking to locate into active biotech hubs such as Boston and San Francisco but companies already located there are expanding.

Despite the higher costs of being situated in these cities companies are willing to pay the price because they gain valuable access to talent and a world leading research ecosystem.

JLL is also seeing that there is fierce competition in the labor markets for data scientists. Big pharma companies are not only looking for scientific expertise but also computational scientists as their R&D evolves.

Major drivers

These industry realities are transforming how new products are discovered, manufactured and brought to market – and will drive real estate and facilities decisions. JLL notes several other key trends that will impact the pharma industry going forward including partnering with startups or licensing technology to fuel their own drug pipelines. Outsourcing R&D will continue and help reduce the cost of internal product development.

With real estate costs at all-time highs and availability at all-time lows, incubators are being created to fill a critical facilities gap. This means that emerging companies do have the ability to locate and grow in the leading biotech clusters.

Diversifying risk across pipelines will also be a significant trend. Humphrey concluded that mid-tier companies are expected to stay focused on the product business that has brought them success in the past, "while looking to trusted partners for non-core services, including real estate services, so they can prioritize innovation and accelerate agility."