There is no doubt that the business landscape for pharmaceutical companies has changed fundamentally. The billions of dollars invested annually into research and development has not yet translated into enough marketable products to replace those that have been lost to generic competition.

The pain of pharma's patent cliff is clearly palpable. Commenting on AstraZeneca plc's third quarter 2012 financial results, for example, CEO Pascal Soriot said, "As expected, the company's financial performance in 2012 largely reflects the ongoing impact from the loss of exclusivity for several brands in key markets, as well as the challenges that confront the pharmaceutical industry as a whole."

AstraZeneca recorded a 15 percent decline in third-quarter revenues, to $6.68 billion, as loss of exclusivity on four products – Seroquel IR, Atacand, Nexium and Merrem – played havoc with its bottom line. Revenues from schizophrenia drug Seroquel IR (quetiapine), alone, dropped by more than $850 million, or 82 percent, in the quarter.

Merck & Co. Inc. also lost market exclusivity for asthma drug Singulair (montelukast sodium) in the U.S., with global sales declining $734 million, or 55 percent, to $602 million in the third quarter of 2012. Approval of a generic version of the attention deficit hyperactivity drug Adderall XR (mixed amphetamine salts) late in the second quarter of 2012 saw sales of the product by Shire plc fall 32 percent, to $102 million, in the third quarter. (See BioWorld Today, Dec 27, 2012.)

Not Pleasant Reading

Although the numbers do not make pleasant reading, there is indeed life beyond the patent cliff, Anne O'Riordan, Accenture Life Sciences' Global Industry Managing Director, told BioWorld Insight.

The negative impact of the patent cliff peaked in 2012 and the company's research indicates that despite shifting global markets, pricing and reimbursement changes, and R&D productivity challenges, biopharma is entering a "new normal" which emphasizes among other things a focus on emerging markets.

Accenture's biopharmaceutical industry study indicates that from 2013 onward, the negative effect from sales lost due to patent expiry will lessen, and sales from the drug pipeline and current portfolio will improve.

Further, the study reveals that a few select companies have clearly articulated a new strategy to dominate in their chosen areas of focus and have quickly mobilized to build the new capabilities required to bring their strategy for growth to life. Success in the new normal will require a robust strategy for growth, and the commitment and discipline to implement a clear, focused strategy on the select areas where the pharma company can dominate and own.

R&D Efficiencies

It also will require a better research strategy that makes more effective use of invested dollars. The Pharmaceutical Research and Manufacturers of America (PhRMA) found that its member companies invested almost $50 billion in R&D in 2011.

To achieve research efficiencies there are signs that some pharma companies are taking a leaf out of biotech's playbook. John J. Castellani, PhRMA president and CEO, points to the fact that "companies are adapting to a changing research paradigm," reflecting a "shift to a more agile sector, which increasingly involves collaborative, constructive partnerships with both public and private experts."

Other steps that companies are taking include identifying efficiencies and reorganizing research structures throughout the R&D process and improving productivity and achieving other efficiencies through incorporation of new technologies, PhRMA said. (See BioWorld Insight, Dec. 10, 2012.)

According to GlaxoSmithKline's 2011 annual report, for example, the company reported it has "fundamentally changed [its] R&D organization . . . we have broken up the traditional hierarchical pharmaceutical R&D business model, creating instead smaller units to encourage greater entrepreneurialism and accountability for our scientists."

Also, at the recent J.P. Morgan Healthcare Conference William Chase, executive vice president and chief financial officer of AbbVie Inc., said the company "brings together the stability, global scale and resources of a pharmaceutical company with the focus, creativity and agility of a biotech."

AbbVie was launched at the beginning of the year as an independent biopharma, splitting from Abbott. The new company took several dozen marketed products and a portfolio of late-stage compounds in immunology, neuroscience and oncology, leaving Abbott to focus on diagnostics, medical devices, nutritionals and branded generic pharmaceuticals. (See BioWorld Today, Jan. 3, 2013.)

Pipeline is Full

Another encouraging sign that pharma companies will be able to recover from their patent cliff woes comes from a new report released last week. Developed by the Analysis Group and supported by PhRMA, the report reveals that more than 5,000 new medicines are in the pipeline globally. Of these medicines in various phases of clinical development, 70 percent are potential first-in-class.

Many of the medicines in the pipeline are also for diseases for which no new therapies have been approved in the last decade. For example, there are 158 potential therapies for ovarian cancer, 19 for sickle cell disease and 41 for small cell lung cancer. (See BioWorld Today, Jan. 18, 2013.)

Emerging Markets

While there are multiple paths for pharma companies to differentiate in the new normal, one of the important growth strategies focuses on expansion into emerging markets, O'Riordan noted.

One of the companies jumping in Accenture's research company rankings is Sanofi SA, which they said, under new leadership, has made a decisive move to rapidly diversify its portfolio away from a reliance on a few new blockbuster approvals alone. It is now targeting 40 percent of its revenue to come from emerging markets.

GSK noted in its 2011 annual report, the company has been re-shaping its business to capitalize on the higher growth potential of markets outside Europe and the U.S. These territories now account for 38 percent of the company's total sales.

It is not surprising that companies are eyeing markets in Latin America and Asia Pacific regions. According to the IMS Health Market Prognosis in May 2012 the compound annual growth rate for the pharmaceutical markets in these regions over the next four years is projected to be between 10 percent and 13 percent. The CAGR for North America and Europe for the same period is projected to be an anemic 1 percent to 4 percent.

Accenture's 2012 study is based on year-end 2011 financials and analyzes the 16 largest global pure biopharmaceutical companies (those with more than 75 percent of their revenue derived from patented or generic biopharmaceutical products) over a seven-year period. Collectively these companies had $487 billion in 2011 aggregate revenue, and represented a 54 percent share of the global pharmaceutical market.