EvaluatePharma_World_Preview_2018

WorldPreview2018EmbracingthePatentCliffWelcometotheEvaluatePharmaWorldPreview2018ThefiftheditionofEvaluatePharma’sWorldPreviewbringstogethermanyofouranalysestoprovideatoplevelinsight,fromtheworld’sfinancialmarkets,intotheexpectedperformanceoftheindustrybetweennowand2018.BasedonEvaluatePharma’scoverageoftheworld’sleading3,500pharmaceuticalandbiotechcompanies,theWorldPreviewhighlightstrendsinprescriptiondrugsales,patentrisk,R&Dspend,globalbrandsalesandmarketperformancebytherapyarea.Alsoincludedinthereportisabriefreviewof2011performance.Additionalcopiesareavailableat:’sfinancialmarkets.EvaluatePharma’sforwardlookingviewofthemarketishugelyinfluentialasitdisplaystheconsensusofexpectations,whichinfluencecompanystockmarketvaluations.Theforecastsofequityanalystsrevealtheirperspectivesonindividualcompanyperformance,industrytrendsandthemacroeconomicenvironment.EvaluatePharmahascapturedtheconsensusforecastsofequityanalystsandseamlesslyintegratedthemwiththehistoricresults,asreportedbycompanies.Fromthiscomprehensiveviewoftheindustry,itspastandexpectedfutureperformanceemergesandcanbeanalysedusingEvaluatePharma.Analysesrangefromtotalmarkettrendsandtherapeuticoverviewstoindividualcompanyperformanceandproductprogress.Whateveryourviewonthefutureoftheindustry,EvaluatePharmaistheessentialguidetovalueinthepharmaandbiotechsector.TofindoutmoreaboutthisreportandEvaluatePharmaservicescontactus:ƒNorthAmericaDebbiePaulTel:1-617-573-9453Email:[e-mail]ƒRestoftheWorldWillHauTel:[phone]Email:[e-mail]ƒAsiaPacificHiroshiYamazakiTel:[phone]Email:[e-mail]ƒGeneralinquiriesaboutthisreportChristineLindgrenTel:1-617-573-9458Email:[e-mail]tualpropertyrightsinthisreportremainthatofEvaluatePharmaand/oritsrespectivethirdpartylicensors.Whilstallreason-ablestepshavebeentakentoensurethatthedatapresentedareaccurate,EvaluatePharmaLtdcannotacceptresponsibilityforerrorsoromissions.NeitherdoesEvaluatePharmaLtdwarranttheaccuracy,merchantabilityorfitnessforaparticularpurposeofthedata.Nothinginthereportsshallconstituteinvestment,financialorlegaladviceandthecontentsofthereportsareprovidedforinformationpurposesonly.Thedataisnotintendedtoamounttoadviceandshouldnotbeusedasadeterminingfactorinanyinvestmentdecision.Thisreportmaynotbelent,resold,hiredoutorotherwisedisposedofbywayoftradeinanyformofbindingorcoverotherthanthatinwhichitispublished,withoutthepriorwrittenconsentofEvaluatePharmaLtd.Copyright©2012EvaluatePharmaLtd.Allrightsreserved.June20122Copyright©2012EvaluatePharmaLtd.Allrightsreserved.astyear’seditionoftheWorldPreviewhighlightedthatprescriptiondrugsaleswereforecasttoincreaseby4%peryearbetween2010and2016.Thiswasbasedonaconsensusofforecastsfromleadingequityanalysts.Inthisedition,wecanreportforecastIndustrygrowthat3.1%peryearbetween2011and2018.ThereductioninforecastgrowthismainlyduetothedeclineintheeuroandthetranslatedvalueofsalesintoUSdollars.Inthisyear’sWorldPreviewwehaveadded,forthefirsttime,ageographicanalysislookingattheperformanceoftheUS,EuropeandJapanpharmaceuticalmarketsin2011(pages8-11).Theanalysisrevealsmajormarketgrowthflat-liningin2011,withlittleornogrowthintheUS(+0.8%),adeclineinEuropeof2.8%andamodest3.0%growthinJapan.Whatisthepatentcliff?Anindividualcompany’spatentcliffisusuallytheresultofawaveofsuccessfulproductsreachingtheendoftheirpatentedlife.Itisworthnotingthatthepatentcliffof2012iscausedbyproductsthatwerediscoveredinthelate1980s1.Acompanyapproachingapatentcliff,3-5yearspriortopatentexpiryofoneormoreblockbusters,usuallysuffersastallingshareprice,duetoanaturalplateauinthenetpresentvalue(NPV)oftheproductscontributingthemosttothevalueofthecompanyandchanginginvestorexpectationaboutfuturegrowthpotential.Thebiggestpatentcliffthepharmaceuticalindustryhaseverseeniscurrentlyhittinghard,with$33bnofsalesforecasttobelostin2012(page7).Thishasledsomecompaniesontheedgeoftheirownpatentclifftoinvestheavilyinacquisitions,licensingandR&Dinanattempttoreplacetherevenuesandearningsduetobelost.Ismanagements’reactiontothepatentclifftherealissue?Thepatentcliffinitsownrightmaynotbetheproblem:morethereactionsofmanagementtoit.Foracompanyfacingapatentcliff,adecliningsharepricecouldevenbeseenasasignofasuccessfullyruncompany–ifexcesscashisbeingreturnedtoshareholdersviadividends.Ifadrugcompanyweresimplytocollectthecashflowsandputthemoneyinthebankthesharepricewouldremainstable,amodeladoptedbyPDLBiopharma(page35).Butbecausemostmanagersdonotfollowthisbusinessmodel,theystartspendingthesurpluscash,therebycreatingariskiercompany,withtheassumptionthatrevenuesandearningscanbesmoothed.Fillingthepipelinegaporpoorinvestmentchoices?TheIndustryhasspent$1.1trillionoverthelast10yearsinR&D(page15).Withhindsightthisappearstobeaninefficientuseofthissurpluscash.Itiso