In the pharmaceutical world, fast delivery offers a critical advantage. The market knows that obesity, diabetes, cardiovascular disease, dementia and cancer pose great dangers for the aging populations of many countries. My last column looked at pharmaceutical breakthroughs and their massive benefits. Once a breakthrough is achieved, and after the euphoria of the scientific achievement ebbs, production, shipping and distribution take center stage.
For example, Bayer ( Chart BAYRY - $15.56 0.27 (1.766%) ) is working on 50 major projects in areas of high, unmet medical need. The high, unmet need is very interesting. This is where speed, production capacity and superb shipping come in. Nubeqa, one of many new products, has achieved regulatory approval in the U.S., the E.U., Brazil, Canada, China and Japan. Nubeqa promises significant improvement in helping patients become metastasis-free and overall survival.
Bayer is in the process of spending over $2 billion in the next two and a half years to upgrade its manufacturing and supply chain capabilities. Getting ready for new products and getting to market fast are the keys to success. Bayer likes to do things on its own, rather than farming out the production process. In 2024, they expect a new €275 million ($269 million) manufacturing site to come on line with a specialty in cancer and cardiovascular products. The new plant design is expected to give Bayer an edge on the competition in terms of speed and accuracy.
Hit the Ground Running
Bayer has a hefty number of products funneling through the three-stage FDA approval process. They plan to hit the ground running, pivoting fast when they get each approval. Bayer also designed the new plant with extensions that will allow rapid response when new breakthroughs are approved or when demand for popular products spikes .
Rival Johnson & Johnson ( Chart JNJ - $153.31 1.49 (0.981%) ) boasts ten separate manufacturing facilities. Watch for increasing specialization and changes made to facilitate rapid changeover to new products.
Smaller players are also looking at fast turnaround. Some of these companies manufacture and distribute for a giant company. Others make products from the growing list of drugs no longer protected by patent. Revlimid (AbbVie), Alimta (Ely Lilly), Lucentis (Roche) and Velcade (Takeda) all lose patent protection this year. Next year will give birth to many more generics.
Investors will note also that the pharma giants love to specialize. Marching behind one leading product or new breakthrough, they see great benefit in specializing in an important area of treatment and medication. Dementia has intrigued them for quite some time. For example, Donepezil (Aricept™), widely used to treat Alzheimer’s Disease, is manufactured by Mutual Pharmaceutical Co., Inc., Philadelphia, Pennsylvania ( Chart CURR - $0.17 0.0048 (2.827%) ). Eisai Inc. ( Chart ESALY - $0. 1.33 (2.109%) ) and Pfizer ( Chart PFE - $40.25 0.26 (0.65%) ) are approved for a higher dose of the medication and expect great success. Donepezil was launched more than a decade ago by Sandoz (Private).
Meanwhile, in 2021, the FDA granted accelerated approval to Biogen ( Chart BIIB - $274.01 3.76 (1.391%) ) and Japan’s Eisai for a new, breakthrough Alzheimer’s drug: Aduhelm.
Dementia faces two massive barriers. No one has found a true breakthrough. Current medications help with some symptoms but nothing approaching a cure has been found. In addition, the term dementia is misleading. It is a catch-all phrase for many separate diseases with different symptoms, all of which are without a breakthrough cure. As we know from previous entries, R&D is expensive and easy to abandon, especially after years of not getting results. Competition is stiff but success is fleeting. Roche ( Chart RHHBY - $35.45 0.57 (1.634%) ), Amgen ( Chart AMGN - $241.03 2.55 (1.069%) ), Novartis ( Chart NVS - $90.19 0.76 (0.836%) ), Merck ( Chart MRK - $104.92 0.61 (0.578%) ), Pfizer, Eli Lilly ( Chart LLY - $335.87 1.78 (0.527%) ) and AstraZeneca ( Chart AZN - $68.64 0.04 (0.058%) ) all dropped development of their Alzheimer’s candidates in the last few years either due to low possibility of success or safety concerns.
The level of competition makes it more difficult for a single company to control a major area of pharmaceutical development, even though it’s clearly the pathway to success.
Michael McTague, Ph.D. is Executive Vice President at Able Global Partners in New York, a private equity firm.