Epoch 37: Three Key Industry Shaping Trends for Biopharma 2050

Pharma Rankings, Franchise Compression, Blockbuster vs Precision Medicines

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Hello Avatar! Welcome back for another week of biotech analysis. This week we will build on our recent forward looking writings which aim to pinpoint current and emerging potential industry reshaping trends as a guide to the next multi-decade biopharma cycle.  The three emerging themes we will go into detail on are: a) Franchise Compression, b) More Biotech, and c) Precision Genetic Medicines.  Specifically, the concept of franchise compression refers to the trend shift to multi-indication franchise products, but with the requirement to build in parallel due to the IRA and learnings from the pandemic.  More biotech refers to the shift toward more and more pharma substrates being sourced from the biotech world.  This is likely to accelerate as pharma top lines and R&D budgets come under pressure from the IRA and other ex-US policies.  Finally, the move from blockbuster to precision medicines is not a new concept, but the driver and accelerator of how and why that will happen is based on recent industry shifts.  Before digging into those themes we will begin with a run through the recent pharma market caps where a re-ordering is occurring.

Monday’s equity research will focus on Ambrx Biopharma ($AMAM) with an anticipated data update on AMX-517 in prostate cancer coming at ESMO.  We flag because the options market is signaling “off the charts volatility” and we know some of you love to play the volatility.

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Enough shilling for the day, lots to cover this week, let's get started!

INTRO

Consider this week an addendum to our recent writings where we explored future industry trends.  Obviously looking out so far into the future is going to be a dynamic situation as present trends are shaped.  Likewise our thought process continues to evolve, which we share today.

We encourage you to explore our previous writing on these topics.

Epoch 24: BIOPHARMA HISTORY & BEYOND (Part 1 of 3) 

Epoch 25: BIOPHARMA HISTORY & BEYOND (Part 2 of 3)

Epoch 26: BIOPHARMA HISTORY & BEYOND (Part 3 of 3)

Epoch 27: Big Pharma vs. Big Tech

Epoch 28: AI for Biopharma 2050    

Epoch 29: Epoch 29: Predominant Biopharma Phenotypes in 2050 

PHARMA MARKET CAP REORDERING 

Last week we noted an interesting headline that got us thinking it is time to revisit the pharma rankings. The headline is shared below: Novo Nordisk, maker of Ozempic, unseats LVMH as European stock market’s largest company

Incredibly not only is a pharma company the largest market in Europe, it is almost certainly driven by the recent hype train around obesity therapeutics.

As we attempted to rationalize this we recalled an interesting chart in the Stifel mid-year report which ranks the pharma companies by enterprise value and compares YoY.  

Looking at the chart below, one can clearly see the “obesity” story in action as Lilly shot up from #8 in 2021, to #2 in 2023.  Likewise, Novo has rocketed from #10 to #2!

On the flip side is the failing COVID narrative where we see Pfizer drop from #3 in 2021, all the way down to #10 in 2023!  As we have stated before this does feel a bit overdone as $PFE is still a $50B/yr sales company without any COVID products and is on track for something ridiculous like 20 new approvals this year alone.

Going a bit deeper into the Stifel report is another interesting chart which tracks the pharma rankings by revenue going back 50 years!  What a cool walk down memory lane.  While the narrative today is obesity, looking at the past we can clearly see how previous narratives have shifted over time. Our take based on the largest product for each of the leading pharma for each era:

2030: ?Obesity?

2027: Merck - I/O 

2022: Pfizer - COVID

2014: Novartis - Vaccines

2005: Pfizer - Statins 

1988: Merck - Statins

1974: Roche - anti-depressants

Note above we have slotted in Obesity into the post 2030 slot as peak year sales typically take 5-7yrs to hit.  However, it is also important to note IRA effects will factor in here and there is already talk of including these drugs on the “negotiation shake down” list sooner than later.

The Stifel team (s/o Tim Opler - this guy is good….really good) takes it one step further and maps their themes by decade onto therapeutic index mix over time. From what we can see the drivers of each era appear to be:

2027: Oncology / I&I

2013: Other

2008: Cardio

1974: CNS

This appears consistent with our analysis above where we pulled the top products for each leading pharma company designated for each time period.

TRENDS UNDERWAY WHICH WILL DRIVE THE NEXT ERA OF THERAPEUTICS

With our analysis of the past complete, let's turn to the future - where do we go from here?  From a therapeutic area focus it is obvious obesity is up next, beyond that is potentially neurodegenerative disease, infectious disease via vaccine breakthroughs, and potentially as a longshot longevity therapeutics if a development path can be worked out with FDA. Our focus today will not be on the future TAs of interest, but on broader sectoral changes influencing the biopharma business model. These include: