Epoch 7: Decoding Signals That Move Big Pharma Stocks
Business Model Shifts, MegaBlockbuster Products, Growth Forecasts
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Hello Avatar! Welcome back for another week of biotech analysis. As a reminder, we refer to our Sunday newsletters as the Building Biotech Series and focus on strategy topics. This week we will be looking at how pharma stocks move. Given the size of their market caps, these companies are often less sensitive to individual data readouts and approval decisions as compared to smaller biotech companies. So how exactly do these stocks move? Today we are going to get into all of that. We will start with an analysis of the challenges of the business model, we then shift to current trend shifts in the business model before moving to analysis on what specifically moves these stocks. Finally we will wrap up on the go-forward implications of these trends and what the pharma model may evolve to in the near future.
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Enough shilling for the day, lots to cover this week, let's get started!
A SEISMIC SHIFT HAS BEEN UNDERWAY IN BIG PHARMA’S LANDSCAPE
If you have been following us it should be no surprise that we see the pharma business model at a crossroads. It appears that these companies have become too big as growth off a $30B+ topline appears challenging to consistently deliver via the blockbuster model. As a result we have seen just about every pharma deliver massive cost saving cuts across the board which include scaling back jobs and drug programs.
The next leg of the search for growth journey appears to be a shift in focus toward mega-blockbuster products. This is clear from the recent success of Lilly and Novo from GLP-1s. Merck is another recent example with Keytruda, and Pfizer with the COVID vaccine (unfortunately for them the life cycle of that mega blockbuster is extremely truncated). As you will see today, companies with mega-blockbuster products unsurprisingly also hold high topline growth projections with consensus from the street. This is driving their stock prices UP!
After we demonstrate how pharma focus has shifted to megablockbusters, and prove how growth is linked to this target product profile (TPP), we will shift the discussion to what comes next? There is likely another 10-20 years of CAGR from megablockbuster left to sustain the pharma model as we know it.
However, over the next 2 decades we are sure to see incredible breakthroughs from genetic medicine - potentially even curative. What is to come from these once highly valued platform companies if their revenues are not sufficient to move pharma toplines? Will they need to build their own commercial capability? We will cover this topic today as well.
Finally, this is not a new topic for us. If you missed our previous writings on the evolving pharma business model we encourage you to check them out:
Epoch 9: Pharma Business Model Dead on the Vine?
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Epoch 27: Big Pharma vs. Big Tech
Welcome to the 19 NEW Biotech Innovators who have joined us this month! If you haven’t subscribed, join the 1,203 researchers, investors, operators, academics, clinicians and entrepreneurs by subscribing here: Hello Avatar! Welcome back for another week of biotech analysis. If you stuck with us over the past 3 weeks you understand where the market is heading into 2050. If you missed the discussion, the TLDR is that we are heading toward what some refer to as the Algorithm Era - which will be shaped by AI guided personalized medicines. During this transformation the industry is likely to be reshaped. One view is that Big Pharma would slowly shrink and smaller organizations capable of high growth and operating more efficient precision medicine driven R&D and commercial operations will take their place. Tomorrow’s therapeutics driven organizations may very well look more like Big Tech than Big pharma. With that in mind, we wanted to have a close comparison of the two business models and see if there are any learnings to extract which may serve as a guide into 2050.
Epoch 5: Is Pharma Too Big to Succeed?
Welcome to the 57 NEW Biotech Innovators who have joined us this month! If you haven’t subscribed, join the 1067 researchers, investors, operators, academics, clinicians and entrepreneurs by subscribing here: Hello Avatar! Welcome back for another week of biotech analysis. This week we are diving into the topic of blockbuster products. The biopharmaceut…
Epoch 24: BIOPHARMA HISTORY & BEYOND (Part 1 of 3)
Welcome to the 15 NEW Biotech Innovators who have joined us this month! If you haven’t subscribed, join the 1,194 researchers, investors, operators, academics, clinicians and entrepreneurs by subscribing here: Hello Avatar! Welcome back for another week of biotech analysis. Today we will begin our much anticipated 3 part series on the history of the biopharma industry and where the path forward leads. Over the next few weeks we will leverage a Torreya/Stifel framework to review the evolution of the biopharma industry. This will begin with a look back at our past, starting from the origins of the industry in the late 1800s to early 1900s into what eventually became known as the “Big Pharma Era.” We will then transition to the “Speciality Era” in which the focus shifted from blockbuster products to rare disease, oncology, and more recently pandemic products which largely are pioneered by the biotech industry. Next week we will transition into the next phase of the industry that is just kicking off - the “Polyindication Era.” A time in which growth will be delivered via mega-blockbuster franchises for common disease which can will often be characterized as rapid franchise builds. Finally, in two weeks we will transition to the future state of biopharma - a world where classical big pharma R&D infrastructure integrates with digital technologies to usher in a new paradigm of modern medicine - the “Algorithm Era”.
Epoch 25: BIOPHARMA HISTORY & BEYOND (Part 2 of 3)
Welcome to the 23 NEW Biotech Innovators who have joined us this month! If you haven’t subscribed, join the 1,202 researchers, investors, operators, academics, clinicians and entrepreneurs by subscribing here: Hello Avatar! Welcome back for another week of biotech analysis. Today we will continue our much anticipated 3 part series on the history of the biopharma industry and where the path forward leads. The saying goes, “you can’t know where you are headed unless you know where you came from.” Last week we brought you up to speed on the early history of the industry as it matured into the “Blockbuster Era” of the 1990s into the early 2000s. We then moved to the “Specialization Era” of the mid-2000s which we are just transitioning out of. Today we will go into detail on the next phase of the industry which is just kicking off - the “Polyindicaton Era.” A time in which growth will be delivered via mega-blockbuster franchises for common disease which can be characterized as rapid franchise builds. Next week the discussion moves toward the future state of biopharma - a world where classical big pharma R&D infrastructure integrates with digital technologies to usher in a new paradigm of modern medicine - the “Algorithm Era”.
Epoch 26: BIOPHARMA HISTORY & BEYOND (Part 3 of 3)
Epoch 26: BIOPHARMA HISTORY & BEYOND (Part 3 of 3)
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Welcome to the 30 NEW Biotech Innovators who have joined us this month! If you haven’t subscribed, join the 1,210 researchers, investors, operators, academics, clinicians and entrepreneurs by subscribing here: Hello Avatar! Welcome back for another week of biotech analysis. Today we will conclude our 3 part series on the history of the biopharma industry and where the path forward leads. The saying goes, “you can’t know where you are headed unless you know where you came from.” Two weeks ago we brought you up to speed on the early history of the industry as it matured into the
CURRENT CHALLENGES TO THE PHARMA BUSINESS MODEL
Below is a figure from a recent study from Numerof & Associates outlines key challenges to the big pharma business model.
Numerof captures 9 challenges where pharma interfaces with different industry stakeholders. All of these contribute to complexity in delivering innovation, and ultimately CAGR.
The topics below are more commercially focused, an area we often do not touch on at BowtiedBiotech. However, if one truly wants to understand the challenges in delivering CAGR one must understand the commercial model. Despite the belief of the scientific community, innovative medicines do not sell themselves. Competition and government regulation is incredibly challenging to navigate. We summarize these issues below in bullet format:
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