With the year coming to an end, the worst of the patent cliff faced by the pharmaceutical sector in recent times is over. Although genericization will continue, the major patent expiries are over and done with.
Many companies which had faced generic headwinds in the last couple of years should continue to see a sustained improvement in results as they move into 2014. Cost-cutting, downsizing, streamlining of the pipeline, growth in emerging markets and new product launches should support growth. Meanwhile, increased pipeline visibility and appropriate utilization of cash should increase confidence in the sector.
Acquisitions & Divestments
Acquisitions as well as divestments will continue in the pharma sector with several companies pursuing bolt-on acquisitions, in-licensing deals and collaborations for the development of pipeline candidates. The in-licensing of promising mid-stage candidates by big pharma companies has gone up significantly – this makes sense as it helps the companies cut down on the time and cost involved in developing a product from scratch.
A major part of the in-licensing activity is focused on therapeutic areas like oncology, central nervous system disorders, diabetes and immunology/inflammation. The hepatitis C virus (HCV) market is also attracting a lot of attention.
Another recent trend is the divestment/monetization of non-core assets so that the companies may focus on their core areas of expertise. Biosimilars are also a focus area. (Read: Play Surging US Manufacturing with these Industrial ETFs)
Restructuring activities are also gaining momentum as large pharma companies are looking to cut costs and streamline their operations. Most of these companies are re-evaluating their pipelines and discontinuing programs which do not have a favorable risk-benefit profile.
The pharma industry has also been looking towards emerging markets for growth. However, bribery investigations on some pharma companies in China, one of the most promising emerging markets, could put a lid on near-term growth.
New Drugs to Drive Growth
Several important products have gained approval so far this year including oral multiple sclerosis drug Tecfidera, type II diabetes drug Invokana, Liptruzet (cholesterol), Fetzima (major depressive disorder), Imbruvica (mantle cell lymphoma), Gazyva (chronic lymphocytic leukemia) and Sovaldi (HCV). Tecfidera is off to a strong start with its sales surpassing expectations by a wide margin.