An alternative strategy
At the bottom of the list you’ll notice Bristol-Myers Squibb with $3.9 billion in R&D spending last year, a 12% increase over 2009. What’s really different about Bristol-Myers relative to the rest of its peers is that it’s planning to grow its pipeline more through acquisitions than wholly through organic research (known as its string of pearls strategy). There can be both upsides and downsides to this approach, though.
In January 2012, Bristol-Myers agreed to purchase Inhibitex for $2.5 billion to get ahold of its experimental early stage hepatitis-C therapy known as INX-189. However, the reach for early stage success would come back to haunt Bristol-Myers with BMS-986094 (INX-189 was renamed to BMS-986094 after the acquisition) causing the death of a patient and hospitalizing others. All told, the drug was shelved and $1.8 billion of the transaction was written off.
Perhaps Bristol-Myers should rethink its strategy because organic partnership advancements have really been the most exciting source of its future growth. The recent approval of blood-thinner Eliquis with Pfizer has peak sales potential of up to $5 billion while its partnership with AstraZeneca has kicked out a potential blockbuster in Forxiga, an SGLT-2 inhibitor for type 2 diabetes that’s currently approved in Europe. If you’re listening Bristol-Myers, stick to the buddy system… it works!
An ominous decline
Last, but not least, Novartis was the odd one out delivering the only R&D spending decline of the group. Part of this could be because Novartis’ patent cliff isn’t nearly as steep over the coming years as its peers.
Another big reason to potentially spend less on R&D is if your success rate is higher than that of your peers. As it relates to obtaining drugs with the highly coveted breakthrough therapy designation, no company is more prolific than Novartis.
Novartis’ LDK378 is a true standout as a potential breakthrough treatment for ALK-positive non-small-cell lung cancer. In a 114-patient early stage study, the highest dosage delivered an overall response rate of 60% and could give the company enough data to file for a new drug application as early as next year.
Serelaxin, in turn, reduced mortality relates as an acute heart failure therapy by 37% in a late-stage trial. If approved, it would become the first new acute heart failure drug in more than two decades.
Novartis also plays a key role in Pfizer’s potential metastatic breast cancer breakthrough therapy palbociclib. You see, Novartis’ Femara is given in conjunction with palbociclib and would simply come along for the ride should it be approved by the FDA. It’s certainly a bit odd to see Novartis’ spending down, but it’s hard to argue against this success.
The takeaway
So what did we learn here? Primarily that R&D spending isn’t a guarantee of success, but it does serve as a good starting point for research. Ultimately, partnerships and pipeline diversity appear to hold the biggest key to whether a pharmaceutical company is successful in replacing expiring therapies.
The article The Pharmaceutical Industry’s 10 Biggest R&D Budgets originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends Johnson & Johnson. It also recommends ImmunoGen.
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