Which are pharma’s most innovative companies?

pharmafile | December 11, 2015 | Feature | Medical Communications, Research and Development GSK, Roche, research and development 

It has been a record-breaking year for the pharmaceutical industry in terms of deals, but what about the underlying innovation taking place in the sector?

Earlier this month, Thomson Reuters published its 2015 Top 100 Global Innovators Report, which highlights world leaders in innovation. Seven pharmaceutical companies are present in the Top 100, while a number of other companies, listed under other industries, also maintain some pharmaceutical interest.

Roche are present for the fifth year running since the inception of the program in 2011. Abbott (including its spin-out, AbbVie), and Johnson & Johnson are present for the third consecutive year. Novartis, which entered for the first time in 2014, is again present. Bayer and Bristol-Myers Squibb (BMS) enter for the second time after a gap of three years, and Boehringer Ingelheim appears in the Top 100 for the first time. This appears to confirm the belief that concerns about the number of major drugs coming off-patent and the loss of revenue resulting from generic competition has resulted in increasing innovation in the pharma sphere.

The list is compiled by analysing data from patents filed by companies to protect their innovations. This examines several factors, including the number of patents published over a five-year period, application-to-grant success rate, global success, and the number of citations of an organisation’s patents by others. The first three factors consider how important the innovation is to the originating company, and the latter provides an indication of the importance assigned to the innovation by others.

While it is not surprising to see large organisations with major drug pipelines – such as J&J, Novartis and Roche – in the Top 100, the list does contain some surprises. Other large international companies, including GlaxoSmithKline and Pfizer, fall outside the list.  Does this indicate that these large organisations, which resulted from several mega-mergers, are less innovative than others? Or could it be they have a different patent strategy, filing fewer but more relevant patents?

The fastlane to innovation

Both GSK and Pfizer have a considerably smaller patent volume over the period than other major pharma firms. This could be due to the type of research being conducted. Companies which originated a higher percentage of biological drugs registered or launched in the last five years also show a considerably larger number of patents, reflecting the complexity of protecting such biologicals, and their manufacture and use.

This may mean that companies heavily involved in developing biologicals are more likely to appear in the Top 100 than others developing simpler products, which require fewer patents to protect them. For example, over 50% of drugs registered or launched in the last five years by Roche, which has Genentech as a subsidiary, were biologicals.

But this does not, however, fully explain the situation. For example, BMS has similar patent volume and globalisation metrics to Pfizer and GSK. Its percentage of biological-to-small molecule drugs is also similar. However, BMS patents are more highly-cited than Pfizer or GSK, giving a higher influence score, which means that BMS is included, whilst the others are not.

So is BMS actually more innovative? A review in Thomson Reuters Cortellis shows that in numerical terms, BMS originated approximately 92% of drugs registered or launched by the company in the same five-year period. Similarly, a review of the number of known candidates in early-stage development  (Phase I) and mid-stage development (Phase II or III) shows that in numerical terms BMS originated more drug candidates than were currently in active development, whilst many other companies are net acquirers. 

2015: The year of the deal

Recent deals may also provide some indication that pharma companies in general see the need to improve their innovation, and explain why they are on the Top 100 list.  

The deal completed earlier this year between Novartis and GSK – in which GSK acquired Novartis’ vaccine business (excluding influenza vaccines) and Novartis acquired GSK’s oncology drugs and candidates (and the relevant IP) – would indicate a need to improve for both companies. Indeed, a GSK circular issued in November 2014 reported that in 2013 the Novartis vaccines business delivered a (smaller) core operating loss of £73 million, which it stated had reflected “continuing heavy investment in research and development”. This would presumably be reflected in Novartis’s Top 100 position, alongside its large well-globalised patent portfolio. How this pipeline swap will affect future innovation and their appearance in the Top 100 is yet to be seen.  

Pfizer, most notably, has a continuing history of large mergers together with smaller strategic ones, to grow its pipeline. Most recently, Pfizer’s $160 billion acquisition of Allergan, although seen by many in the media as a means of considerably reducing Pfizer’s tax bill, could well be an indication that the company’s good-sized early stage pipeline will take time to bear fruit, and there is a need to compensate for patent expiries in the nearer term. This deal may well give the results of current innovation time to come to fruition.

In addition to bringing in a number of existing products and candidates, the accompanying IP will mean that for future Top 100 reports, the volume of patents belonging to Pfizer and its subsidiaries will have increased. Alongside this, it can be reasonably assumed that the merged company will follow Pfizer’s current patent strategy of strong globalisation, alongside a high grant-to-application ratio. Consequently, we may well expect to see Pfizer appearing in the 2016 or 2017 Top 100 Global Innovators, once the results of the merger and implementation of the patent strategy begins to show.

Where’s the UK?

With the UK missing from the list entirely once again this year, one has to ask how it can improve its position. One reason is that the UK economy is heavily biased towards services rather than manufacturing, resulting in less patenting. But the UK also does not spend as much on R&D as a proportion of GDP as other similar economies, such as France.

The UK is a recognised world leader in science and research, but much of the discovery that happens here is commercialised and manufactured into new products abroad. Government incentives like the Patent Box legislation will see companies pay a lower rate of corporation tax on profits derived from patented inventions. The legislation has not been around long enough for us to see its impact on the Top 100 Innovators report, but we should see signs of improvement in the future.

Diversification beyond pharmaceuticals

One unsurprising re-entry into the Top 100 is Bayer. It is perhaps more surprising that a company with a strong mix of pharmaceuticals, agrochemicals, veterinary products and general chemicals and APIs exited the list at all in the previous years. On pharmaceutical performance alone, it is likely that the company would still have made the Top 100 – but in a much lower position, due to the lower patent volumes. The increased importance of enhanced food production and the accompanying importance of the agrochemical sector also plays a large part in Bayer’s re-emergence. 

Bayer is not the only company in the list with interests in several sectors. Alongside the seven ‘pharma’ companies listed, there are other companies such as General Electric, with its GE Healthcare division; Canon, Fujifilm and Olympus with their healthcare and imaging businesses; and pure medical device companies. In the latter category, Medtronic appears for the second consecutive year, whilst Becton Dickinson enters the list anew. The growing importance of medical device companies can also be seen in the Bay Area section of the Top 100 report. Eleven of the companies in that area are listed as medical dDevice companies, although two are Abbott companies (Abbott Cardiovascular Systems and Abbott Diabetes Care) which would appear under Abbott/Abbvie in the Top 100.

Last, but certainly not least, Google – now Alphabet – appears in the Top 100 and certainly would not usually be considered a pharmaceutical player. Nevertheless, it has produced a number of patents over the last year in the medical device space. At least one of these inventions is being developed further in partnership with Novartis, through its Alcon eye care division.

Novartis is planning the first human tests of a “smart” contact lens it is developing with Google, designed to help restore the eye’s natural autofocus. Novartis speaks about a smart lens for accommodative vision correction in people with presbyopia, or age-related long sightedness, who can no longer read without glasses.

Under an agreement signed with Google in 2014, Novartis is also developing smart contact lenses to help diabetics track their blood glucose levels.  Maybe this ‘far-sighted’ agreement shows that Novartis certainly deserves its place in the innovation Top 100 and that in the future we will need a different view of which companies are defined as ‘pharmaceutical’ or ‘medical devices’. We are certainly finding that the distinctions between industries are increasingly blurred in a world transformed by technological advances.

Gez Cross is life science analyst and Bob Stembridge is senior IP analyst at Thomson Reuters.

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