Top 15 Pharma R&D Budgets

Ishan shukla

Project Management

Zydus Cadila(PTC)

• Over the past few years we have seen enormous changes on the R&D side of the Pharma Industry

• Mergers big and little have spawned plans to shave costs and many, many research jobs.

• Struggling to clear a path through a dangerous thicket of patent expirations and risky trials to a bright new future,

• companies have been overhauling development plans and highlighting new disease arenas as they shutter programs for some of their long-term favorites.

• And the rapid changes have been felt around the globe.

• In 2009, according to the EU's newly released Industrial R&D Investment Scorecard, the Biopharma companies among the top 1400 companies around the world actually posted an overall increase in R&D spending even as the global economic crunch triggered a setback in research spending among the entire group.

• With gains in R&D spending in Europe and the U.S. at only 2% and 1.8% respectively,

• it took a 26.5% hike in Japan to really drive the numbers up.

• And many increased their budget devoted to R&D with new mergers and acquisitions that often reflected a hefty appetite for new biotech buyouts.

Global R&D Spending

Pharma's 15 biggest spenders

Sr No. Pharma Company Spent on R&D

1 Roche $8.7B

2 Pfizer $7.4B

3 Novartis  $7.06B

4 Johnson & Johnson  $6.66B

5 Sanofi-Aventis $6.25B

6 GlaxoSmithKline $5.59B

7 Merck  $5.58B

8 Takeda Pharmaceuticals $4.64B

9 AstraZeneca $4.23B

10 Eli Lilly $4.13B

11 Bristol-Myers Squibb $3.48B

12 Boehringer Ingelheim  $3.03B

13 Abbott Laboratories $2.61B

14 Daiichi Sankyo $1.89B

15 Astellas Pharma $1.63B

• In 2009 Roche vaulted ahead in line to become the second biggest R&D spender in the world with an $8.7 billion research budget. For pharma, it's number one.

• Roche wants to protect the best of what it acquired while undergoing a top-to-bottom review of its pipeline work and licensing needs following its acquisition of Genentech ($DNA).

• Roche has been credited with an envious position among the big players in the field, without the kind of near-term patent losses that are likely to derail its annual income anytime in the immediate future.

• But Roche has nevertheless had to suffer a string of key clinical setbacks that is unusual for the pharma giant.

• One of its biggest setbacks in 2010: A late-stage failure this year for ocrelizumab, a rheumatoid arthritis therapy that had been one of the jewels in its 2009 crown of drug programs. Later in the year taspoglutide suffered its own huge setback in the clinic. Those clinical trials show once again that spending a ton of money on R&D is no protection from the huge risk of failure that dogs every study.

1.

• Once the R&D leader in the industry, Pfizer ($PFE) actually slipped a little in 2009.

• Pfizer has been working over much of the past year to swallow up Wyeth's ambitious research group.

• But the combined R&D budget--Wyeth and Pfizer combined spent $11 billion on R&D in 2008--is in line for some huge cuts

• At the beginning of this year CEO Jeffrey Kindler  outlined plans to chop $3 billion out of Pfizer's bloated R&D budget.

• By 2012, the overall R&D budget number will be downsized to $8 to $8.5 billion--along with a large number of researchers--as it falls more into line with Roche.

• Like many other drug developers, Pfizer has been treated to a drumbeat of criticism about a failure to develop new blockbusters to replace the big drugs that provide the bulk of its revenue. Those critics want to see more outsourcing and more partnerships and smaller in-house research empires.

2.

2.• This year Pfizer earned a black eye for Dimebon, which the pharma giant

licensed for $225 million upfront. That drug failed a high-profile Phase III study for Alzheimer's.

• But that's just one of a string of clinical trial failures that has frequently put Pfizer on Wall Street's whipping post.

• Now Pfizer has to dramatically complete its restructuring of R&D even as it faces its biggest clinical challenge in the company's history.

• One future spotlight for Pfizer: China. The pharma giant has been ambitiously expanding its research work in Asia as it sets its sights on one of the fest growing emerging markets on the planet.

3.• With its R&D budget rising last year Novartis  began outlining plans for an

ambitious expansion of R&D--in China. • In the words of Novartis CEO Daniel Vasella  "You have to ask yourself,

‘Where do you need to be down the road?" And clearly it is here."• Altogether Novartis has mapped plans to spend a billion dollars beefing up

its research operations in the Asian country, which will become a center of development activity for new drugs that are targeted at Asians as well as the entire world.

• This year Novartis outlined plans to pursue new cancer drugs in China, with plans to introduce its first personalized therapy for the Chinese market in 2013.

• "We are developing drugs for Chinese patients. If we can't do first-in-man trials in China, then we are ruined," Novartis research leader Chris Lu told Reuters recently.

• "We are working with the SFDA (China's State Food and Drug Administration) to see what we need to do," 

4.• At the beginning of 2009, J&J research chief Paul Stoffels was outlining

his vision for an "open innovation" framework for drug development. • "All simple diseases have been solved," Stoffels declared to the Wall

Street Journal. "The next-generation drugs, therapies, are much more complex

• That open innovation strategy, of course, has become a refrain in the pharma industry, which has been trying to do more with less these days.

• In J&J's case, the new approach to development work would also lead it to strike a deal with WuXi PharmaTech to boost the amount of R&D work being done in China--another new strategy sweeping the industry.

• J&J also took a page from the competition's play book when it went the buyout route this year.

• The pharma giant paid $2.4 billion to nab Crucell, a partner which helped lead the company to strike out with an ambitious new plan to get into the vaccine industry in a big way.

• That could cause J&J to rise in the ranks when the EU reassesses the playing field in 2011. 

5.

• Sanofi spent more money on R&D in 2009 than any other pharma

company in the EU. • Sanofi CEO Chris Viehbacher he quickly moved to the center stage on the

whole outsourcing trend, vowing to strike far more partnerships and rely far less on its in-house work.

• He followed through with a string of new deals, expanded that with an academic partnership with Harvard this year and has been aggressively reshaping the company's pipeline, determined to identify a group of lead programs that Sanofi can build a future around.

• And, of course, he's topped it all off with a slow-motion hostile takeover attempt of Genzyme in 2010.

• The restructuring has led Sanofi to move to shutter places like its Great Valley, PA facility while grabbing new space and planning big ops in Boston around its cancer plans.

• In the next two years look for lots of new work on diabetes, cancer and ophthalmology drugs.

• By the early part of 2010 Viehbacher was reporting that the company's R&D budget had shrunk seven percent in 2009.

• And the company reported an R&D portfolio comprised of "49 projects in clinical development of which 17 are in Phase III or have been submitted to the health authorities for approval.“

• Toward the end of this year Sanofi had struck a deal to sell two of its research facilities to an aggressive Covance as they forged a 10-year outsourcing deal, much like Eli Lilly had done earlier.

• Sanofi still has a long way to go delivering on new approvals from his reshaped R&D effort. But no company has stirred up more attention for the brave new world of drug discovery than Sanofi.

5.

6.• GlaxoSmithKline ($GSK) started off 2009 looking for

about 850 people it could chop out of R&D in the U.S. and the U.K., most in preclinical and early-stage development work.

• And it was R&D that GSK turned to when it needed to find much of the $1.4 billion it was determined to trim out of its budget.

• Of all the Big Pharma companies, GSK has talked the most about getting an R&D brain transplant from the biotech world, which it holds dear as a lean-and-mean research model pharma needs to follow.

• Some GSK research teams have even ordered up their own gear emblazoned with their group titles and logos to help underscore the new, small-is-better mindset.

• And GSK has made major changes in its R&D structure, spinning out a major facility in Verona, Italy as it phases out some elements of neuroscience and adds new focuses on areas like rare diseases.

• Some of GSK's cast offs are getting a second life as full-fledged biotechs in their own right.

• One group of 14 left with company IP on new pain therapies and created Convergence, helping to highlight a new generation of Big Pharma spinouts.

6.GSK

7.• After swelling enormously following its merger with Schering-Plough, Merck  took

a considerable amount of time before rolling out a plan for comprehensive downsizing in the middle of this year. With a particularly close eye on the facilities that it swept up in the merger, Merck detailed deep cuts, shuttering eight R&D facilities around the globe.

• Merck also narrowed its research focus to seven key arenas: Cardiovascular disease; diabetes and obesity; infectious disease; oncology; neuroscience and ophthalmology; respiratory and immunology; and women's health and endocrine. 

• Like its competitors, Merck has voiced a big interest in partnering as it swears off an unproductive reliance on its in-house work. And the pharma giant has identified the biosimilar business as a big new focus as it beefs up the technology and staff it needs to gain future approvals on follow-ons.

7.MERCK

• Merck is also looking for some added R&D help among its fiercest competitors.

• In a deal that would have seemed unthinkable just a few years ago, Merck joined forces with Eli Lilly and Pfizer to create a new research group in China that will collaborate on new cancer drugs.

• And Merck followed Lilly's lead recently when it struck a five-year genomic research outsourcing deal with Covance, which took over its Seattle-based gene-expression lab.

• The China gambit, collaborations, downsizing in the wake of a big merger--Merck is ringing all the bells in search of a more efficient drug discovery engine.

8.

• Like most of the big pharma companies, Takeda has an enormous patent problem. Actos, its big earner in the diabetes area, will lose patent protection next year--equivalent to the day after tomorrow in R&D circles--and Prevacid revenue is already in freefall now that the competition has arrived.

• Those patent issues figured prominently in Takeda's decision to eliminate more than a quarter of its employees in the U.S., along with hundreds of R&D staffers in a Chicago area complex.

• Takeda had shifted its R&D headquarters from Japan to Illinois just a year earlier as it sought new ways to jazz its development efforts.

• One reason why Takeda has had such an enormous patent headache is that the FDA has been steadily ratcheting up the bar on new diabetes drugs, looking for more safety data than ever before.

8.TAKEDA

• Takeda's best R&D hope may lie in Boston, where it found and bought Millennium Pharmaceuticals for $8.8 billion.

• The move, completed at a 65 percent premium for Millennium shareholders in 2008, delivered the blockbuster Velcade and a significant pipeline of oncology drugs, where the safety standard is balanced with an urgent need to find drugs offering greater efficacy for patients.

• Millennium has continued to forge its own R&D path since the buyout, with CEO Deborah Dunsire aggressively partnering with the likes of Seattle Genetics on promising new therapies.

• If Takeda can't deliver on the R&D front by itself, it will need Millennium to show them the way.

9.• Some of AstraZeneca's  biggest R&D changes still lie ahead of the

company. At the beginning of this year AZ outlined plans to hack a billion dollars, and many, many jobs, out of its R&D work by the end of 2014.

• Earlier this year AstraZeneca completed a complex grading process, assigning scores to R&D programs based on the prevalence of the disease they were targeting, their chances of success and the likelihood that payers would properly reimburse them for the therapies once they made it to the market.

• Here's what didn't make the list: thrombosis, acid reflux, ovarian and bladder cancers, systemic scleroderma, schizophrenia, bipolar disorder, depression and anxiety, hepatitis C and vaccines other than respiratory syncytial virus and influenza.

9. Astrazeneca• RSV and flu, of course, are the special province of

MedImmune, its independently operated Maryland-based biologics arm that has its own active pipeline and partnering projects underway.

• In the meantime, the entire R&D side of AstraZeneca's business is being hammered into a radically new shape.

• AstraZeneca has hired for one R&D post this year, though.• It managed to gain the services of Martin Mackay, who bolted

from the odd pairing he faced with Mikael Dolsten from Wyeth after their big merger with Pfizer.

10.

• But this year has seen a bitter harvest of bad data and troubling regulatory setbacks as Bydureon was shoved back by regulators--again.

• Shortly after it expanded its R&D work in Singapore, Lilly determined that the Asian facility should be shuttered.

• In 2009 semagacestat for Alzheimer's was one of its prize pipeline possessions.

• In 2010 it failed a critical Phase III trial. About the only big regulatory success it has had in five years, Effient, has been an underachiever in the marketplace.

• And all of Lilly's setbacks get trotted out over and over again every time there's some new mishap.

11.• Earlier this year Bristol-Myers Squibb had its first sit-down with the

investment community in three years.• Evidently, the company had been waiting for something to boast about.

And it made up for its lengthy absence by detailing 60 compounds in development, with seven in full development.

• Its late-stage drug candidates include ipilimumab, a new therapy for melanoma analysts say has real blockbuster potential.

• The FDA is expected to announce its decision on the drug before the end of this year.

• BMS acquired ipilimumab when it bought out Medarex, a key part of its pipeline overhaul. There's also brivanib (liver diseases); necitumumab (oncology), the promising dapagliflozin (diabetes); belatacept (an organ transplant drug delayed as regulators sought more info); and apixaban (a potential mega-blockbuster blood thinner) which are either in late-stage trials or filed for approval. And the company has been working on additional indications for approved drugs like Sprycel, Orencia and Onglyza

11.BMS

• The company expects five of its late-stage compounds to be launched by 2012.

• And it needs to deliver on those promises. • BMS's blockbuster Plavix loses patent protection in 2012.• There have been some setbacks along the way this year. XL-

184, a cancer drug licensed in from Exelixis, was handed back a few months ago.

• But so far there have been more advances than setbacks on the R&D side of the business this year; not bad in an industry that faces steep odds at every turn.

12.

• Big Pharma R&D budgets usually dwarf the estimated revenue expected from their experimental therapies.

• But Boehringer beat the spread just weeks ago when it delivered on its long-awaited approval of Pradaxa a blood-thinner expected to go on to earn billions in annual sales revenue.

• Boehringer has been active on the partnering side of the business but it was a latecomer to the corporate venture game.

• Back in March the company announced plans to invest $137 million in biotech companies as it sent its scout teams around the world to find the most promising new developers on the scene

• Boehringer's top three disease focuses: Cardiovascular, respiratory and cerebrovascular diseases.

13.

• Abbott's  R&D story this year has reflected all the key M&A trends seen in the industry. It bought Solvay, outlined billions in savings and followed up with deep cuts to its combined staff--with the axe falling most heavily on the newly acquired asset.

• In September Abbott outlined a plan to slash 3,000 jobs with big cuts for R&D. Solvay's pharmaceuticals unit in Marietta, GA, is being shuttered by the end of next year. And some 500 positions in the Netherlands are being eliminated along with 300 jobs in Germany.

• Abbott also completed its $450 million buyout of Facet Biotechnology earlier in the year, adding to its pipeline of experimental oncology and immunology drugs. The new Abbott compounds included daclizumab--a late stage biologic intended to treat multiple sclerosis--and oncology compounds in early- to mid-stage development. Abbott's successful bid followed Biogen Idec's failed takeover attempt. Biogen is partnered on daclizumab.

14.

• Back in 2008, Daiichi Sankyo became an early and aggressive believer in the future of emerging markets when it acquired control of India's Ranbaxy That deal not only gave the Japanese pharma company access to Ranbaxy's low-cost R&D infrastructure, it also provided the company an inside position to mount its assault on one of the globe's most attractive emerging markets.

• For Daiichi, the acquisition laid the foundation for a projected 60 percent growth spurt over the following three years. But after running through two CEOs and dealing with an enormous headache triggered by the FDA's unhappiness with Ranbaxy's manufacturing abilities, the deal hasn't gone quite as smoothly as Daiichi had hoped.

• The same year that Daiichi acquired Ranbaxy, the pharma company also acquired U3 Pharma for $234 million and put down $60 million in a pricey development pact with ArQule gaining licensing rights to a cancer compound and access to the biotech's discovery platform. That pact seems to be going well, as the two companies expanded their oncology discovery partnership a little more than a month ago.

15.

• Like other Japanese pharma companies, Astellas has been an aggressive buyer as it sought to break out of a moribund home market and spread its wings around the world.

• In Astellas's case, the expansion drive led it to OSI Pharmaceuticals in New York, which it acquired this year for $4 billion in a hostile takeover.

• To help cover the premium, Astellas wasted little time in the follow-up cost-cutting drive pinpointing facilities in Ardsley and Melville, NY, that it could live without.

• Like many pharma companies, Astellas has had the cash to pursue new deals. And like many, it's focused on the potential for experimental cancer drugs. A year ago Astellas agreed to a rich, $390 million deal it struck with Ambit for the biotech's lead cancer drug for acute myeloid leukemia.

• But Astellas's deal-making crew hasn't always been successful. In 2009 Astellas made a bid to acquire CV Therapeutics, but its $1 billion effort to nab the cardiovascular drug developer only drove the company into the hands of Gilead, which bought it out for $1.4 billion.

Summary

Sr No. Pharma CompanySpent on

R&D   Change from '08% OF Income spent on

R&D

1 Roche $8.7B (€6.4B) (+9.1%) 19.40%

2 Pfizer $7.4B (€5.4B) (-2.4 %) 15.50%

3 Novartis  $7.06B (€5.1B) (+2.5%) 16.70%

4 Johnson & Johnson  $6.66B (€4.86B) (-7.8%) 11.30%

5 Sanofi-Aventis $6.25B (€4.56B) (+0.2%) 15.30%

6 GlaxoSmithKline $5.59B (€4.08B) (+9.5%) 12.80%

7 Merck  $5.58B (€4.07B) (+21.6%) 21.3% 

8 Takeda Pharmaceuticals $4.64B (€3.39B) (+64.3 %) 29.50%

9 AstraZeneca $4.23B (€3.09B) ( -12%) 13.50%

10 Eli Lilly $4.13B (€3.01B) (+12.6%) 19.8% 

11 Bristol-Myers Squibb $3.48B (€2.54B) (+1.7%) 16.9% 

12 Boehringer Ingelheim  $3.03B (€2.21B) ( +5%) 17.40%

13 Abbott Laboratories $2.61B (€1.91B) (+2%) 8.90%

14 Daiichi Sankyo $1.89B (€1.38B) (+12.9%) 21.90%

15 Astellas Pharma $1.63B (€1.19B) (+18.3 %) 16.50%

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