2018 Drug Approvals: A Closer Look

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Includes: GILD
by: Derek Lowe
Summary

2018 was quite a year, by the numbers. C&E News has a comprehensive roundup: 59 approvals (versus 46 in 2017, which was already a record by itself), and about two-thirds of those small molecules.

Interestingly, over half of those 59 (34 approvals) were for rare diseases, which is the natural outcome of the way things have been going in the industry for some years now.

And that leads to the next thing to think about: are recently approving drugs earning back the expense that went into making them?

How much of the investment money flowing into biopharma over the last few years has been coming from people who hope that they're buying into the next Gilead?

In the end, very few companies and very few drugs are going to hit like that. Maybe none.

Let's have a look at the recent new drug approvals. 2018 was quite a year, by the numbers. C&E News has a comprehensive roundup: 59 approvals (versus 46 in 2017, which was already a record by itself), and about two-thirds of those small molecules. There are some very interesting molecules in the list, and I always recommend that medicinal chemists sit down every so often and look over the structures of approved drugs as if you're seeing them for the first time (say, as screening hits).

You might be surprised at how many of them you find chemically somewhat unappealing - would you aim for an n-hexyl ether in your final structure (Mulpleta/lusutrombopag), the heterocyclic ring in the lower section of Xofluza (baloxivir marboxil), or think that 3,4-diaminopyridine (Firdapse) or Diacomet (stiripentol) could be drugs at all?

Those last two also illustrate the tricky nature of drug approval statistics. Diaminopyridine has been kicking around as a therapy since at least the early 1980s, and stiripentol was discovered in 1978. They each have taken very winding paths to final US approval. There's also Galafold (migalastat), which was isolated in 1988 and given orphan drug status by the FDA for Fabry's disease back in 2004, finally approved this year. As an extreme example, you have Aemcolo, which is rifamycin (discovered in the Eisenhower administration), approved this year for traveler's diarrhea.

These all can be contrasted with Vitrakvi (larotrectinib), which is a new kinase inhibitor (TRK fusion proteins) that went from first-in-man to FDA approval in under four years (blazing speed, if you're not in the business and wondering about that) and Onpattro (patisiran) which is the first RNA-interference-based drug to be approved anywhere at all (an impressive scientific achievement). So that 59 number is rather heterogeneous, as all year-by-year approval numbers are.

Interestingly, over half of those 59 (34 approvals) were for rare diseases, which is the natural outcome of the way things have been going in the industry for some years now. Not everyone is happy about that - C&E News quotes Peter Bach of Sloan-Kettering referring to these as "amazing science one-offs," which is pretty accurate, and noting that each of them treat only a very small number of people (albeit people who in most cases had no treatments at all before these drugs were developed). So you have people who are being helped tremendously, on the one hand (although at great expense), but not that big an impact on overall public health, on the other. If you ranked drug approval years by number of patients affected, I don't think 2018 would look as impressive.

And that leads to the next thing to think about: are recently approving drugs earning back the expense that went into making them? The first thought is "Well, they'd better," and that ain't wrong. IDEA Pharma has its annual roundup of innovation in the industry out, and they also have some thoughts about the finances involved. If you look at 2013-2017, their top-ten innovative companies still only average about one approval a year (while the bottom ten average about one approval every four years!). Interestingly, adding up R&D expenses over that time, both groups spend about $6 billion per approval. And yes, those R&D figures have various amounts of SG&A (selling, general, and administrative expenses) rolled into them, but it's money spent either way that has to be earned back. Is it?

Apparently not. There were 217 drugs approved over that time span, and so far only 6 of them have reached cumulative sales of $6 billion or more. Note, that's just sales - not profits. And it's very much a power-law-looking distribution, with Gilead's (NASDAQ:GILD) Harvoni and Solvadi raking in huge profits and most everyone else tailing off pretty quickly. Only 48 of the 217 have even added up to one billion in sales over this period. Mike Rea of IDEA sums it up this way:

So, we have a problem. Not only do most of the drugs we put into pipelines not make it to market, those that do are not even paying for their own R&D programmes, never mind the R&D for the failures around them.

Companies can talk about 'innovation' all they want, but this is an unsustainable state. Launching medicines that stand a chance of repaying their own investment has to be the measure of success, of productivity. The commercial environment is a whole lot easier to predict than the biology of the human. (Or, should be.)

Now, it's worth remembering that consulting firms have an interest in making things appear dire, because their business is coming in to fix your horrible problems. But even if you turn those figures down quite a bit, they're still unsettling. These drugs have many more years on the market, for one thing, but balancing that out is that they're likely to show declining sales over the longer term. Not everyone spent that $6 billion per approval, either - the smaller companies probably didn't, but balancing that out is that they're generally bringing out drugs with smaller sales. And so on.

It does make you think. How much of the investment money flowing into biopharma over the last few years has been coming from people who hope that they're buying into the next Gilead? The VCs and other early-stage investors are (for the most part) smarter than that, but you do wonder about the investors in the publicly traded companies. In the end, very few companies and very few drugs are going to hit like that. Maybe none.

Disclosure: None

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.