January 1, 2009 (Vol. 29, No. 1)
Market Conservatively Estimated to Grow at 15% Annually
Protein-based therapeutics may be moving from a second-string opportunity to a first-draft prospect. The market for protein-based therapeutics is significant and growing at a rate that is well above what one would call average for the therapeutics/pharmaceuticals industry. A large product pipeline and many competitors are operating in the market and will continue to do so, presaging high growth, at least in the long term.
There are many protein-based therapeutic products currently in clinical trials and there are probably at least as many in preclinical stages. But the number of FDA-approved products has been declining over the last two years and has decreased significantly in recent years. Moreover, those products that have been approved recently have been less novel than previous entries, with less impact on economics and healthcare.
The trend has been more toward a me-too approach and the use of existing technologies (monoclonal antibodies in particular) to develop new biopharmaceutical products. More and more biopharmaceutical development projects are addressing fewer and fewer new disease targets.
At this point in time, market expansion will primarily be affected by the introduction of new products; but also through the introduction of existing products for additional indications. This is especially true for cytokines, hematopoiesis factors, and vaccines—particulary cancer vaccines. The markets for these products are expected to experience robust growth over the next ten years, and the addition of indications to the labeling will be important.
There is continual reference to protein therapeutics as if this concept were one class of therapeutics, unified by a single type of compound—a protein. Nothing can be further from the truth. Each substance or group of substances associated with protein therapeutics does have one thing in common—they are all composed primarily of a-amino acids; and these a-amino acids are linked together by a peptide bond. In this report, we consider four classes of protein-based therapeutics: peptides, proteins, enzymes, and antibodies.
We estimate the total global market for protein-based therapeutics to be growing at an average annual rate of 15%. Kalorama is somewhat conservative as compared to other market watchers. Our estimate is somewhat smaller than most estimates, the largest of which has been given at 30% per year. Such a larger figure is hardly sustainable over the next ten years, or possibly the next five.
What is expected to happen is that some segments will continue to grow more rapidly than others, and the market composition will change. Some segments will grow at a fairly constant rate, and one or more may plateau within the next five years. Some may eventually find competition from biosimilars, creating pricing competition that will put downward pressure on the dollar growth of the market. Overall, however, we believe that a 15% growth rate is sustainable, on the average, over the next ten years.
Protein-based therapeutics are generally high-priced. In 2006, recombinant biopharmaceuticals alone had global sales of nearly $65 billion. That figure represents between 10 and 15% of the world’s pharmaceutical market. More than 150 biopharmaceutical products are currently marketed, and over 400 more are in advanced stages of testing and clinical trials.
There are many me-too products in development. With that level of me-too products in the pipeline and virtually no differentiation in technology, one would expect there to eventually be significant competition based on price, the lowering of the price points, and dollar-dilution of the market. This is what is normally seen, for example, in diagnostics. It is sometimes seen in the ethical pharmaceuticals market, and likewise an occasional occurrence in the OTC markets. But the major factor in cutting price-point is the existence of generics. When only branded products exist, there is little impetus to deal on price because physicians prescribe therapeutics and the patient has little or no say in the election of products used.
The concept of biosimilars (generic biologics) has not yet gained hold. The FDA is finding ways to promote this, as are insurers, but the barriers are not readily coming down. This situation is not reflective of the transition to generic small molecule drugs in 1984. The cost and complexity of meeting current FDA requirements for biosimilars are too onerous to allow a direct comparison with, and cost reduction parity, small-molecule drugs. There will be, therefore, no generic competition from the U.S. in the near future, although countries such as India are moving ahead in this area.
Currently, marketed protein-based therapeutics carry high prices due to the major costs of: discovery, in terms of basic research; development and clinical trials; and production and complexities. These are all valid justifications. However, with the rising costs of healthcare overall, such justifications may not be sufficient. Indeed, many such therapeutics are rapidly listed as experimental by insurers, avoiding reimbursement of these costs.
It is generally the rule that companies that are first-to-market with a particular product will tend to dominate that segment of the market. Such will be true despite the series of me-too products that follow. This, however, is expected to be a short-term phenomenon for most protein-based therapeutics. The me-too products can never fully erode the first-to-market position. They can chip away at it a bit, but the dominance will remain—for the short term.
Protein-based therapeutics is a field with a vast number of opportunities. The delineation of market dominance will, in the long run, be decided, not by the early stages of market position and revenues, but by the technology positions achieved that allow more effective treatments. Among these may be protein-based therapeutics delivery technology or new cell or tissue targeting approaches. This is something that has not been lost to most of the participants in the field, and they are deciding now where and what they want to be as time goes by.
At the present time, there are at least 213 companies active in various aspects of protein-based therapeutics development. This is at, or greater than, the saturation level for the industry at this time. There is no doubt that some new companies will be started based on either an existing technology or something that the company believes is novel, whether it is practical or not. Presently, the industry is at an equilibrium—companies at the lower end leaving and entering at about the same rate, and a small number of protein-based therapeutics companies being acquired by the more-established participants.
Barriers to entry have increased and will continue to do so. The number of me-too companies has increased competition in certain product areas to a point where it will eventually become unprofitable to work in this manner. It will also become more difficult to finance such work. The investment markets and credit lines have hit a major crisis at this time, and the time it will take for them to recover is unknown.
Andrea Hiller ([email protected]) is the marketing and
market metrics manager for Kalorama Information. The firm’s protein therapeutics report is available at www.kaloramainformation.com.