The World's Most Innovative Companies 2018

FierceBiotech’s top 10 stories of the year: Mergers, cuts and setbacks

by Ben Adams

We all love a top 10: It serves as a definitive "best of the best," and sometimes a look at the top of the chart can reflect the state of an industry.

Looking back at our most-read stories shows our readers certainly like a broad range of news and features: This year, for the first time I believe, a CRO story topped our charts. It's indicative of the kind of noise the contract research industry has been making over the past few years.

Our top story, by a clear margin, was the merger of INC Research and inVentiv Health, making the pair worth around $7.4 billion in May when the deal was announced. This came around a year after Quintiles and IMS Health came together in their massive $19 billion megamerger, and at a time when Big Pharma-biotech deals have been a little sparse, to say the least.

The second largest story is less surprising, as it’s all about cuts and reorgs, and it was Shire’s change up that saw readers come to the site in tens of thousands. The biopharma said it wasn’t expecting any major staffing cuts, but closure of some sites are in the cards. This all comes after some big buys for the company, and an attempt to bring closer together its R&D operations.

The third was something of a theme in 2017: R&D “consolidation”, or in this case, GlaxoSmithKline’s new chief Emma Walmsley looking to make a statement in research by wielding the ax to dozens of pipeline meds and putting its rare disease work in the crosshairs.

Then we come to our special features: FierceBiotech’s Fierce 15 2017, and the top pharma R&D budgets for last year. This year’s crop of Fierce 15 ranged across cancer, rare disease and neuroscience, with all vying to be big hitters in the race to be a next-gen biomedical company.

The top pharma R&D budgets, meanwhile, saw Roche and Novartis top the list of big spenders, with the average top 10 pharma seeing 17% of its total revenue going into R&D, with a combined $70 billion being spent across the top 10. Stay tuned for our top ten early next year, and we’re already on the look out for the next crop of early-stage biotechs for Fierce 15 2018.

Our sixth most read story of 2017 was AbbVie’s positive phase 3 psoriasis data on its potential blockbuster risankizumab, scoring a big win against its own major blockbuster Humira, as well as Johnson & Johnson’s Stelara. AbbVie is gunning for other inflammation indications as it looks to try and head off some of the losses it will rack up from Humira biosimilars, with revenue expected from 2019.

Number seven centered on President Donald Trump’s potential NIH director pick Dr. Patrick Soon-Shiong, CEO of I-O biotech NantKwest, who was rumored to have been the best paid CEO in the world. In the end, this didn’t happen of course. In fact, Soon-Shiong had a pretty bad year after a series of investigations from healthcare news site STAT alleged that he donated millions of dollars to philanthropic causes, which later circled back to his company. A promotional video for one its pipeline meds also drew ridicule on Twitter.

Meanwhile, STAT’s senior writer Adam Feuerstein, via the power of the poll, named Soon-Shiong the worst biopharma CEO of 2017.

In at number eight was an unusual story about biotech Acerta, bought up by AstraZeneca, which it turns out faked some early preclinical data for its drug acalabrutinib. AstraZeneca admitted the falsification in the fall, after a story from Retraction Watch, blaming a “former Acerta employee who acted alone.”

This got a lot of views, but did not upset the apple cart for AZ, as acalabrutinib was in fact approved by the FDA just a few weeks later as Calquence for certain blood cancers.

Number nine was related to the drawn-out saga of Elizabeth Holmes and her beleaguered Theranos. We ran many stories on this for FierceMedTech, but the most viewed was the fact that it turned out Holmes was $25 million in debt to her own company. This was found out by the Wall Street Journal, which has spent years investigating the company.

And finally, we have the tenth most viewed story of 2017: The FDA’s rejection of Amgen and UCB’s application for approval of osteoporosis candidate romosozumab, coming off of a safety scare, notably on potential cardiovascular adverse events.

Check out your top 10 below:

1. INC Research and inVentiv Health merge in another major CRO deal
2. Shire will cut U.S. locations and move HQ in consolidation push
3. GlaxoSmithKline stops development of 30 pipeline prospects, mulls sale of rare disease unit as new CEO Walmsley makes her mark
4. FierceBiotech's 2017 Fierce 15
5. The top 10 pharma R&D budgets in 2016
6. AbbVie’s risankizumab blows away aging rivals in phase 3
7. Donald Trump considers NantKwest CEO for NIH chief
8. AstraZeneca buy Acerta faked cancer drug data, company admits
9. WSJ: In a twist, Holmes owes Theranos $25M
10. Safety scare prompts FDA to reject Amgen’s romosozumab

Top 10 Global CROs 2017

The global contract research market is growing at a strong rate owing to increasing patent expiration and declining R&D productivity. Furthermore, increasing costs of new product development and revenue loss due to generics have resulted in high demand for contract researching of new biologics and compounds. The global CRO market is highly consolidated with the combined market share of the top-10 companies in this market estimated to be around 80% in 2016. This consolidation can be attributed to the highly stringent nature of the market with requirements of high capital investment. The leaders in this market include a mix of public-listed and privately held organizations.

A ranking system was developed for the top-10 global clinical research organizations. A score statistic was developed to determine the rank of each organization. Revenues, scope of service portfolio, net income and expenses ratios were the key input criteria used to calculate the score statistic for and every organization was assigned a score for each of these key input criteria. Different weights were assigned to each rank. A weighted sum of the scores was used to arrive at the final score statistic for each organization. The final score statistic represents the financial health, competitive advantage, and activity status of each organization in the clinical trials domain.

Ranking of Top-10 Global CRO

Note: *Estimated, **2015, Y= present

Sources: Annual reports and SEC filings.

QUINTILES IMS HOLDINGS, INC. 

Quintiles recorded its revenues at USD 7.8 billion, an increase by nearly 20% from previous year. The company is ranked first among the top CROs across the globe owing to its wide portfolio of clinical research and post-clinical research services. Formed through the merger of Quintiles and IMS Health, QuintilesIMS’s over 50,000 employees conduct operations in more than 100 countries and is listed on the New York Stock Exchange (NYSE).

LABORATORY CORPORATION OF AMERICA HOLDINGS

The company became the second largest player in the ranking post its acquisition of Covance in 2015. The Company reports its business in two segments, LabCorp Diagnostics (LCD) and Covance Drug Development (CDD). Covance Drug Development is a provider of end-to-end drug development services from early-stage research to regulatory approval and beyond. In 2016, LCD and CDD contributed 69.9% and 30.1%, respectively, of net revenues to the Company.

PAREXEL International Corporation

The company is ranked third in the list and has a second largest service portfolio. The company provides a broad range of expertise in clinical research, clinical logistics, medical communications, consulting, commercialization and advanced technology products and services to the pharmaceutical, biotechnology and medical device industries.

Pharmaceutical Product Development, LLC

PPD is a privately held organization with a strong portfolio of integrated drug development, laboratory and lifecycle management services including clinical, pre-clinical, post-clinical, and commercialisation services. The company has 89 offices in 47 countries with more than 19,000 employees.

INC RESEARCH HOLDINGS, INC.

The company is focused primarily on Phase I to Phase IV clinical development services for the biopharmaceutical and medical device industries. The company has approximately 6,800 employees in 50 countries across six continents. The company offers a variety of clinical development services, including global studies, clinical monitoring, investigator recruitment, patient recruitment, data management, specialized consulting services, scientific exploratory medicine amongst others.

PRA Health Sciences, Inc.

The company provides clinical trial expertise using clinical development platform includes approximately 70 offices across North America, Europe, Asia, Latin America, South Africa, Australia and the Middle East and over 13,000 employees worldwide. The company ranked seventh in the list, owing to one of the highest expense ratios and low income ratios.

ICON PUBLIC LIMITED COMPANY

The Ireland based company specialize in the strategic development, management and analysis of programs that support all stages of the clinical development process - from compound selection to Phase I-IV clinical studies. Net revenues for the company increase 5.8%, from 2015 to 2016 owing to continued organic growth and acquisition of ClinicalRM in 2016.

WUXI PHARMATECH (CAYMAN) INC

The Chinese company is a contract researcher for most of the largest pharmaceutical, biotech and medical device companies and many smaller companies. It portfolio includes small molecule R&D and manufacturing, biologics R&D and manufacturing, cell therapy and gene therapy R&D and manufacturing, medical device testing, and molecular testing and genomics. The company’s platform is enabling nearly 3,000 innovative collaborators from more than 30 countries to bring innovative healthcare products.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

The company has a diverse portfolio of discovery and safety assessment services, both Good Laboratory Practice (GLP) and non-GLP, to support target identification and drug development model. The company has three reporting segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Support (Manufacturing).

Advent International

Advent, a private equity firm, acquired inVentiv Health in 2016. The company provides comprehensive and integrated clinical and commercial outsourcing services to the biopharmaceutical industry. The company has more than 15,000 healthcare professionals servicing clients in 90 countries.

 Watch the summary video

Sources: Annual reports and SEC filings.

Luca Dezzani, MD

Top 20 Pharma Companies Based on R&D Investments

Drug development cost more than doubles to $2.56 billion

It costs drugmakers $2.56 billion to bring a new medicine to market, on average, more than double the price of 11 years ago, according to a study released today. The higher cost comes from clinical trials that are larger and more complex, as well as more drugs that fail in development, according to the researchers. “Drug development remains a costly undertaking despite ongoing efforts across the full spectrum of pharmaceutical and biotech companies to rein in growing R&D costs,” Joseph DiMasi, director of economic analysis at the Boston-based center, said in a statement.

Who's The Best In Drug Research? 22 Companies Ranked

Billionaire hedge fund manager Bill Ackman is fundamentally wrong in the arguments that he is making in his efforts to force Botox-maker Allergan to sell itself to Valeant Pharmceuticals. Merck and Novartis, both regarded as paragons of R&D, are actually laggards. And Pfizer and AstraZeneca, far from sad sacks driven into each others arms by an inability to develop new drugs, are actually average.

Those are some of the surprising conclusions reached in a new ranking of the top 22 firms by R&D productivity created by Sector & Sovereign Health and its lead analyst, Richard Evans, a former Roche executive and longtime Wall Street analyst. The ranking is included below.

Drug Companies Ranked By R&D Performance
Rank		Company	Economic Returns to R&D Spending*	Patents / $1M R&D spend*	Average Relative Quality of Innovation*	Average Rank (by share of innovation) in Target Research Areas	Internal Bias Index
1		Bristol-Myers Squibb	1.5%	0.22	1.2	1.9	23
2		Celgene	32.3%	0.23	1.5	8.4	98
3		Vertex	-125.4%	0.81	2.4	4.2	53
4		Gilead	20.8%	0.16	1.1	6.4	185
5		Allergan	8.0%	0.46	1.4	8.1	96
5		Roche	7.7%	0.09	0.9	2.0	24
7		Amgen	9.4%	0.09	1.1	5.3	58
8		Johnson & Johnson	8.2%	0.07	1.0	4.8	34
9		Novo Nordisk	17.5%	0.11	1.7	10.8	439
9		AbbVie	11.1%	0.12	1.0	9.4	54
9		Pfizer	-3.2%	0.11	0.9	2.5	24
12		AstraZeneca	3.9%	0.10	1.0	7.1	43
12		Biogen Idec	9.1%	0.13	1.1	13.1	155
12		Shire	18.6%	0.11	1.4	15.4	338
15		Sanofi	1.5%	0.09	0.9	4.2	28
16		Merck	3.0%	0.08	0.9	5.4	35
17		GlaxoSmithKline	1.0%	0.09	1.0	6.0	36
18		Novartis	8.4%	0.05	0.7	5.3	37
19		Regeneron	8.3%	0.16	0.7	13.7	638
20		Bayer	-2.1%	0.07	0.9	10.3	82
21		Eli Lilly	4.5%	0.05	0.8	11.7	131
22		Alexion	12.8%	0.03	0.4	21.4	8,012
		Sources: Bloomberg; AcclaimIP; SSR Health Hidden Pipeline Analysis and assumptions. *Rolling 5-year average.

The goal of the report, available for purchase at HiddenPipeline.com, is to start to provide metrics that companies can use to measure how well they are doing when it comes to inventing new drugs — and to get better. T0o often, Evans says, pharmaceutical executives instead use the industry’s low success rates as an argument that success is right around the corner. “A gambler that has lost everything he owned, just because he now has a strong hand doesn’t make him a good gambler,” Evans says.

“This is a very rigorous report,” says Elliott Sigal, the former head of research and development at Bristol-Myers Squibb, the top-ranked company. “Nobody would argue: the general trend is that by many measures R&D productivity of the group is going down. Those of us trying to compete and do well in this space see a lot of value for being in the upper quartile. You used to do well if you were in the average.”

The business of inventing, testing, and marketing new medicines is in a protracted crisis. The number of new drugs invented per billion dollars of research money spent has been halved every nine years going back decades, like a perverse reversal of the exponential improvement of microchips that keeps Silicon Valley constantly hopped up on its own grandeur.

But when it comes to fixing the R&D difficulties of any particular company, there is a huge problem: the business of inventing and testing drugs is so full of random chance that it is hard to measure how well a company is doing. Merck might launch no drugs one year and six the next because of luck, not because it got infinitely better in that short time. So how do you tell if a particular company is doing better or worse than average? How do you measure R&D productivity so that you can get better?

This is the problem Evans is trying to tackle in his ranking, which he detailed in a 128-page report that he shared with me, and that I have shared with several experts in drug company R&D. Based on discussions with them, I think Evans’ work provides a valuable new lens through which to view drug company research labs, although there’s a lot more work to do before we know how bankable his conclusions are.

Evans ranks firms based on five metrics:

1. The economic returns of each company’s R&D spending — essentially, how does income now compare to R&D investment a decade ago?
2. The number of patents filed by companies for every $1 million they spend on R&D; only patents before drugs hit the middle stages of trials count, because after that some companies file extra patents with an eye toward defending marketed products later.
3. How often a company’s patents are cited by other patents or publications.
4. A “leadership” index: is the company is leading or lagging in terms of the number of patents it files in particular diseases or types of chemist. Is it #1 or #11?
5. And a ranking of internal bias: basically, how good is a company at avoiding “not-invented here syndrome.

“It’s a really good, solid, and thought-provoking piece of work,” writes Jack Scannell, a noted researcher on pharma R&D productivity, in an email. “I wish I had written it or something like it.” But Scannell notes that, except for the financial metrics, the new data have not been back-tested. “If such an analysis showed that measures did not present subsequent economic returns (or stock returns), then the measures would appear to be demonstrably useless and there would have been no point in writing a big report about them.”

Evans ignores one of the most common measures of research productivity, and one of my favorites: the number of new drugs, called new molecular entities or new biologic entities, approved by the Food and Drug Administration in a given year. Evans says these can be “grossly misleading” because they reflect “the sporadic nature of research.”

Bernard Munos, of the InnoThink Center for Research in Biomedical Innovation, worries that Evans may actually be understating the degree that R&D is a money-losing proposition for drug firms. One reason is that Evans doesn’t separate out R&D in pharma from that in other businesses, like medical devices or over-the-counter products, nor does he try to filter improvements in earnings from introducing new medicines from those that come from cutting costs or increasing drug prices. “The top 12 pharma companies spend $70 billion on R&D, but what comes from their pipelines doesn’t generate $70 billion or more in sales,” Munos writes. However, Evans’ data do indicate that R&D prospects have continued to worsen, even as many executives argue they have turned a corner.

Bristol-Myers Squibb tops Evans’ ranking, as it does the rankings that I’ve published using Munos’ data and R&D figures. Celgene and Gilead are ranked #2 and #4, which is, again not a surprise: they’re the two most successful biotechnology companies of the past couple decades. Worth noting: Evans includes R&D costs from companies that are acquired, so Gilead gets credit for the hepatitis C drug, Sovaldi, which it bought, but which is having the most successful drug launch ever.

Vertex Pharmaceuticals of Cambridge, Mass., does surprisingly well. Evans points to it as a rare example of a company focusing in on a core competency — in this case, the science of understanding how drugs bind to receptors, and compares Vertex to the amazing numbers that were posted by Genentech when it was a standalone company.

One big surprise is the performance of #5-ranked Allergan, which is currently the subject of a hostile bid by Valeant Pharmaceuticals and its billionaire CEO Michael Pearson with some help from Ackman. Valeant’s model has been to buy companies that are wasting money on unproductive R&D and to cut costs to make them more profitable and return money to shareholders. If Allergan’s R&D is actually productive, this effort becomes value-destroying. “It’s absolutely counter to Valeant’s argument, no doubt,” says Evans.

Evans admits that for companies that have only launched one product, like Alexion or Regeneron, the analysis may not be valid. Munos also argues that AbbVie shines only because of its marketing of one new drug, Humira, not because of its ability to introduce new products, and that Lilly is dinged because of its losses in the U.S. insulin market, despite a better record of introducing new drugs.

Twenty years ago, Merck was viewed as the best drug research firm on the planet, a lot like Genentech. Novartis has recently achieved a similar reputation. But Evans says both are actually inefficient, because they follow a model of paying a lot of internal researchers, many of them in fields in which the company is not a leader, to work on a huge number of products. Over the course of its history, Evans says, Merck’s success has not been because it has had better ideas, but because it spends even more money when it finds one, like the cholesterol-lowering statin drugs.

“The reason they are so innovative is because they’ve taken a four-cylinder engine and put nitro in it,” he says. A more efficient model is the one adopted by Bristol under Sigal, which focused on bringing in products from the outside (Bristol’s breakthrough cancer drugs came from the purchase of Medarex) and using capital efficiently.

Evans has more work to do if he wants to make this ranking definitive; there are just too many ways to measure research productivity and they all give slightly different answers. But it’s a valuable contribution as we try to figure out the shape of the problem facing drug research and look for solutions.

https://tinyurl.com/26s96tew