Blockbuster Drugs to Lose Market Share Over Next Decade: Easton Associates Study Analyzes New Forces That Will Drive Industry's Growth.

Business Editors/Health/Medical Writers

NEW YORK--(BUSINESS WIRE)--Oct. 22, 2003

Pharmaceutical companies that continue to focus their business strategies predominantly on blockbuster drugs(a) for low-severity conditions will see a significant decrease in market share over the next decade. In contrast, pharmaceutical and biotech companies that target their business strategies on 14 high-growth category drugs are predicted to drive a rebound in the industry's revenue growth.

This prognosis is the result of a year-long study recently released by the Easton Associates, LLC, a leading business strategy firm specializing in the pharmaceutical, biotech, medical device and diagnostic industries. The report, Pharma 2012: Strategies for Winning in a Transformed Pharmaceutical Industry, is based on interviews with industry executives and thought leaders and in-depth quantitative analysis of the industry's growth, pricing, regulation, patents, marketing, and research and development (R&D).

"In 2000, we calculated that drugs for low-severity conditions, such as high cholesterol, gastric reflux, arthritis, mild depression and hypertension, had a 62% share of worldwide sales of the Top 500 drugs." said Brian Buxton, partner and co-founder of Easton Associates. "By 2012, worldwide sales for drugs that target these conditions will decline to 42% of the total."

In contrast, drugs for high-severity conditions, such as cancer, HIV, congestive heart failure, asthma, diabetes, and neurodegenerative diseases, will have almost twice the growth rate of low-severity drugs and will account for more than 60% of the industry's dollar growth over the next decade.

"A bias, even a mythology, has grown around blockbuster drugs as the ideal source of growth, one that the facts simply don't justify. Our analysis shows disease severity is driving revenue growth, not peak sales," says Buxton. "Yet we find discovery researchers tell us they would shelve a compound if it had projected peak sales of `only $400 million.' The blockbuster business model is fading fast, and many companies already recognize this. But nothing has replaced it. Even the most sophisticated companies have a deep uncertainty about where to focus R&D and how to assess development portfolios. Our study provides the framework of a new industry business model, one that centers on drugs that we term the `new engines of growth'."

Which companies will best utilize this new business model? The major pharmaceutical companies have far greater resources and unparalleled expertise across nearly all functional areas. Key assets include medicinal chemistry and clinical trial design, but they find it hard to change their strategies and business models. Biotech companies have greater discovery expertise and are far more flexible, and thus appear poised to take the greatest advantage of this new business model.

The report, Pharma 2012: Strategies for Winning in a Transformed Pharmaceutical Industry, is now available. In addition, Easton Associates will present its findings at industry forums throughout the coming year. For more information about the Easton Associates' findings, contact: Brian Buxton at [phone] or visit www.eastonassociates.com

New York City based Easton Associates, LLC, is an experience-based management consulting firm, working exclusively for companies and investors in the pharmaceutical and medical products industries. The firm assists clients in a full range of strategic planning, opportunity assessment and due diligence engagements across nearly every commercial medical segment. Easton Associates' mission is to provide executives and investors with accurate, insightful and creative market assessment and strategic advice based on detailed analysis and a unique industry perspective. Its five founders collectively spent more than 60 years at the Wilkerson Group before founding Easton Associates.

           Worldwide Revenues of Top 500 Prescription Drugs
                2000 (Actual) and 2012 (EA Projection)

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 Severity          Actual   Projected    CAGR     Dollar   Share of
                  Revenues  Revenues   2000-2012  Growth    Dollar
                   (2000)    (2012)                         Growth
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 High Severity       71       300        13%       229       64%
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 Low Severity       126       256         6%       130       36%
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 Total              197       556         9%       359      100%
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                        Source: Med Ad News and Easton Associates, LLC

(a) Drugs with annual sales of over $1.5 billion.