Old Guard and New Trends
Traditional pharmaceutical companies typically have research and discovery (R&D) capabilities as well as the capital and personnel to bring a drug to market. Non-traditional companies, including smaller pharma, biotechnology companies, and contract research organizations (CRO), typically are rich with new compounds and research and discovery capabilities, but lack the ability to bring a product to market. Traditional pharmaceutical companies include Big Pharma companies (e.g., Pfizer, Merck, GSK (GlaxoSmithKline), etc.), whereas, non-traditional companies may include start-ups, newer, or smaller companies that focus on specialty or biotech products (e.g., Amgen, Celgene, Gilead, Onyx).

The division between traditional and non-traditional companies grows increasingly arbitrary as Big Pharma continues to acquire smaller companies who possess promising drugs, and biotech firms that add capabilities.

Traditional Big Pharma through early 2000s
By 2014 revenue, the top 10 pharmaceutical companies include: Johnson & Johnson, Novartis, Roche, Pfizer, Sanofi, Merck, GlaxoSmithKline, AstraZeneca, Bayer, and for the first time, a biotech company has made the list – Gilead Sciences.¹⁷⁵

With the exception of the last company, all of these have been considered industry giants for decades. Notably missing from the list are Eli Lilly, and Bristol Myers Squibb, traditionally part of the Big Pharma cohort. The Big Pharma operating model has undergone significant shifts in the past 20 years freeing up market space for non-traditional pharma and biotech companies.

Big Pharma companies of the 1990s and early 2000s typically were large, diversified companies, with primary care business revenue streams.¹⁷⁶ During this time, R&D was carried out in multiple global hubs.¹⁷⁷ Merger and acquisition activity increased the size of Big Pharma companies during this time (e.g., Glaxo and SmithKline, Astra and Zeneca).

Consolidation and focus on R&D
The merger and acquisition growth of Big Pharma through the early 2000s yielded redundancies in manufacturing, sales, and larger R&D hubs.¹⁷⁸ The later 2000s to the present time has seen more consolidation from research hubs to “hotspots” of research innovation (e.g., Boston, San Francisco, London, Cambridge, and Shanghai).¹⁷⁹ Simultaneously, Big Pharma also began divesting non-core assets and focusing efforts on perceived strengths. For example, AstraZeneca divested all business units except oncology, cardiovascular-metabolism, and respiratory diseases. Additionally, Abbott split into an innovative business unit, AbbVie, and its diversified healthcare company, Abbott.

The rise of non-traditional pharmaceutical companies
Declining output, unsustainable costs, and increasing financial penalties have shaped pharmaceutical industry change in the last decades.¹⁸⁰ In addition to paradigm shifts amongst Big Pharma just described, newer companies have developed small molecules, or biologic proteins. Companies like Amgen, Genentech, Onyx and Gilead Sciences, have emerged in the last 20 years as non-traditional companies focused on biology, innovation, and treatments for rare and serious diseases. These companies aim for faster cycle times and promote their commitment to economic efficiency and return on investment in R&D. Their smaller size and the importance placed on entrepreneurial thinking relative to more traditional pharma companies has enabled these non-traditional companies to be more nimble in discovery and development. Big pharma has noticed this strength and has seized partnership opportunities to launch attractive products (e.g., BMS acquisition of Medarex in 2009). This strategy has also been applied by larger biotech companies (e.g., Amgen’s acquisition of Onyx Pharmaceuticals).

What’s next in pharma?
Emerging markets are growing steadily: many large pharmaceutical companies have established research units in Shanghai (AZ, Lilly, GSK, JNJ, Novartis, Roche, and Sanofi) or Beijing (Merck, Novo Nordisk, and Bayer).¹⁸¹ Close proximity to large US or European companies may help emerging markets-based companies through collaboration or competition. Pharma company portfolios are increasingly migrating toward specialty medicines. The table below shows product pipelines of the largest pharmaceutical companies and the percent of those products that are biologics. Though the middle class is expanding in emerging market countries (e.g., Brazil, Russia, India, China), patients may not be able to afford costly biologics.¹⁸² There remains a great need, particularly in emerging markets, for small-molecule discovery and development to bring medicines and increased standards of living to these countries.

Products in pipelines of large pharmaceutical companies^183,184

Adapted from Price Waterhouse Coopers. From vision to decision. Pharma 2020. 2015, Gautaum A, Pan X. Drug Discovery Today. Oct. 2015.

Notably within these pipelines are small molecules that offer promise for widespread, serious diseases. For example, Merck’s MK8931 is a BACE inhibitor currently being tested in prodromal patients for the treatment of Alzheimer’s disease. Lilly’s advanced breast cancer drug abemaciclib recently received FDA breakthrough designation which may expedite its review.¹⁸⁵ Janssen’s combination antiviral pill, darunavir/cobicistat/emtricitabine/tenofovir/alafenamide, for HIV in treatment naïve and experienced patients consolidates complicated pill regimens and may improve adherence.

The new non-traditional companies
More recently, technology firms are throwing their hats into the pharmaceutical ring. Apple, Dupont, General Electric, Google, and IBM have recognized how their acumen for data management, capital, and innovations can contribute to the development and marketing of new medicines and devices. These companies are expected to have more flexible product development cycles as opposed to the lengthy cycles required by Big Pharma.¹⁸⁶ These are some of the new non-traditional companies in the pharmaceutical space that will no doubt drive innovation.