The number of clinical research programs undertaken by the major pharma players has now fallen by as much as 70% in the last ten years.
The global pharmaceutical industry has spent well over a trillion dollars on research and development in the last ten years, and analysts expect annual investment levels to grow by around 3% annually, reaching up to $200 billion per year by 2022.
Far and away the largest market for pharma investment is the USA, which now spends almost 60 cents for every dollar used on R&D globally, a big increase from the early 1990s, when around 40% of pharmaceutical R&D was American.
Robust levels of investment have supported unprecedented gains in the products that are available today, with an estimated 7,000 new therapies in development.
Merck & Co’s (NYSE: MRK) Keytruda (pembrolizumab) has led the way in extending gains against many kinds of cancer, cell & gene therapies are opening up new and previously unimaginable therapeutic modalities, and once chronic illnesses like hepatitis C are now regarded as eminently curable.
With such an apparently rosy picture for investment in the industry, it’s worth considering which areas may be being left behind.
Figures from UK trade group the ABPI suggest that 38% of global R&D is invested in oncology and immuno-oncology, whereas other areas, such as respiratory (9.3%) and nervous system (7%) attract less money.
Many believe that mental health is one such area that is now critically underfunded.
Mental health challenge
Early gains developing antidepressants and antipsychotics in the 1950s led to further development to make such products safer and more effective, but since then, the industry has apparently stepped back.
The last significant surge of blockbuster psychiatric therapies, including drugs such as Eli Lilly’s (NYSE: LLY) groundbreaking selective serotonin reuptake inhibitor (SSRI) Prozac (fluoxetine), hit the markets in the late 1980s.
Researchers estimate that the number of clinical research programs undertaken by the major pharma players has now fallen by as much as 70% in the last ten years, with firms like AstraZeneca (LSE: AZN) and GlaxoSmithKline (LSE: GSK) focusing on other areas.
The blame must partly be placed on the high cost of undertaking major clinical trials. While SSRIs have delivered tens of billions of dollars for drug developers, there has been little incentive to fund alternatives.
Now that SSRIs like Prozac are subject to generic competition, the daunting challenge of finding the next generation of breakthrough medicines may seem like too risky a bet, particularly as the industry sees multi-billion dollar investments in other neurological disorders falling by the wayside.
But it’s not all doom and gloom for the sector, with drugmakers and analysts beginning to identify a large and growing market opportunity.
World Economic Forum research, authored by the Harvard School of Public Health, finds that “lost productivity and the social burden of mental illness, even in the absence of designated mental health spending, are substantial across the globe.”
“The global cost of mental health conditions in 2010 was estimated at $2.5 trillion, with the cost projected to surge to $6 trillion by 2030.”
Commenting on the social and economic burden of mental health, GlobalData pharma analyst Rahael Maladwala says: “One in six adults reported to have a common mental health disorder.”
Given the high level of unmet need, pharmaceutical companies are seeing “gaps in the market and commissioning research into the etiology and pathophysiology of these indications to better understand how they work,” she adds.
In fact, a new generation of faster acting therapies for depression may be just around the corner, starting with a revolution propelled by a very old drug, ketamine.
Investment in innovation
Ketamine works on a region of the brain, the N-methyl-D-aspartate (NMDA) receptor, that is not targeted by currently available options, and it offers much faster relief from symptoms.
The first such therapy of this kind, the nasal spray Spravato (esketamine), was approved by the US Food and Drug Administration in March 2019.
US healthcare giant Johnson & Johnson (NYSE: JNJ) picked up the approval, in conjunction with an oral antidepressant and as a later-line option, on the back of Phase III data which showed a 51% lower risk of relapse than among people in the oral antidepressant plus placebo group.
Estimates from analyst Informa Pharma Intelligence suggest that the drug could bring in revenues in the region of $2 billion by 2026, although questions remain over the drug’s safety profile.
These concerns center around the fact that while ketamine has a long and established track record in the therapeutic setting, with an established profile as an anesthetic, it is also an abusable and potentially addictive street drug.
San Francisco’s VistaGen Therapeutics (Nasdaq: VTGN), which is also investigating the therapeutic potential of ketamine-like alternatives, hopes to avoid such obstacles.
VistaGen has identified an opportunity with a candidate that has a similar mechanism of action, but a different pharmacological profile.
This, the firm hopes, will help it to avoid the psychological side effects and other safety concerns of ketamine.
The firm picked up a Fast Track designation from the US regulator for its candidate, AV-101, against both major depressive disorder and neuropathic pain, in 2018.
Chief executive Shawn Singh says: “AV-101 is mechanistically similar to ketamine, engaging the NMDA receptor, but chemically different,” adding: “this means AV-101 has potential to deliver fast-onset ketamine-like antidepressant benefits, without ketamine’s well-known psychological side effects.”
Another exciting new discovery in mental health is Sage Therapeutics’ (Nasdaq: SAGE) Zulresso (brexanolone), an injection which targets the GABAA receptors, now the first and only medicine specifically approved to treat postpartum depression (PPD).
Despite an unattractive method of administration, with patients requiring a continuous intravenous (IV) infusion for two and a half days, analysts suggest the drug could bring in up to $300 million in peak sales.
Rahael Maladwala says the industry is starting to focus more on “developing drugs that target the root cause of these diseases.”
She says: “Clinical research is not the only trend that is being used to address the gaps in the market; this is where the creativity of pharmaceutical companies comes into play. There have been several digital approaches that are being trialled to help meet some of the unmet needs for some of these indications.”
Examples of such creative investment include Otsuka Pharmaceutical’s (TYO: 4768) use of a digital sensor in a pill, with approval from the US regulator in late 2017 for Abilify MyCite (aripiprazole tablets with sensor).
The therapy includes an ingestible sensor embedded in the pill that records that the medication was taken, leveraging technology developed by UK-based Proteus Digital Health.
Meanwhile, Takeda Pharmaceutical (TYO: 4502) has partnered with Cognition Kit to evaluate the potential for wearable technology to measure outcomes in mental health, and several companies are using artificial intelligence to help identify potential drug targets for these disorders.
Ms Maladwala says that: “The use of technology is helping to revolutionise patient care, right from drug discovery to drug delivery.”
With potentially trillions of dollars’ worth of productivity and an unmeasurably large social burden on the line, the outcome on health is surely worth the investment.