A Peek at Europe's Pharma Pipeline

New products, while not plentiful, will be key for the sector's growth in 2008. Here's a look at the major players' planned launches

by Wendy Diller From Standard & Poor's Equity Research

The European pharmaceutical industry, like its U.S. counterpart, is looking for an improvement in 2008, following a poor performance in 2007. A key indicator—although by no means the only one—of its ability to grow this year and beyond is its new product flow.

In 2007, European companies launched only a handful of new drugs, and the outlook for 2008 isn't expected to be much better. The poor research and development output comes at a particularly bad time for pharmaceutical companies, as they scramble to compensate for revenues lost to generics when their key products lose patent protection. While 2008 is not likely to be a big year for patent expirations, 2009 onward is nearly certain to be. IMS Health estimates that in the U.S. in 2008, brand drugs valued at $17 billion are expected to go off patent, including AstraZeneca's (AZN; S&P investment rank, 4 STARS, buy) Casodex (oncology), and GlaxoSmithKline's (GSK; 4 STARS) Requip (Parkinson's disease).

In 2007, U.S. regulatory setbacks for key products hit two European companies particularly hard and dashed their hopes for making a splash in 2008: Sanofi-Aventis (SNY; 4 STARS), which withdrew its application for Zimulti (obesity), and Novartis (NVS; 3 STARS, hold), which ran into significant problems with Galvus (diabetes). (Both drugs are cleared for marketing in the EU.) In addition, safety concerns hurt some European Union pharma megaproducts already on the market, including GSK's Avandia (diabetes) and Novartis' Zelnorm (gastrointestinal), increasing the urgency for new products.

Analysts believe that in 2008, Food & Drug Administration approvals are less likely to be a catalyst for news—good or bad—simply because not many EU pharmaceutical companies have important products up for review. Of the top European companies, GSK looks best poised to replace sales lost to new generic competition with new drugs, according to an analysis by Raymond James. In 2007 the company gained regulatory approvals for eight products, including Tykerb (advanced breast cancer), Altabax (topical antibiotic), and Veramyst (allergies). Tykerb is competing against two best-selling Roche drugs, Avastin and Herceptin, but promising new data, released in December, 2007, could boost its prospects.

Promise at GSK

In addition, Cervarix, GSK's novel Human papillomavirus (HPV) vaccine, which has potential to be a blockbuster, received EU regulatory approval, although U.S. regulators want more data before making a decision. GSK hasn't released specifics about its concerns or how much additional work it has to do if it is to have a shot at the all-important U.S. market. GSK also submitted eight new drug applications (NDAs) in 2007 and started Phase III trials for nine drugs. Overall, analysts estimate that the company could launch up to eight brand-new drugs before 2010, including four for central nervous system disorders. Many of these aren't significant, but HuMax CD20 (oncology) and Synflorix (streptococcus vaccine) sales could approach $1 billion within five years, according to the data firm EvaluatePharma.

Roche (RO.DE; 3 STARS) is comparatively better off than its peers because it has no looming patent expirations and, while it doesn't expect to launch new products in 2008, it has ambitious plans for line extensions. Of these, the most important are Avastin and Rituxan. Phase III trial results of Rituxan's utility in progressive multiple sclerosis and lupus are expected in mid-2008. Roche also expects to launch Actemra (rheumatoid arthritis) in Western markets, and it's already on the market in Japan.