Memorandum

McKinsey report: pharmaceutical companies should focus on therapies for microvascular diabetes complications – July 13, 2016

McKinsey recently released a discussion paper entitled “Preventing and treating complications –
the opportunity in diabetes care” arguing that pharmaceutical companies should focus on developing and bringing to market therapies for microvascular diabetes complications (nephropathy, retinopathy, neuropathy). Co-authors Jeff Algazy and Sachin Nichal explain that treating complications is expensive – for the average type 2 patient, a lifetime of complications management and treatment costs over $45,000, and of the $245 billion spent on diagnosed diabetes in 2012, 61% was attributed to hospital inpatient care and prescriptions for complications. In addition to the economic burden of microvascular complications, the glycemic-control drug market is expected to slow in the coming decade – largely due to the arrival of patent-expiry dates and generics – which makes complications a wide open area to drive future growth. McKinsey forecasts that the microvascular complications pharmaceutical market will grow at 11%-12% per year, roughly tripling in size from 2015 to 2025 (reaching ~$22 billion), at the same time the proprietary glycemic-control market is expected to double (reaching ~$65 billion, growing 7%-7.5% per year, though from a much higher base). The report points out that small companies are currently dominating the complications drug pipeline (page seven). There are 19 phase III candidates and 82 Phase II candidates, approximately half of which are new chemical entities or nonbiological drugs that have never been previously approved for human use. Astellas has three complications candidates in development, followed by two each at 10 companies (Pfizer, Allegro, D Western, Genaera, Abbott, Mitsubishi Tanabe, BMS, Sanofi, Celgene, and Thrombogenics), and a long-tail of organizations with one candidate in the pipeline. The prominence of small players represents a big opportunity for collaboration, though of course, there is always uncertainty – we’d be remiss not to mention Abbott’s $450 million investment in Reata’s bardoxolone methyl, which failed in phase 3 to profound disappointment. Still, there is so much potential to change patient lives and truly modify disease here, and we hope this field expands massively in the coming years.

 

-- by Brian Levine, Adam Brown, and Kelly Close