Big Pharma is on a buying spree to obtain smaller biotech companies after having spent billions on R&D and failing to produce new drugs.
Where have all the billions gone?
Long time passing
Where have all the billions gone?
Long time ago
Where have all the billions gone?
Pharma has spent them every one
When will they ever learn?
When will they ever learn?
(Sing to the tune of "Where Have All the Flowers Gone?"--with apologies to Pete Seeger.)
For years, large pharmaceutical companies have mostly shied away from buying biotech companies. They have preferred to develop their own drug pipelines and to license or colicense new meds in development at biotech companies. The common wisdom has been that biotechs are nimbler and more creative than the lumbering giants, which have used the smaller companies as a kind of farm-team system to feed new compounds to the big leagues.
This trend began to shift last year when Novartis purchased Chiron, and Merck of Germany bought Serano. Now Astra-Zeneca has snatched up Medimmune for $15.6 billion, in what may be the largest purchase ever of a U.S. biotechnology company.
This is not a financial blog, so I won't bore you with finance-speak or details about companies you may or may not have heard of. The point is that folding the best of biotech into large companies that are having serious trouble developing their own drugs may be a great idea for investors cashing in, but it may end up killing off creativity in drug making.
It's hard to imagine that huge companies, spending billions on R&D with little to show for it, will absorb the creativity and entrepreneurial drive of the smaller companies. Maybe they will, though this seems to be less a motivation for new ideas than a fear of what these companies might do.
In 2005, Big Pharma companies spent $40 billion on R&D in a year in which the FDA approved only 20 drugs. Comparatively, in 1996, $17 billion was spent, and 53 new drugs were approved. Add to this the fact that many billion-dollar drugs are about to lose their patent protection on blockbuster drugs such as Lipitor, and one can understand why Big Pharma is throwing around money while it still has it.
Possibly, these bioyoungsters will infuse new blood into their elders rather than the other way around. Otherwise, we may see the pharmaceutical industry continuing to be unable to transform the raft of discoveries and science developed in the past 10 years into useful products.
There are many reasons for this failure, not the least of which is that the science is turning out to be far more difficult to turn into drugs than anyone anticipated in this age of genomics. But one still has to wonder if the industry is up to the task in its current incarnation.
Massachusetts Institute of Technology
Comments
The other source for R&D is the work being done by academic scientists at colleges and universities all over the world. After all, talk about billions lost. While NIH is essential for funding basic research (to the tune of billions), most of what is discovered never leaves the bench. There's a new breed of "not-for-profit biotech" however that is taking those discoveries, patenting them and validating them in accordance with the needs of pharma. This creates a source of first-rate R&D that's been essentially derisked for pharma to further develop. The Myelin Repair Foundation is one of those "not-for-profit biotechs" that is testing out the potential of a collaborative, managed academic consortium and bridging the traditional gap that has existed between the academic and commercial worlds. So far the results are promising.
cmenaker
04/25/2007
Posts:1
But let's not lose perspective. The knowledge gained in research is not lost, and it will definitely pay off. Biology is hitting a wall of complexity, and we don't yet have the tools to address this problem. The answer is not to back off and give up - the answer is to keep working at the problem, even if it costs a lot.
And in fact, if you put biomedical R&D in perspective it does not cost a lot. The NIH budget was about $28 billion. By comparison, B-2 bombers cost about $2.2 billion each + $2.5 billion life-cycle costs for each. If you round up the numbers the NIH budget equals about 10-12 bombers...I repeat, NIH budget = 10-12 aircraft...Not to mention that these bombers are only a tiny sliver of the total military budget.
Perhaps we should cut down on our cancerously bloated military budget, and use the money for something more useful...like basic research.
gabrielg01
04/25/2007
Posts:361
When it comes to big pharma, however, the investors might want better disclosure if the goals are merely to support basic science or better execution if the goals are to produce drugs.
Personally I believe part of the problem is the current focus that overemphasizes blockbuster drugs.
rhapsodyingl...
04/28/2007
Posts:55
tmcclain
04/29/2007
Posts:4