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Credit crunch hits R&D

The global credit crunch could jeopardise the near-term development of innovative medicines by pharmaceutical companies and biotech firms, according to experts

The global credit crunch could jeopardise the near-term development of innovative medicines by pharmaceutical companies and biotech firms, according to experts.

Investment in research for new life-saving drugs is now seriously under threat as investors are overwhelmed by negative sentiment and put on hold their investment plans as the global economic meltdown takes hold. This was the stark warning delivered by Professor David Wield, director of the Economic and Social Research Council's (ERSC) Innogen Centre, ahead of the Genomics and Society: Reinventing Life? conference in London (October 27 and 28).

"Like many other sectors, the pharmaceutical industry had had tough times recently – there is seemingly no way to speed up and improve the drug discovery pipeline, and heavily increased R&D has not increased the number of new drugs," he said.

"As a result, big companies have been laying off staff and closing down their research units, instead looking to biotechnology start-ups for new ideas."

News throughout October of major job cuts and aggressive restructuring strategies makes for uncomfortable reading: Merck announced the loss of 7,200 jobs globally (across all parts of its business) and the closure of three research sites in Italy, Japan and the US, as it narrows its focus to just nine therapy areas; Novartis slashed 550 jobs in its US salesforce and Danish firm Genmab cut 100 posts and halted development of its cutaneous T-cell lymphoma treatment HuMax-CD4(R). In addition, Pfizer announced that it would ditch development programmes in 10 disease areas and has identified six 'high priority' areas: Alzheimer's disease, diabetes, inflammation/immunology, oncology, pain and schizophrenia.

In contrast, some pharma companies with money in the coffers have completed deals to acquire buoyant biotechs with potentially lucrative drugs in their pipeline. Lilly's purchase of ImClone has secured the company access to Erbitux, the future of which has been hotly debated by ImClone's marketing partner for the drug, Bristol-Myers Squibb, which lost out in the race to acquire the firm. In addition, French vaccine maker Sanofi Pasteur agreed a £285m deal to buy UK-based biotech Acambis.

Biotech firms without a possible suitor waiting in the wings are set to suffer as venture capital firms struggle to raise funds in the continuing harsh conditions. "Investing in biotech companies is now seen as risk-taking, and will not be for the timid. What will happen to investment in biotech research if finance cannot even be found for relatively everyday expenses, which are increasingly becoming more of struggle?" said Professor Wield.

"Drug discovery depends on long-term finance with high risk of failure – and lots of it. Financing of biotechnology companies hit $50bn in 2007. And overall, these biotechs only made profits for the very first time last year, amounting to $1bn on revenues of $59bn."

To help pharma and biotech companies weather the financial storm and stay on track with R&D, the UK Research Councils are working to help underpin future developments in the sector by identifying new ways of enabling effective drug trials that the public has confidence in, and building new research partnerships with the sector. 

27th October 2008

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