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Pharmaceutical companies leave investors cold

Bloomberg reports that top-line pharmaceutical companies are testing a record number of experimental drugs, but shareholders remain unmoved

According to a Bloomberg report, top-line pharmaceutical companies are testing a record number of experimental drugs, but shareholders remain unmoved.

Cowen and Co analysts said there are about 1,425 potential therapies in the drug industry's research pipeline, 50 per cent more than in 1997. The treatments, for diabetes, cancer and brain disorders, may help offset the global revenue decline which is set to start in 2011, when annual sales of USD 150bn become eroded by generic competition.

However, Standard & Poor's 500 Index of 14 pharmaceutical companies increased a mere 1.7 per cent in 2007, less than the 3.5 per cent return of the S&P 500. As a result, investors continue to remain cautious, especially since the FDA approved the fewest number of drugs since 1983 and regulators delayed approval of medicines, including S-A's obesity treatment Zimulti (rimonabant) and GE Healthcare's cannabinoid derived treatment for cancer and MS pain, Sativex.

The FDA, which is under scrutiny from US lawmakers, consumer groups and doctors for not taking a harder line on safety, approved only 19 new drugs in 2007, down three from a year earlier. According to the Cowen report, however, it approved approximately 400 generic drugs.

Bloomberg says that drug stocks are showing signs of recovery, as investors buy companies less reliant on economic growth as concerns over the health of the US economy grow.

While US-based Pfizer fell 14 per cent in 2007 and France-headquartered S-A dropped 10 per cent, Merck & Co, which has brought six new drugs onto the market over the past two years, jumped 37 per cent even after revenue of its best-selling drug, Zocor (simvastatin), was cut more than 80 per cent by generic rivals. Merck's head of research, Peter Kim, told Bloomberg that the company's achievement was a result of building up its scientific strength.

More than a dozen targeted tumour-fighting drugs have been approved in the past five years, including Genentech and Roche's Herceptin (trastuzumab) and Avastin (bevacizumab), GSK's Tykerb (lapatinib) and Pfizer's Sutent (sunitinib) and Bristol-Myers Squibb's Sprycel (dasatinib). All of these new treatments have reduced deaths from cancer for two year in succession, which the American Cancer Society said has never happened before.

A record 600 cancer therapies are in development worldwide, according to the Pharmaceutical Research and Manufacturers of America (PhRMA), which the industry hopes will bring investors back into the fold.

14th January 2008

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