Is the Big Pharma biotech well going to run dry?

The healthcare market is becoming increasingly demanding of the pharmaceutical industry to deliver products that are innovative and that can demonstrate clinically meaningful differentiation from currently available treatment options (including generic drug alternatives) .  This hurdle will become even more challenging as more mass market blockbuster products come off patent over the next five or so years.

The sources for these innovative products have historically been Pharma discovery research, start-up biotechnology companies, and university laboratories.  With a disappointing track record over the past decade or more, pharmaceutical companies have been narrowing their focus and downsizing their research efforts in favor of in-licensing technologies for development.  Looking for reduced risk and higher return on investment opportunities Pharma targets late stage technologies with proof of concept and a high probability of scientific and technical success.  Unfortunately, virtually every pharmaceutical company is now evaluating the same finite supply of technologies to find the few that fit the innovative, late stage, high probability of success profile.

Although one might expect a regular replenishing of the supply, this  should not be taken for granted.  While universities are fertile grounds for therapeutic concepts, targets, and interesting compounds,  few can afford or have the expertise to take potential drug candidates to proof of concept in a regulatory acceptable fashion that will mitigate the risk sufficient to warrant Pharma investment.   As a result, the diminishing supply of investment- worthy late stage programs is about to be exacerbated by the lack of adequate early stage discovery research funding.

At the same time, Biotech companies that can transform these promising technologies into viable development candidates have been starved for cash for the past two years making it nearly impossible to sufficiently fund new projects much less keep current programs adequately funded.  What this means is that the university/biotech pipeline of innovative new products that Pharma is counting on may soon become depleted if it isn’t already.

The obvious solution is for Pharma to accept more risk, invest much earlier, and collaborate.  Given the challenges of drug discovery research and the time required to get programs to proof of concept, Pharma may not have much time before the lack of discovery stage funding creates a gap in the flow of innovative pipeline products far greater than has ever been imagined.

mike@pharmareform.com