New age therapies

There is widespread concern that the pharmaceutical industry is not producing as many innovative drugs as it used to. Although the costs associated with R&D, clinical trials and marketing have contributed to the decline in new drug discovery, there are other factors that have inhibited the introduction of new therapeutics.

More patent litigations and an increasing demand for lower drug prices have led to a reluctance to spin- out new molecules. The ever-increasing costs of producing a new drug and the spiralling attrition rates have also contributed. Additionally, patient noncompliance is a serious issue — losing the industry around $32 billion each year. This obviously impacts public health and increases healthcare expenditures.

Enormous pressure is also being exerted by generics. The impact of generic competition is well illustrated by the recent case of Bristol Myers Squibb's (BMS's) blockbuster Plavix. More patent litigations are on the horizon and the pharmaceutical industry is fighting to preserve its revenues. By 2011, $50 billion worth of branded drugs will face patent challenges and pharmaceutical companies are struggling to avoid the legal potholes. Therefore, they are resorting to settlement strategies by paying off the generic manufacturers to 'stay away'. Such measures are gaining popularity; for example, Cephalon has agreed to pay $136 million to generic manufacturers of Provigil to delay production until 2011.

Blockbusters and biotech

Pharmaceutical productivity has been extremely good in the last couple of decades owing to the influx of blockbusters. Almost all major pharmaceutical companies produced a blockbuster. Upgrading technology and efficiently using these novel drug discovery technologies has enabled drug companies to produce top-selling drugs. However, these technologies are tapering off and the most wanted novel drug discovery technological platforms are still in the nascent stage, forcing pharmaceutical companies' pipelines to be somewhat lacking.

To overcome these issues, the pharmaceutical industry is looking to the biotech sector, which has undergone tremendous growth in recent years. Globally, 2005 witnessed an explosive growth of 18% with revenues reaching an all time high of $60 billion. These companies boast a deep, rich and lustrous pipeline of very promising drug candidates spread over a wide spectrum of diseases. This is something the pharmaceutical industry finds extremely attractive and, therefore, has involved itself in a whole series of mergers, acquisitions and alliances (M&A) to relieve shrivelled pipelines.

So, the question arises: "Why do the biotech ventures mange to have such promising drug candidates while pharmaceutical R&D is facing a drug deficit?"

Analysing the scenario reveals that the biotech start-ups are headed by university professors and students who have excelled in research and can develop innovative technologies. These people are siphoned off from the universities by the biotech start-ups; by becoming involved in M&A activity, pharma companies are tapping into these intellects.

The critical judgement in these aggressive M&A movements is the accurate identification of the potential biotech companies. The funding available to enhance the formation of small- and medium-sized enterprises (SMEs) has increased over the years to enhance the knowledge-based economy. Though there are numerous biotech start-ups, not all are successful; most hit a blank wall and fold.

As the trend in M&A gathers momentum, it has become critical to forge an alliance before a competitor surges forward. The trick lies in identifying the budding biotech start-ups that house potential blockbusters before the drug enters clinical development. Highly sophisticated and careful analysis of the market is essential to perform successful M&A activities.

Outsourcing

The accelerating expenditure for conducting clinical trials is spurring pharmaceutical companies to look towards Asian markets. Outsourcing to India, China, even Africa and Eastern Europe, is regarded as one of the best options in reducing spiralling R&D costs. This model offers great benefits if the trials adhere to FDA regulations and are well monitored. India and China are emerging markets and are fertile grounds for pharmaceutical players to open up their manufacturing facilities as well.

The positive trend in outsourcing is expected to boost the global pharmaceutical industry and provide the much needed respite from augmenting cost pressures.

Niche markets

The trend to pursue a blockbuster has been the norm in the pharmaceutical industry, with companies tending to introduce drugs in a therapeutic area already flooded with numerous therapeutic options. However, the aim is now to improve current therapies in terms of efficacy, dosing or compliance. A better understanding of disease mechanisms and a history of successful drug candidates drive pharmaceutical companies to continue this strategy.

Such a scenario limits the motivation to introduce novel drug candidates targeting niche therapeutic areas. The bigger pharmaceutical players are used to the concept of blockbusters targeting the major therapeutic categories such as cardiovascular and diabetes.

The shift of focus towards manufacturing drugs catering to a niche market is critical in tackling the declining revenue in pharma. Personalized medicines are becoming attractive to drug manufacturers, and are likely to be big hit among the diseased population. These drugs herald the burgeoning of specialty pharmaceuticals. In addition, new categories such as molecular diagnostics and algorithm-based diagnostics are emerging and are likely to steer the growth of personalized medicine. The shift towards noninvasive medicine, which includes telemetry, telemedicine and increased sophistication in patient monitoring is redefining healthcare. However, the trend is pretty slow and is yet to gain momentum.

Summary

The global industry is likely to experience tangible changes in the near future. The basic research in life sciences is evolving as the understanding of human and other genomes have revolutionized the potential of drug development.

Scientists will need to gain a clear understanding of the underlying disease states, thereby paving the way for better therapeutic drugs. The increased use of systems biology is verging on providing a new dimension to drug discovery efforts. The unprecedented industrial and economic advantages offered by the integration of fundamental genomics, structural genomics, proteomics and systems biology in drug discovery is bound to attract more takers. Furthermore, there are several approaches to integrate technology and biology to translate research into tangible economic and health benefits.

Moving from novel biochemical methodologies, pharmaceutical companies are intending to use genomics and proteomics to stir up innovative health solutions. The increasing importance of these technologies and the emphasis the R&D sector is putting on using them is likely to catalyse new drug development.

The increase in life sciences funding for genomics and proteomics, emphasizes the relevance and importance of these technologies to drug discovery. Although integrating these processes may take time, pharma is awaiting a revolution in drug discovery. The next couple of decades are certain to witness the emergence of innovative and efficacious therapeutics to improve public health.

Sylvia M. Findlay is an industry analyst, pharmaceutical and biotechnology, healthcare (EMEA) for Frost & Sullivan, Chennai (India).