Driver 1: The R&D Landscape

PharmaFutures 2 discussions underlined the critical importance of R&D and the hiatus in productivity today. Assessments of current levels of R&D productivity differ depending on whether they are made on the basis of today’s pipeline or today’s output. Judged against the former, changes in the management of R&D have combined with advances in molecular and cellular biology and biochemistry to produce promising results, and early stage projects have experienced very robust growth. Judged against recent output, productivity over the past ten years – the annual number of new molecular entity (NME) approvals of the US Food and Drug Administration (FDA) – has fallen slightly, while R&D expenditure has almost doubled.

The project discussed whether the industry has achieved the optimal balance between significant, risky innovation and the less hazardous policy of maximising returns on areas of known research and the challenges in successfully managing R&D.

Investors in the PharmaFutures project expressed considerable appetite to have more detailed information about earlier stages of pipeline development. In addition to the progress of the number of compounds through the pipeline they expressed interest to understand better productivity metrics in Phases I and II. Investors assess the quality of the pipeline, evaluate how quality changes over time, and seek to understand the underlying factors that affect it.

Consequently, good solid data on the early stage pipeline could reduce the risk associated with investments and consequently be used to increase the overall value of the pharmaceutical sector – especially if targets are developing into novel products. Investors also expressed interest in development and acknowledged that early stage development may be more diversified company by company than they previously thought.

Through the course of PharmaFutures 2 it became apparent that companies believe that investors are not interested in this stage, partly because the risks of failure are high and partly because of the difficulties of predicting success. However, the adoption of novel discovery platforms may have traction within the investment community. For companies to be granted stock value for this investment, they will need to revise their perception of lack of investor interest and provide more information. Investors in the PharmaFutures project also expressed interest in understanding how the industry would support and respond to a possibly re-emergent robust FDA. Specifically, investors were interested to see evidence of successful strategies to address safety concerns.


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I have watched the industry suffer the loss of public trust, struggle with bringing new products to market and lose the ability to grow its top line. This perfect storm is reflected in the current share price and as a long term investor I hope to hear and perhaps help find the early signs of a path to recovery.

John Schaetzl, Independent