Every pharmaceutical company knows that it has become more expensive to in-license clinical phase products because of a widespread weakness in clinical development pipelines and the resultant greater competition for clinical phase drugs. The ensuing increased cost of commercialisation of such drugs through higher upfront, milestone and royalty payments to their originators is, then, a consequence of high market demand and low supply.
However, for biotechnology companies, the high potential rewards for clinical phase products should drive a renewed interest from investors, and there is every indication that values of these companies will increase significantly over the next few years.
In fact, the pharmaceutical industry as a whole has changed considerably over the past 15 years, and we are now operating in a completely different environment, particularly with regard to drug development.
There is, for example, considerable political pressure to stop the price of drugs rising, while at the same time the hurdles to get a drug to market are getting higher. The recent draft guidance issued by Britain's state cost control watchdog NICE (the National Institute for Clinical Excellence) that Pfizer's inhaled insulin product Exubera® should not be prescribed for use by the NHS in England and Wales, is an example of how patients have been deprived of medical breakthroughs on the basis of cost to the state alone.
"Although the potential rewards for biotech licensor companies are higher than ever, nothing is certain: the inherent risk of drug development, along with the issues of development costs, acceptance by regulatory bodies and, ultimately, price, could make the product non-viable in the end."
This kind of judgement reinforces the fact that although the potential rewards for biotech licensor companies are higher than ever, nothing is certain: the inherent risk of drug development, along with the issues of development costs, acceptance by regulatory bodies and, ultimately, price, could make a drug product non-viable in the end.
Everyone will know that the cost of filling the fuel tank of your car has increased significantly in the past year. Although frustrating, there is no real surprise that the price we pay for fuel at the pump has increased when the cost of crude oil at a point earlier in the value chain has increased. We expect that when economic or market conditions change there is a consequence. Likewise, paying more for drugs is something that we may have to accept if we want to control disease in our society.
Fintan Walton
Chief Executive Officer
PharmaVentures Ltd