Wednesday, 20 November, 2002, 15:37 GMT 
Drug firms 'must change - or die'
http://news.bbc.co.uk/2/hi/business/2493811.stm

Research methods will be transformed

The pharmaceutical industry is poised a revolution which will oust the blockbuster drug, and usher in targeted treatments based on a fresh understanding of human biology, a report has said. 

The drugs industry is suffering a crisis which saw the number of new drugs approved in the US fall to a seven-year low of 24 last year despite a doubling of investment in research, a report by IBM Business Consulting Services said. 

Companies that fail to respond to the market conditions which are now emerging, will see their value plummet 

IBM report: 
US patents on 35 blockbuster drugs will expire by 2008, yet only 14 potential new best-sellers are in the pipeline. 

Yet while pharmaceutical firms have seen their share prices fall as the product squeeze has unfolded, new generations of treatments present an opportunity for huge profits, Wednesday's report said. 

"Companies that learn to make such medicines could triple their shareholder value by 2010," the report said. 

"Companies that fail to respond to the market conditions which are now emerging, will see their value continue to plummet." 

Researchers added that the pharmaceutical firms currently most profitable "may well be" those slowest to change, setting the scene for a major shake-up of company rankings. 

Cheap and fast 

The new generation of drugs will be based largely around larger molecules, such as proteins, whose composition is becoming the focus of increasing research. 

Such molecules, although complex, will be faster to develop thanks to the help of biochemistry software. 

The report noted the importance of a "much better grasp of the biological sciences and a massive increase in computer power". 

The treatments' speed of development will also make them cheaper to produce, putting them within the budget of developing countries which often have more severe health concerns, yet little cash to pay for treatments. 

Fewer side effects 

Yet as the drugs require in researchers a greater understanding of a disease's progress, they will be more accurate, in treatment terms, leaving them less prone to causing side effects. 

"Most [current] drugs only work in between 40-60% of the patients for whom they are prescribed," the report said. 

"And drugs which work well in some patients cause intolerable side effects in others. 

"Most medicines for adult patients are prescribed without regard for variations in body size even though there is a roughly threefold difference between the biggest and smallest adults." 

The report comes at a time of increasing concern among drug giants over the expiry of patents on best selling drugs. 

Once patents have expired, firms in developing countries often manufacture their own version of the drugs, and, with lower overheads, can afford to sell them more cheaply. 

While some firms have sought to bolster their drug "pipelines" by buying biotechnology firms with promising products, uncertainty within the industry and worries about the accuracy of research, has reduced the appetite for takeovers. 

The last report by IBM Business Consulting Services into the pharmaceuticals industry, published in 1998, predicted the spate of mergers and acquisitions which has reduced the number of sector giants from 20 four years ago to just 13 today.