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Financial crisis: How will it affect new drug development?

It’s hard to imagine an industry that isn’t affected by the global financial crisis, and science is no exception. The credit crunch will slow the development of new medicines, too, say economists and scientists meeting in London today and tomorrow.

The concern for novel treatments follows a boom time in the development of so-called “lifestyle drugs” to treat conditions such as impotence and baldness, which critics say has eclipsed innovation in treatments for serious diseases and those in developing countries where people cannot afford high-priced medicine. Investment in biotechs, companies that focus on developing new technologies from biology, last year hit a record-high $50 billion, but “the signs are that this has flattened,” says David Wield, director of the Economic and Social Research Council’s Innogen Center in Edinburgh.

We asked Wield, who is set to speak at the Genomics and Society: Reinventing Life meeting today, how serious a threat the market crisis poses to pharmaceutical innovation.

The following is an edited transcript.

Are there particular classes of drugs or diseases that you expect will be hardest hit?

The most risky areas and those most dependent on venture capital investment are likely to be the ones that suffer first – probably early-stage biotech companies with novel approaches to therapies for which there is not yet a clear route to market via the multinational company routes (such as stem cell therapies). One piece of evidence is a recent survey conducted for Mid-Atlantic Biosciences firms for their conference last week, [in which] the companies emphasized the early stage, or A round, as most vulnerable to the financial crisis.

However, after more than 20 years of investment, public and private, the big [payoff] from biotechnology innovation is still talked about in terms of being "just around the corner." Many companies are in the business of selling IP (intellectual property) to each other rather than developing profitable products. So if the perception of high risk and probably low profits should become more widespread, then external investment in the industry could drop quickly.

What sort of investments are most at risk: companies' own investments, venture capital investments, stockholder investments or all or some combination?

It is widely believed that public demand, and public health spending for drugs and therapies will remain high in the short term, which will maintain present profitability of the big R&D-based multinational pharma firms.  But even here the demand for cheaper generics products is likely to be stronger than that for expensive new products. This would strengthen generics producers at the expense of the R&D-based firms. Given the present weakness in the drug pipelines of the R&D companies, they may be more vulnerable than we expect, particularly if shareholders become more impatient for a fast return on investment. Paradoxically, the perception that these large pharma companies are relatively protected from the current financial crisis, and also have [funds]  to invest in high-tech biotechs, may make them more vulnerable if they face unrealistic expectations.

For how long do you expect those investments to be less?

Putting a figure on the extent and length of investment squeeze depends, sadly, on knowing the extent and depth of the recession. As yet, that does not look clear.

(Image by iStockphoto/Onur DöngelOnur Döngel)

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