Company Analysis - Mergers & Acquisitions
Safety first
Another upcoming issue driving this rethink in business strategy within the pharmaceutical sector stems from ever more stringent safety regulations. Following huge class-action lawsuits such as the rofecoxib (Vioxx) affair, the US Congress recently granted the US FDA increased authority to enforce safety standards in drug registration filings as well as a greater influence over post marketing safety. The UK has also tightened drug development legislation in the face of highly-publicised events such as TeGenero’s near-fatal Phase I trial with TGN-1412 and GlaxoSmithKline’s alleged withholding of adverse event data concerning paroxetine (Seroxat).
"It is often said that drugs such as aspirin and penicillin would never have passed the screening procedures in place today; however, this is a consequence many have come to accept as inevitable."
While many people welcome the changes to safety regulations, the impact on the industry could be far-reaching. The time required to bring a drug to market could well increase, which will of course have the follow-on effect of raising the cost as well, already estimated to be an enormous US$800m. Along with this rise in R&D costs, there will be an inevitable impact on innovation, as companies become less inclined, or less able, to take risks on entirely novel therapeutic approaches, instead focusing on ‘safe’ development of reformulations of established ('me too') drugs, generics and over-the-counter products.
In light of these revenue-hitting factors, most of the top pharmaceutical companies are restructuring their pipelines in order to weed out less risky candidates and focus their resources on those with the greatest potential to guarantee a return. Greater selectivity at the early stage of development compresses the discovery cycle by eliminating redundant research with unsuitable candidates as early as possible. However, if the future earning potential of a drug is assessed too early on, and risky options are passed over as a result, potentially valuable discoveries may be missed. It is often said that drugs such as aspirin and penicillin would never have passed the screening procedures in place today; however, this is a consequence many have come to accept as inevitable.
