Pharma market growth slowing down

Growth in the global pharmaceutical market will continue to slow from the double digit rates of the early 1990s to around 7% by the end of this decade, according to life science consultancy Wood Mackenzie.

The company's latest pharmaceutical industry research, carried out using its Productview and Licensingview analysis tools, finds that the negative factors influencing the growth of the pharmaceutical industry continue to dominate, with r&d productivity continuing its decline and the cost of drug discovery and development seeing a sustained rise.

To feed the need for products, which is still not being met by internal r&d, many large pharmaceutical companies are increasingly resorting to in-licensing. Companies that historically have not considered a product that was not invented in-house are now players in the global market for development compounds originated in smaller and biotechnology companies.

This increased level of demand, together with a shortage of quality late-stage products to in-license, has caused an increase in the value of late-stage deals and a trend towards earlier stage licensing, according to Wood Mackenzie's research. It put the cost of a late-stage licensing deal at an average of $390m in 2005, compared with US$60m in 2000 - a near 7-fold increase in just five years.

The increase in the value of deals not only favours those companies with greater financial resources, but also encourages smaller biopharmaceutical companies to look to the big companies for the commercialisation of their products.

However, while large pharma companies are able to cope with increased licensing costs, mid-sized companies reliant on in-licensing find themselves unable to compete with the prices being demanded by licensees.

Wood Mackenzie believes that there are limited strategies that mid-sized pharmaceutical companies can follow to make them attractive licensing partners in this competitive market, and says that they face a choice between either focusing on one therapeutic area and attempting to dominate it, or becoming experts in a geography that is unattractive to large pharmaceutical companies.

"It is clear that mid-sized pharmaceutical companies looking to attract products from innovator ones are faced with significant competition," said Dr Stuart Bowman, vice-president of research. "To become an attractive partner, the mid-sized company needs to develop a compelling reason for the deal to happen. Without a change in strategy, mid-sized companies reliant on in-licensing will find themselves priced out of the auction for good late-stage products."