Pharma Companies Turn to Deal Making Due to Falling Pipeline Productivity

Although the pharmaceuticals market continues to witness global growth, pharmaceutical and biotechnology companies are facing challenges due to disruptive events in the healthcare market, such as increasing costs of production and R&D, shifts in patent laws, and challenges in the economy, according to business intelligence provider GBI Research.

The company’s latest report states that internally developed pipeline productivity at big pharma companies has decreased recently. Taking discontinued programs into account, the cost of bringing a new drug to market has continued to rise, and is now estimated to exceed $1 billion. In this way, the traditional business model cannot be fruitful in the new market landscape.

Dominic Trewartha, Managing Analyst for GBI Research, explains: “Companies are considering various strategies to overcome current challenges, with deal making the most popular means of boosting revenues over a short period of time. For example, agreements between companies for drug discovery, which allow them to share the risk of co-developing products, have become more common.

“Small companies that primarily carry out early-stage research, development and production activities are now routinely entering into agreements with key industry leaders to out-license the rights to their products, utilizing the strengths of the larger companies in terms of commercializiation expertise, manufacturing, distribution, and marketing capabilities and global presence.”

Key players keen to secure novel and promising molecules are willing to co-operate with small players to in-license promising early-stage assets to expand their portfolios, reduce R&D risks and move ahead in the market.