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Feature

Biotech and Beyond

Posted on: 29 Oct 04
Biotech and Beyond

Summary

The environment for drug development is tougher than it has ever been, with companies having to deal with a variety of political, regulatory, social and economic pressures in order to get their products to market. Few biotech companies have been able to devise a strategy to succeed in this hostile environment on their own, but there is no shortage of new entrants in the market.

The environment for drug development is tougher than it has ever been, with companies having to deal with a variety of political, regulatory, social and economic pressures in order to get their products to market. The current difficulties are best illustrated by figures for new drug output, which has steadily declined in recent years, but has been accompanied by a rise in R&D expenditure.


 


Many of the major companies have been criticized for lacking new ideas and methodologies and it has been suggested that they have lost their capacity to innovate. Industry observers have suggested that smaller companies, such as those in the biotech sector, now show more of the creative spirit necessary to discover novel drugs. Yet although the biotech sector is showing promise in terms of innovation, companies in this sector must get their products to market under the same tough conditions as their major pharmaceutical counterparts (1). Few biotech companies have been able to devise a strategy to succeed in this hostile environment on their own, but there is no shortage of new entrants in the market.


 


US success
From a general perspective, the US biotech industry is considered to be the most successful in the world and it is likely to maintain this leading position for the foreseeable future. The R&D environment has been key to the success of the US biotech sector. There has been a drive to create an environment that rewards biotech companies for their innovative efforts, encourages collaboration with larger companies and allows them to tap into the strong and vibrant academic research base. For example, in July 2003, the US House of Representatives introduced the Biotechnology Future Investment Expansion (BIOFIX) Act (H.R. 2968), a piece of legislation designed to change the US tax code in order to encourage further investment and innovation in the biotech industry (2).


 


California, which has 31% of the biotech companies in the US, has been a particularly strong biotech R&D base and has helped the US sector mature (1). Companies starting out, and their backers, are much more aware of the risks in the US sector than 20 years ago and have been able to learn the lessons of those that have failed. In essence they are usually able to temper their optimism with a heavy bout of realism in order to avoid complacency (1). Thus although California features some of the most successful biotech companies in the world, with a range of products on the market, companies starting out today are aware that they are operating in a very different environment to the industry pioneers (1).


 


Playing catch up
Outside the US the promise offered by the biotech sector has been less convincing. For example, Japan has a highly developed pharmaceutical industry and a strong academic base, but its biotech sector is yet to prosper (3). The Japanese environment is still some way off from providing the 'spark' that will enable scientific promise to find a commercial outlet (1). Much will depend on government support to encourage start-up companies and collaborations.


 


Although Europe has made great efforts to develop its biotech sector, its performance on a regional basis has been inconsistent and the R&D environment is considered fragile as governments implement cost containment measures designed to reduce the prices that companies charge for their products (1, 4). Only a few European companies have been truly successful and others that have shown initial promise have unfortunately faded. Uncertainties over funding have continued to trouble the sector and the political set-up of the European Union (EU) has made it difficult to develop initiatives similar to those in the US. Some observers believe that the current EU structure and its recent expansion from 15 Member States to 25 means that any legislation relating to the biotech sector takes a convoluted route and results in proposals that lack the decisiveness of the original ideas (1). They have suggested that the biotech community in different EU Member States should ask their national governments to introduce specific schemes to improve conditions for R&D, rather than looking only for EU-wide schemes (1).


 


Grounds for optimism
Despite problems, there is continued commitment in Japan and Europe to find the formula that will lead to a mature biotech sector. Although it is inevitable that comparisons will be made, the growth of the sector in Japan and Europe is taking place in a political, regulatory and financial environment that is very different to that of the US (1).


 


In a sense, it is unwise to read too much into generalizations about a region's biotech sector. Those involved in the sector point out how companies within the same country will compete for resources, public attention and try to gain a competitive edge over their national rivals (1). Therefore it is better to examine how biotech clusters in different areas of a country compare with each other and with similar set-ups elsewhere (1). A number of these biotech clusters are exhibiting great promise and demonstrate that the biotech sector outside the US is far from stagnant.


 


Outlook
Despite the difficulties involved in getting a drug to market, biotech companies continue to display optimism about their chances of success. As the US sector has shown, ups and downs in the market are unavoidable and a certain level of attrition in the industry is to be expected. There is a continued demand for new drugs that will target areas of unmet medical need and a number of biotech companies have promising approaches to these therapeutic areas. The efforts by governments in Europe and Japan to boost the biotech sector illustrate how important the industry is considered for the future of new drug development.


 


References
1. Kermani F. (2004). There's something about biotech. Contract Pharma magazine. http://www.contractpharma.com/1004intlbiotech.pdf
2. BIO Applauds House Measure to Correct U.S. Tax Code. 28 July 2003. Biotechnology Industry Organization. http://www.bio.org/newsroom/newsitem.asp?id=2003_0728_01
3. Kermani F. (2003). Biotech boom for Japan? http://www.pharmiweb.com/features/feature.asp?ROW_ID=338
4. Kermani F. (2004). Pharma R&D in Europe: Past, Present and Future. Chiltern International. http://thepharmyard.networkpharma.com/shop/section.php?xSec=96



 

Dr Faiz Kermani

Last updated on: 27/08/2010 11:40:18

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