Funding woes threaten future drug development, finds new research
Risk aversion from investors is posing a serious threat to drug development, according to the latest annual biotechnology report by Marks & Clerk, one of the world’s leading firms of patent and trade mark attorneys. The research identifies a number of unique challenges currently facing the biotech sector, which are adversely affecting investment. These stem in particular from growing caution in the granting of marketing approval for new drugs by the US Food and Drug Administration (FDA) which, in turn, is placing added pressure on the patent life. The report suggests that drug modification or late-stage development will become increasingly popular – at the expense of genuine innovation.
The international research is based on the views of nearly 500 executives across the biotechnology and pharmaceutical sectors, principally in the US and UK markets as well as Europe and Asia.
83% of respondents feel that the pressures currently facing biotech are making it less attractive in the eyes of many investors. 90% believe secondary and further funding will become increasingly difficult to secure as market conditions deteriorate, and that investors will focus on less risky, latter-stage drug development in a bid to limit their exposure to risk. Correspondingly, 83% think that biotech companies will themselves focus increasingly on drug modifications as well as more mature drugs in the pipeline.
Where capital is available, the terms for funding may become simply uneconomic. 80% of respondents believe key investors will either take a greater equity stake, or potentially look to secure their capital against the drug-makers’ intellectual property (IP) assets. This reflects a trend gathering momentum within the industry where investors focus much more intently on the strength of valuable IP rights. Overall, 78% agree that the climate for enabling biotechnology innovation has deteriorated within the last year, and 89 per cent believe some small and/or early stage companies will either fail or be bought out at unattractive levels.
Dr. Gareth Williams, Partner at Marks & Clerk and co-author of the report, commented: “Biotechnology represents the future of modern medicine, where yesterday’s innovators now struggle with dwindling pipelines, generic competition and a chequered R&D record. Whilst the long-term view has not changed, we are seeing a short to mid-term funding gap in the current climate, which poses a genuine risk to essential, early-stage research and development.”
The genesis of the funding issue is not solely attributable to current economic fragility. A much more cautious attitude from regulatory bodies (specifically the FDA), is making it considerably harder for biotechs to get the marketing approval they need for drug development. This, in turn, is affecting investor sentiment. 68 per cent of respondents believe that the drug approval process must become much less risk-averse if investment levels are to be maintained, with 72% viewing this as essential to the delivery of future drug pipelines.
One of the most important consequences of sluggish drug approvals is its impact on the lifetime under which a new drug is protected by its patent. 91% of respondents feel that the time it now takes for drugs to get through the system is eating into the time those drugs enjoy the rewards of patent protection. 78 per cent warn that there is a danger of biotech companies bringing more ‘me too’ drugs to market, rather than investing in real innovation, if the threshold for approving new drugs is set too high.