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Over the past few months the majority of the news coming out of the pharmaceutical industry has been a refrain of slashing R&D spending as a result of increasingly competitive drug development. Developing products for niche areas has forced many large companies to change their approach and as a result cut staffing and budgets for clinical trials.
Still, recent news from the Financial Times indicates that a new model could be coming to the fore. The inclusion of private investors in the clinical trial phase specifically as opposed to the overall venture is a bold idea from Merck and many in the industry will be watching closely to see how well it works.
One clear advantage of this new concept is minimizing risk exposure for the company. According to the Financial Times, several other companies have similar plans in the works. Trying to share the financial burden of clinical trials has become the norm for many companies, including disease-specific partnerships and negotiated milestones with CROs for payments.
As the era of the blockbuster drug winds down, companies are understandably wary of putting large amounts of money into risky ventures for products that have a limited potential patient population. The patent cliff hasn’t been as apocalyptic as some may have feared, but the dent in revenues has been impossible to ignore. Companies are trying to answer the question of how to produce better, more targeted drugs with less money than they’ve had in the past.
A more macro approach to this problem has been taken by Eli Lilly, which has been able to buck the trend of declining R&D with a smart run of tactical acquisitions to bolster its ability to develop drugs for smaller patient markets. Joining forces with smaller, more flexible companies, allows for a larger pipeline. However, even the best acquisition strategy doesn’t remove the financial risk inherent in these types of clinical trials, and companies will need to continue to adapt to the changing market place.
Jacob Presson is a research analyst at Cutting Edge Information, providing market research to pharmaceutical companies.