More M&A as big pharma struggles to innovate sufficiently
World News | May 17, 2010
The looming patent cliff is pushing the industry into a critical phase in terms of innovation and consolidation, according to a report from international intellectual property group Marks & Clerk.
The analysis, based on a survey of 381 executives across the sector, says that big pharma is becoming increasingly reliant on patent term extensions to safeguard essential blockbuster revenue “ahead of a likely ‘make-or-break’ round of company acquisitions”. It claims the gains “from yesterday’s small molecule-based drug discovery have been largely enjoyed” so the “picture for R&D is now far more complex, with the research predicting increased industry convergence driven principally by acquisitions”.
Figures-wise, 82% of those polled believe big pharma will be unable to innovate sufficiently from within to replace blockbusters, while 97% expect that patent life extensions will continue to grow in importance. Almost seven in 10 predict substantial acquisition activity within the next two years, while almost two-thirds believe the improved economic situation “means the industry now has the confidence to go ahead with those mergers”.
Gareth Williams, a partner at Marks & Clerk, said that while the pharmaceutical industry seems to be “returning to health, our research merely indicates a shift in concern from the global economic backdrop and the subsequent funding drought to more immediate industry-specific problems”. Companies may now have confidence and the support of institutional investors to press ahead with acquisition, he adds, “although at this stage, selecting the right acquisition targets will be critical to their future R&D success”.
Dr Williams added that “increasing reliance on patent term extensions buys them some vital time ahead of making a move,” but notes that “what is being predicted is not necessarily driven so much by desire as urgency.”
The Marks & Clerk report also reveals concerns about Europe’s regulatory and IP system, with 62% of respondents claiming that the US system “has better managed to reward innovation and keep up with the changing needs of the industry”.
Almost 90% believe it is “legitimate commercial practice to take full advantage of the patent system,” which should not be seen as anti-competitive by the European Commission, while over eight out of ten say recent changes to Europe's patent application process “will place a significant burden on smaller companies”. Almost nine in 10 claim that “lasting capital will be attracted back to the US market, as optimism emerges over Obama's healthcare reform”.
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