Pharmaceutical companies should “externalise” their drug development programmes by working with biotech companies to cut the costs of early stage development, a study has found.
The Morgan Stanley report said that pharmaceutical giants such as AstraZeneca and Sanofi-Aventis should address the cost of high-failure rates of experimental drugs by developing licensing agreements with biotech firms that can provide experimental products at a fraction of the cost of in-house development.
The report found that introducing products from smaller firms would cut failure rates and boost profits while improving safety during the development stage.
Morgan Stanley said the cost of failure for drug companies has risen from an estimated $150 million (£93.8m) per drug ten years ago to $2 billion (£1.25bn) in the current climate, prompting pharmaceutical firms to explore new avenues in order to cut costs.
The introduction of externally sourced products should only be introduced once they have reached mid-stage phase 2 clinical trials in humans, by which time the data allow far greater understanding of safety, the report said.
The report said that AstraZeneca and Sanofi-Aventis were most likely to develop licensing agreements with smaller biotech companies, while rivals Bayer and GlaxoSmithKline would also see a rise in valuations from the new strategy.
Copyright Press Association 2010