on the discovery stories:

Edited by subu76 - 03/Aug/2009 at 10:07am

FUND VIEW - MStanley favours drug firms, shuns banks

Morgan Stanley believes Indian generic drug makers are good bets for investment because of the world's drive towards bringing down healthcare costs and making medicines affordable, a fund manager said on Friday.

"My sense is that it is similar to the opportunity that we had in IT way back in 1999," said Jayesh Gandhi, referring to India's information technology sector, which became the hub for outsourcing to companies and governments across the world.

Gandhi, who manages about $100 million in India for the U.S. money manager, said Indian drug firms were available cheap at 6-7 times their price to earnings multiple and could show an earnings growth of 30-40 percent.

One thing which is changing very, very significantly is the importance of Indian generics in the supply of global pharmaceuticals industry," said Gandhi, who holds Aurobindo Pharma, Cadila Healthcare, Dr Reddy's Laboratories and Jubilant Organosys.

He said the U.S. generics market, the world's biggest, will double in size to about $100 billion in five to seven years, creating at least a $10 billion to $15 billion opportunity for Indian drug makers.

U.S. President Barack Obama's drive for healthcare reforms and lower cost can only be done by using the cheaper Indian generics, he said.

The world's biggest drugmakers are also eyeing Indian firms to gain access to emerging markets and cheap production, as well as to retake some of the business they have lost to inexpensive copycat versions of their blockbuster drugs.

Reliance Pharma Fund: Invest

http://www.thehindubusinessline.com/iw/2009/08/09/stories/2009080950481000.htm


Edited by Hitesh Shah - 09/Aug/2009 at 5:39pm

Mohan Ji,

Let us now also see the other side of the coin :

Drug Discovery Costs
    * ~$1.5 Billion / drug
    * 80% failure rate during development
          * reason mainly Toxicity,  Efficacy
    * Clinical Trials 60-70% cost
    * Regulatory Submissions
    * Post-Launch Costs
 
Some Drug Development Facts
    * One major reason for increased costs and lower ROI is a dramatic decline in productivity.
    * Only one compound now reaches the market for every thirteen discovered and placed in preclinical trials, compared to one for every eight between 1995 and 2000.
    * Attrition has been particularly severe in Phase III development.
    * Average development costs per compound have increased from $131 million to $200 million, while the chances of each compound receiving approval has fallen from 73% to 59%.
    * Post-Launch Costs - can be extreme
Sourced from Innovation or Stagnation, FDA Report March 2004

Some More R&D  Facts
- Total US industry spending on R&D by all manufacturers reached a record high of $62.3bn in 2008, which equates to a direct cost per new molecular entity of more than $1.2bn. Similar cost trends are also being seen across Europe.
- Team consolidations have become an extremely popular method of improving R&D efficiency by optimizing the structure and objectives of working groups. Many companies have undertaken substantial reorganizations throughout 2008 and 2009.
- Drug development alliances are increasingly being used to leverage resources and cut R&D costs. Drug development deal values are expected to triple over the next few years as developers seek partners to reduce in-house spending.
- Schering-Plough and Novartis had the highest rates of R&D spending growth between 2006 and 2008, at 27.9% per year and 15.8% per year respectively. GSK and Merck registered the lowest growth rates, at -3.7% and -2.0% respectively.
- R&D cost cutting is expected to continue gaining pace through 2010, with reduced emphasis from 2011 to 2014. Outsourcing and drug development alliances will become key initiatives in the future.

Sourced from R&D Cost Cutting: Managing Cost Containment and Safeguarding Productivity .Business Insights, April 2009,


Drug Development Costs About $1.7 Billion
RICK MULLIN
Pharmaceutical manufacturers will be able to use a startlingly high appraisal of the cost of developing drugs when they attempt to justify the price of their products to skeptical consumers. According to a study by Bain & Co., the cost for a single new drug averages $1.7 billion, almost double the widely accepted $897 million estimate published in May by the Tufts Center for the Study of Drug Development.
According to Bain, the cost of drug development--currently 55% higher than the average cost from 1995 to 2000--is rising largely as a result of an increasing failure rate for prospective drugs in clinical trials. The rising cost of commercializing new drugs is another contributing factor--12 months of sales and marketing costs are included in Bain's cost estimate but not in the Tufts figure.
The consulting firm says rising costs, declining productivity, and a shortening of the average period of exclusivity for new drugs have driven return on investment for large pharmaceutical companies down from 9% in the late 1990s to 5% today.
The study criticizes big pharma for failing to aggressively attack costs by designing more efficient trials, pursuing partnerships, and integrating drug development and marketing activities.
Study coauthor Ashish Singh warns that by clinging to a blockbuster drug business model, which focuses efforts on drugs that will garner $1 billion or more in annual sales, the drug industry risks a reduction in stock market value, much like that faced by the computer industry in the 1990s.

Sourced from Chemical & Engineering News Volume 81, Number 50


PHILADELPHIA - The Tufts Center for the Study of Drug Development  announced that the average cost to develop a new prescription drug is $802 million.
“Bringing new drugs to market has always been an expensive, high-risk proposition, and our latest analysis indicates that costs have continued to skyrocket,” said Tufts Center Director Dr. Kenneth I Kaitin.
He added, “The single largest challenge facing drug developers — both pharmaceutical and biotechnology companies — is to contain R&D costs and reduce development times without compromising clinical test design. It’s a tall order.”
Related Tufts Center research has found that it takes between 10 and 15 years to develop a new prescription medicine and win approval to market it in the United States.

Among the study’s key findings were the following:
    * The full capitalized resource cost of new drug development was estimated to be $802 million . This estimate accounts for the cost of failures, including research on compounds abandoned during development, as well as opportunity costs of incurring R&D expenditures before earning any returns.
    * When compared to the results for previous similar studies, the R&D cost per approved new drug increased 2.5 times in inflation-adjusted terms.
    * After adjusting for inflation, the out-of-pocket cost per approved new drug increased at a rate of 7.6% per year between the 1991 study and the current study. The annual rate of growth in capitalized cost between the two studies was 7.4% in inflation-adjusted terms.
    * While costs have increased in inflation-adjusted terms for all R&D phases, the increases were particularly acute for the clinical period. The inflation-adjusted annual growth rate for capitalized clinical costs (11.8%) was more than five times greater than that for pre-clinical R&D.

About the Tufts Center for the Study of Drug Development
Based in Boston, Mass. and affiliated with Tufts University, the Tufts Center for the Study of Drug Development provides strategic information to help drug developers, regulators, and policy makers improve the quality and efficiency of pharmaceutical development, review, and utilization. The Tufts Center conducts a wide range of in-depth analyses on pharmaceutical issues and hosts symposia, workshops, and public forums on related topics throughout the year.
Tuft Centre is regarded as a independent nodal research agency for pharmaceutical industry in U.S in particular and its findings are respected and debated worldwide in pharmaceutical sector.
  
This is just to give an idea what goes in a tablet cost when developed and one can not anyway just compare it with cost of general active ingredients.

Edited by vsb2pwn - 10/Aug/2009 at 7:13am