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The process by which a single new medicine is developed from a research-based concept into a fully marketed product is lengthy and extremely costly. As a matter of fact, it takes as much as 15 years to complete, and is currently estimated to cost around a billion dollars to develop a new drug or therapy.

The overestimated factors that contribute to these costs is the fact that the vast majority of the drugs fail at some stage of the development process. Indeed, 10 000 compounds need to be investigated at the discovery stage in order to deliver a single new medicine for the market.

The process leading to a drug discovery is lengthy and costly

A good way to measure the success and the productivity of the drug discovery and development process is to look at the new molecular entities approved by the U.S. FDA. Overall, the number of entities approved has been in decline since 1996, indicating that either companies are finding it increasingly difficult to find new drugs, or that commercial pressure is also driving them towards a preferred strategy of life cycle management with existing products.

NMEs approved by the FDA between 1996-2008 - Source: FDA

Conversely, the amount of money invested in R&D by pharmaceutical and biotech companies worldwide has been steadily increasing. Not only in terms of value, but most significantly, proportionally to sales.

Pharma spending has increased in proportion to sales - Source: Cohen F.J.(2005), Macro trends in pharmaceutical innovation, Nature Reviews Drug discovery, Vol 4 pp.78-84

Importantly, over a quarter of the invested money is spent on the discovery stage of drug development. In addition to the investment and internal R&D, companies are more and more aware that health-based R&D has expanded beyond the proficiencies of any single company. The need for externalisation is stronger than ever because it gives the opportunities to access new technologies and novel therapies efficiently. As a result, many companies have started industry collaborations, hence benefiting from complementary expertise and skills (Biotech and Pharmaceutical alliances).

45% of the total drugs approval by FDA in 2006 and 2007 were from the biotech industry. However, the rate of failure was high, 60% failure rate in phase III.

In the pharmaceutical industry, the rate of failure was lower, 16% failure rate due to phase III. However, the number of drugs approval by FDA coming from the pharma industry only represented only 35% of total FDA drug approvals.
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20% of all drugs approval by FDA come from collaborations or acquisitions, with a rate of 50% failure rate in phase III.

Therefore, the data from the last few years show that the pharmaceutical itself have showed low productivity in proportion to the total number of drugs approval and while the biotech industry show higher number of drug approvals by FDA, the rate of failure is extremely high, leading to less interest by investors. Hence, biotech and pharma collaborations could lead to a better productivity and a smaller failure rate in phase III.