Contract Fine Chemicals: Hindsight
9:50 AM MDT | March 15, 2010 | By GUY VILLAX
CEO of Hovione
1. There was no reduction of NME approvals since the Nineties, instead what occurred in the 2nd half of the 90s was an unusually large number of approvals. One more reason for the flood of NDA's in the late 90es was the boom of anti-HIV drugs. “Several explanations have been offered, most of which centre on the impact of the PDUFA2 of 1992. They include a clearing of the backlog of new drug applications that were submitted before 1992; the setting of performance goals that required swift action on post-1992 submissions; a surge of post-1992 submissions to take advantage of PDUFA before it might expire; and a temporary acceleration of drug R&D across the industry to try to increase NME output”.
2. The number of NME approvals in the current decade is not so different from that of all the previous decades (except the 90s).
3. There is no evidence of correlation between R&D budgets and the number of approvals, rather there is close correlation between the number of companies active in R&D and the number of NMEs approved – the corollary of this conclusion is that mergers halve NME approvals, as Munos eloquently puts it “1+1=1”.
4. A tough medicines agency like FDA is actually a good thing for Innovation, setting high hurdles drives companies to do the right thing: “because exacting regulatory requirements force companies to be more selective in the compounds that they aim to bring to market”.
5. As from 2002 small pharma has started to contribute more than 50% of the approved NMEs.
What this author does and what is rather unique is to take a big enough step back –all the way to 1958– in order to see clearly. The cycle time of drug approval is so long that looking at a decade alone is insufficient.
“By virtue of their number, small firms collectively can explore far more directions, and investigate areas that their larger, more conservative competitors avoid. However, only a small fraction of these small companies will be rewarded with an FDA approval. Individually, they are a much less reliable source of NMEs than large companies, but collectively, they produce more, for less. In this strange equation lies perhaps one potential avenue for renewing the pharmaceutical R&D model”.
If the Nature article is right then the recent actions of Astra Zeneca (see FT) are going in the right long term direction, those of Pfizer are only correct short term.
It is 10 years Deutsche Bank issued an infamous analyst’s report3 that claimed that “the fine chemical/pharmaceutical contract manufacturing industry [is expected] to generate growth in excess of 15%” for the next 2 to 5 years. This view triggered a mass M&A frenzy in fine chemicals in the late 90s. We all know what happened after, so it is not surprising that nobody celebrated this anniversary.
Hovione will continue to serve drug development customers, both large and small – we are manufacturing experts: we do it better, faster, and provide more value to our customers because we use standardized methodologies, invest heavily in science and take risk.
1Lessons from 60 years of pharmaceutical Innovation by Bernard Munos, Nature Reviews, Drug Discovery Volume 8, December 2008, pages 959 to 968.
2Prescription Drug User Fee Act
3Deutsche Bank Alex. Brown, Fine Chemicals, Pharmaceutical Contract Manufacturing, September 9 1999, by C. Whitmore & D. Manlowe.