Drug Firms To Cut R&D Spending?

Pharmaceutical companies around the world are faced with having to either reduce research spending or join forces with a large competitor in order to square up to the challenges of the changing marketplace. The problem is that although innovative R&D is essential, the drug industry has been overinvesting.

With an annual research bill of $30 billion for the industry, "it's unlikely that these huge investments could ever pay off," said Juergen Drews, research director at Roche, in an interview with the Wall Street Journal. His company is undergoing a major restructuring program following its acquisition of the US company Syntex (see pages 4 and 5). A total of 5,000 jobs are expected to go.

The key benefit of the Syntex acquisition is that the company has a strong research pipeline but it was not financially strong enough to take the products to the market. The directors had little choice but to sell.