Increased cost of product deals requires change of strategy, says Wood Mackenzie

The negative factors influencing the growth of the pharmaceutical industry continue to dominate, according to UK-based consulting group Wood Mackenzie's latest research. This forecasts that the growth of the global pharmaceutical market will continue to slow from the double-digit rates of the early 1990s to around 7% by the end of this decade. Meanwhile, R&D productivity continues to decline, while the cost of drug discovery and development continues to grow.

To feed the need for products, which is still not being met by internal R&D, many of the large pharmaceutical companies are increasingly resorting to in-licensing. Companies which historically have not considered a product that was not invented in-house are now players in the global market for development compounds originated in smaller firms and biotechnology companies.

This increased level of demand, together with a shortage of quality late-stage products to in-license has caused an increase in the value of late-stage deals and a trend towards earlier-stage licensing. The cost of a late-stage licensing deal has increased from an average $60.0 million in 2000 to $390.0 million in 2005; a near seven-fold increase in just five years, according to Wood Mackenzie's Licensingview, February 2006.