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Big Pharma's Response to R&D Woes: More Early-Stage Compound Deals

The earnest tone of the discussions at this year's Pharmaceutical Strategic Alliances Conference reflected an increasingly common assumption among industry executives and insiders: the drug industry's growth problem isn't a merely cyclical issue. Declining productivity, a problem evident in biotech companies as well as Big Pharma, is to blame. Industry executives provided mixed opinions on how to best tackle this challenge, but both Pfizer and Bristol-Myers Squibb suggested a trend towards early-stage compound licensing.

The earnest tone of the discussions at this year's Pharmaceutical Strategic Alliances (PSA) Conference held in New York City reflected an increasingly common assumption among industry executives and insiders: the drug industry's growth problem isn't a merely cyclical issue. Forecasts for flat or single-digit earnings growth are widely accepted. Worse, confidence in the industry's projections – once one of the sector's greatest investment assets – has disappeared. "The whole aura of predictability has melted away for Big Pharma," remarked Arnie Snider, General Partner, Deerfield Management. "It will take a while to get this back."

The fundamental cause, noted speaker after speaker, is declining R&D productivity.

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