No. of Recommendations: 41
stillwater9999 analyzes,

There is a role for government but historically NIH research has yielded far less than privately funded drug development.

That's the first I've heard of this and I've been a Pharma investor for 30 years.

Big Pharam excels in reverse-engineering patents and developing "me-too" products in therapeutic classes where there are effective existing drugs. But the NIH and university labs are more likely to find innovative therapies, because that's where they focus their research. The NIH isn't spending its time trying to work around a competitor's patent to bring out the 7th "me-too" high blood pressure med that's only slightly different from the other 6 on the market and no more effective.

http://pipeline.corante.com/archives/2010/11/04/where_drugs_...

And now to innovation - 118 of the drugs during this period were considered to have scientific novelty (46%), and of those:

44% were from pharmaceutical companies.
25% were from biotech companies, and
31% were from universities (transferred to either biotech or pharma).

The university-derived drugs clearly outperform in this category. What this also means is that 65% of the pharma-derived drugs get classed as "not innovative", and that's worth another post all its own. Now, not all the university-derived drugs showed up as novel, either - but when you look closer, it turns out that the majority of the novel stuff from universities gets taken up by biotech companies rather than by pharma.

So why does this happen? This paper doesn't put it one word, but I will: money. It turns out that the novel therapies are disproportionately orphan drugs (which makes sense), and although there are a few orphan-drug blockbusters, most of them have lower sales. And indeed, the university-to-pharma drugs tend to have much higher sales than the university-to-biotech ones. The bigger drug companies are (as you'd expect) evaluating compounds on the basis of their commercial potential, which means what they can add to their existing portfolio. On the other hand, if you have no portfolio (or have only a small one) than any commercial prospect is worth a look. One hundred million dollars a year in revenue would be welcome news for a small company's first drug to market, whereas Pfizer wouldn't even notice it.

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