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Analysts track a spike in mid-cap biotechs' R&D spend

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Some of the analysts at GlobalData took a quarterly snapshot of the R&D expenses for a big batch of mid-cap biotechs and concluded that rising research costs were eroding corporate profitability. And they pinned the blame squarely on the pricey hunt for new cancer drugs.

The conclusions are a bit of a stretch, but the numbers bear a close look. The total R&D spend for 20 mid-cap biotechs like Regeneron ($REGN), Onyx Pharmaceuticals ($ONXX), Acorda Therapeutics ($ACOR) and ViroPharma, added up to $746.8 million in R&D costs for Q3 2012, up 20% over the $621.1 million they spent in the same period last year. Regeneron emerged as the new top spender, with $158 million in R&D costs for the quarter.

"Oncology is the main focus of biotech R&D activities," says analyst Adam Dion. "Biotech companies are becoming increasingly more successful at developing innovative therapies. However, our research has found that the high-cost of bringing these therapies to market continues to erode corporate profitability."

That statement doesn't really stand up, though. New cancer drugs are certainly a big focus in biotech. But many of the companies on GlobalData's list don't work in oncology, or include cancer drugs in a diversified portfolio. Regeneron is coming off a stellar year for research productivity, pushing new drugs with its big partners. One of those, the colorectal cancer drug Zaltrap, is partnered with Sanofi ($SNY) and was recently approved by the FDA. But Regeneron has seen some big revenue coming from Eylea for wet age-related macular degeneration. And it has a huge program under way for a PCSK9 cholesterol drug.

ViroPharma--an orphan drug company, another hot R&D field--had the biggest drop in R&D costs in the group. The FDA put a program for the genetic disorder drug Cinryze on hold, which helps explain the countertrend slide. The full roster of companies assessed: Acorda, Alexion, Alkermes, BioMarin, Cubist, Exelixis, Incyte, Jazz, Momenta, Nektar, Onyx, Regeneron, Seattle Therapeutics, United Therapeutics, and ViroPharma. GlobalData's full report measures 20 different financial metrics for these companies.

- here's the press release

Special Reports: The Biggest R&D Spenders in Biotech | Top 10 Late-Stage Cancer Drugs – 2012

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