Pharma chiefs offer dire warning on meager R&D productivity

Strategically speaking, Big Pharma R&D is between a rock and a hard stock market. Unless the mega developers can reverse years of declining productivity and score a string of new approvals in the near term, regaining investor confidence, the multi-billion dollar budgets and the jobs they support will be jeopardized. And that's the view of the top execs in charge, says Reuters' Ben Hirschler, reporting from a London pharma conference.

"I am absolutely convinced that this will be the last generation of R&D spending unless a decent return is generated," GlaxoSmithKline strategy chief David Redfern told the conference. "The industry will not go forward another 10 years spending the money that it has been spending unless the return to investors is dramatically greater than it has been in the last 10 years."

Investors won't let them. Reuters notes that the industry spent $65 billion on drug R&D in the U.S. in 2009, but approval rates have sunk 44 percent over the past 13 years.

Investors "see us as investing large sums of money and, in American baseball parlance, hitting for the fences with less hope of being able to achieve blockbuster status," Eli Lilly CEO John Lechleiter told the crowd. "There's less belief on their part that we would make the sort of returns that would make that sort of risk justifiable."

Bayer's head of pharmaceuticals development, Kemal Malik, was struck by the fact that Pfizer's shares went up when it downsized R&D. But any increase is punished.

"That tells you the market has a degree of skepticism," he told the gathering. "There is real doubt about whether the sustainability model of pharma can be maintained with our current R&D productivity."

- here's the article from Reuters