The drug discovery process typically involves the following basic steps:
Development:
- Target Identification
- Target Validation
- Lead Identification
- Lead Optimization
Pre-Clinical Activities:
- In vitro validation
- In vivo validation
Clinical Trials:
- Phase I Trials
- Phase II Trials
- Phase III Trials
Regulatory Filing & Approval Post-Approval Activities:
- Manufacturing
- qSales & Marketing
- Distribution
The Cost involved in the Drug Discovery process at the various stages of development is:
- Cost of discovering a drug: About US$ 800 -1,000 million
- Without cost of capital, cost is about US$ 400 -500 million
- Development phase accounts for 28% -35% of total
- Developing a single optimized lead costs US$ 25 -40 million
- This includes both development and animal studies
- Cost of development phase: Generating enough "promising" or "optimized" leads to go to animal trials costs $ 10 -25 million per study
R&D Scenario Worldwide
The total global market for research products is expected to grow from $19.6 billion in 2002 to $25.1 billion in 2006 at a compound annual growth rate (CAGR) of 6.3%.
Some of the key trends are:
1. Stable consumption of chemicals and consumables
2. A decrease in R&D as a percentage of sales for drug discovery companies, resulting in a slowing of the market
3. Decrease in purchase of capital equipment (and related consumables)
4. Slowed growth of sequen-cing consumables and instrumentation
5. Continued growth of separation products for nucleic acids and proteins
6. Global economic slowdown, which effects Venture Capitalist funding and thus consumption of research products
7. NIH budget growth slows substantially, limiting growth of research product manufacturers.
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Deficiencies in the product pipeline, coupled with the growing list of potential targets, will drive the R&D spending of top 20 pharmaceutical companies to an estimated $50 billion USD by 2006.
Drug discovery biotech R&D spending will not grow as fast as revenues, as Biotech Company's move towards profitability. In 2002, drug discovery biotech revenues total $21.4 billion USD with R&D costs of $17 billion.
The five-year initiative to double the NIH's budget was completed in 2003. As a result, the 2004 budget reflected an increase of 3.7 per cent over 2003. It is anticipated that the budget's growth rate will continue to experience minimal growth rates over the near term, which will considerably affect academic and government research spending.
The growing global demand for biotech crops and the increasing amount of research in the use of plants to manufacture biologicals is expected to drive the Agribiotech market. In 2002, the top 5 agribiotech companies reported revenues of $20.5 billion USD, and is expected to reach $28.6 billion by 2006.
Because of the staggering cost and the time involved in the research process right from drug development to clinical research and finally getting the product in the market gives rise to the pharmaceutical and biotech companies to look towards outsourcing their R & D work. The top 10 outsourcing suppliers recorded revenues of US$14.5 billion in 2002. The total research supply market was estimated at US$ 19.6 billion with the top 10 companies accounting for 74% of the market revenues in 2002.
Almost 60% of the research supply work is done in development of new drugs, chemical intermediates, reagents while the rest is done for development of new instrumentation and research tools.
Some of the leading names doing the research supply work in drug/chemicals/reagents development are Millennium, Sigma Aldrich, Fisher Scientific, Merch KGaA. The leading companies doing research supply work in development of new Instrumentation are Thermo Electron Corporation, Agilent Technologies and Waters. With pressures on pharmaceutical companies to reduce the time and money it takes to develop a drug--typically seven to ten years at a price of $800 million or more--lower-cost locales like India and China look likely to take a bigger piece of the action.
Presently in India the National Laboratories involved in New Drugs Research spend around Rs. 55 - 60 crores per year. The top ten companies, Ranbaxy, Dr. Reddy's, Torrent, Cadila Health Care, Cadila Pharmaceuticals, Lupin, Sun Pharma, Nicholas Piramal and Dabur, which together account for almost 40 per cent of the Indian pharma sales, plan to invest around 7-8 per cent of their annual turn-over on new drugs research. Such investments in global terms are quite marginal and sub-critical in quantum, amounting to less than 10 per cent of the R&D spending of each of the top ten MNCs.
Another peculiar feature of the domestic R&D initiative is a lack of facilities and resources to develop a molecule; conduct trials and then launch the product. Although Indian companies with their expertise in chemistry are able to synthesize molecules, the huge costs involved in conducting clinical trials and launching the drug has prompted them to depend on international peers to undertake the more expensive clinical trials and product launches in return for upfront and milestone payments (eg., Ranbaxy out-licensed one of its urology molecules to Schwarz Pharma and Dr Reddy's out licensed a molecule to Novo Nordisk). Indian companies are thus able to mitigate the risk involved in new drug discovery.
As India entered the post-2005 era, the new scenario presents both challenges and opportunities for the Indian pharmaceutical industry.
The opportunities for India rest with the country's ability to enter the global arena with new drugs discovered and developed through indigenous research efforts. In order to capitalize on such opportunities, there is urgent need for an integrated approach which will remove several impediments, which affect drug discovery research, including mobilization of adequate funds, policies on animal experimentation, biodiversity issues, drug regulatory standards and systems and IPR-related matters.
- (Mahesh Sawant is Industry Analyst-Healthcare Practice, Frost & Sullivan India.
The author can be reached through sdedhia@frost.com)