* R&D spending $68 bln in 2010 vs $70 bln in 2009
* First ever decline follows poor returns
* Trend set to continue as Pfizer, others cut more
By Ben Hirschler
LONDON, June 27 The global drug industry cut its
research spending for the first time ever in 2010, after decades
of relentless increases, and the pace of decline looks set to
quicken this year.
Overall expenditure on discovering and developing new
medicines amounted to an estimated $68 billion last year, down
nearly 3 percent on the $70 billion spent in both 2008 and 2009,
according to Thomson Reuters data released on Monday.
The fall reflects a growing disillusionment with poor
returns on pharmaceutical R&D. Disappointing research
productivity is arguably the biggest single factor behind the
declining valuations of the sector over the past decade.
"For the first time, drug companies are reducing costs in
their R&D organisations and I believe we will see that trend
continue," said Hans Poulsen, head of life sciences consulting
at Thomson Reuters.
Traditionally, R&D laboratories have been largely immune to
cost cutting but that has changed in the past year or so, and in
recent months the pace of cutbacks has increased.
Pfizer , the world's biggest drugmaker, has taken the
most dramatic steps under new Chief Executive Ian Read, with
plans to slash around a quarter of its R&D budget over the next
two years. Other companies have also made smaller cuts.
The winding back of research budgets represents a major
change for an industry that has ploughed billions of dollars
into the hunt for new drugs, often with little to show for it.
Since 2000, research investment by drug companies accounting
for 80 percent of the industry's total R&D has increased by more
50 percent -- but output of new medicines has actually gone
Last year, 21 new molecular entities were launched on the
global market, down from 26 in 2009, and only a third of those
were from major drugmakers with annual research budgets of at
least $2 billion, according to the 2011 Pharmaceutical R&D
Factbook compiled by Thomson Reuters unit CMR International.
Between 2008 and 2010 there were 55 terminations of projects
that had already reached the final Phase III stage of clinical
testing, more than double the level of 2005-07, reflecting the
growing difficulty of developing new drugs that are better than
Faced with the loss of exclusivity on more than 110 products
in the key U.S. market between 2012 and 2014, the industry has
stepped up its drive to buy in promising experimental medicines
from small biotech companies.
But this in-licensing strategy, too, is facing difficulty,
as drugs that originate inside Big Pharma companies actually
have a 20 percent higher chance of making it to market,
according to CMR figures.
Recently, some experts have suggested that productivity in
drug research may be improving, as evidenced by progress with
breakthrough medicines like GlaxoSmithKline's new drug
Benlysta for lupus and Bristol-Myers Squibb's melanoma
Poulsen, however, believes it is too early to judge.
"We could see an improvement but it may take four to six
years before we can really say the trend has been reversed," he
(Editing by David Cowell)