High Cost of Drug Discovery and Stock Prices

With not too many really interesting things to write about, I thought I will just put up this post about an  interesting article that I read last week. The article appeared in Forbes http://www.forbes.com/sites/matthewherper/2012/02/10/the-truly-staggering-cost-of-inventing-new-drugs/ that talks about the actual cost developing a new drug. Like others, I also used to believe that the average costs of developing a new drug is around $4 billion but the author rightly argues that we need to divide the total R&D spend by the number of drugs approved. This means we take into account the failure of drugs to make it to the market. The results of the exercise for global pharma giants are dramatic. They are spending far more money than what is popularly believed. We all know the original drug discovery needs deep pockets but when you look at keep these figures you realise just how deep the pockets need to be. Now, what are the implications for Indian pharma firms? Clearly, it is a tall ask for Indian companies to make a transition to be part of original drug discovery club. No wonder not too many Indian firms are now talking about these ambitions unlike even what it was some years back. An important aspect here is that the stock market doesn't really reward drug discovery and will look at it as an expense unless you can quickly monetise it in the near future (that's 6-9 months for you). Of course, they can be part of certain segments of the drug discovery process like discovery of the molecule or trials. So, the next time a pharma company talks of drug discovery we know the context in which those statements can be evaluated.