Fewer Drug Approvals Pushes Pharma Into Corner

The pharmaceuticals industry is already sweating the expiration of a number of patents over the next few years, and the news isn’t getting any better, according to Fitch Ratings.

The ratings agency has forecasted that the Food and Drug Administration (FDA) will approve fewer new drugs in 2012 compared to 2011. Last year, the agency approved 30 new drugs, but so far it is off that pace.

During the first half of 2012, the FDA has approved only 14 drugs; during the same timeframe in 2011, 18 drugs were approved.

The slowdown matches the fact that fewer experimental drugs reached late-stage patient testing. Also, research on other promising drugs was stopped after disappointing results. Approvals have also been delayed awaiting more information.

"Branded pharmaceutical developers' research success of 2011 will be difficult to repeat," according to the report.

The industry has been eyeing the so-called patent cliff for years now, when big pharmaceutical companies lose exclusivity of drugs. Pfizer’s patent on Lipitor expired recently, as did Eli Lilly’s Zyprexa and Bristol-Meyer Squibb and Sanofi’s Plavix.

Merck’s Singulair is up this week.

Despite years of closing plants and slashing costs, the loss of these patents, some of which are the world’s best-selling drugs, will severely hurt some of these companies unless they find ways to live without that revenue.

In Merck’s second quarter earnings call, the company’s executives addressed the imminent loss of Singulair’s patent.

"When Singulair loses exclusivity in the United States next week, we expect multiple generic entrants on day 1,” said Adam Schechter, executive vice president and president of Global Human Health, in the call. “This means that erosion will be rapid, and it will be significant."

These companies will have to start looking elsewhere unless there is an increase in successful trials translating into FDA approvals. One thing Big Pharma is doing is moving more into emerging and developing markets. In these areas of the world, companies will be able to increase sales while also doing something good for society. Plus, these countries mostly need vaccines that are easy to roll out.

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