Biotech is outshining pharma at turning research into drugs

San Francisco Business Times
From the June 6, 2005 print edition
Biotech

The scientific distinctions between biotechnology and pharmaceutical companies appear to be blurring, but the cultural ones remain clearer.

Art Levinson, chairman and CEO of Genentech Inc., examines these differences in a piece in this year's annual report on the biotechnology industry from Ernst & Young. He highlights such things as the academic culture of biotechnology companies, the greater tolerance for risk and willingness to pursue drugs with smaller potential markets.

These may be significant contributors to one other emerging difference Levinson highlights -- R&D productivity.

In 2004, the pharmaceutical industry spent about $50 billion on R&D compared with $16 billion at publicly traded biotechs and an estimated $20 billion from the global biotechnology industry. But starting in 2003, new drug approvals for biotechs surpassed those for pharmas and that trend continued with about 20 approvals in 2004 for biotech and about 10 for pharma.

The R&D numbers probably overstate reality. Increasingly, big pharma is spending its R&D dollars on biotech drug development collaborations. But nevertheless, it's a reflection that big pharma is turning to biotech for innovation it seems less able to produce by itself.