Pharmaceutical manufacturers should consider increasing research & development investments to sustain growth, GlaxoSmithKline R&D Chairman Tachi Yamada declared during a Nov. 30 pipeline update.

"I don't know how this industry arrived at a conclusion that roughly 15% of sales is the amount of money you should spend on R&D," he stated. The executive addressed industry-wide R&D spending during GSK's Oncology & Supportive Care Seminar highlighting the company's oncology pipeline.

"I actually think that in many companies, it's not working. That amount is not enough to sustain the growth of the companies that are spending that money," Yamada said.

"So either the companies have to think differently or have to think about investing more," he added.

Yamada's comments responded to an analyst question about recent reports that CEO J.P. Garnier has been pushing the drug industry to increase investment behind R&D.

"It's just by accident, I think, that we arrived at this 15%, and the problem is, when you set this model at 15%, you don't know if you failed until 15 years down the road. So in a sense, maybe the industry is going to have to adjust to this 15% of sales number for R&D," Yamada said.

"I think that is kind of the logic behind J.P.'s push to try to raise R&D spend beyond the current 15% level," he added.

GlaxoSmithKline spent $4.8 bil. (£2.8 bil.) on research & development expenses in 2004, according to figures provided in the company's annual report. The investment represents approximately 13.9% of the U.K. company's top-line sales.

Along with GSK, several leading pharmaceutical manufacturers spent less than 15% of sales on research initiatives in 2004. They include Novartis (14.9%), Pfizer (14.6%), Wyeth (14.2%) and Bristol-Myers Squibb (12.8%).

In contrast, other manufacturers spent a significantly higher percentage, including Lilly (19.4%), Schering-Plough (19.4%), Amgen (19.2%) and Merck (17.4%).

Johnson & Johnson's total R&D spending, at 11% of sales, was lower than many in the industry because of the inclusion of medical device and consumer investments. J&J spent 16.4% of pharma sales on R&D.

Higher spending, however, is by no means a guarantee that investments will translate into marketable products capable of driving top-line growth.

Recent years have seen an increasing number of late-stage development failures; the Phase III attrition rate has reached 50% (¹ Also see "Schering Seeks Salvation In External Deals; Hassan Outlines Licensing Plan" - Pink Sheet, 7 November, 2005., p. 18).

Bristol-Myers Squibb/Merck's late-stage investigational drug Pargluva (muraglitazar) has been one recent casualty.

The two drug makers announced plans to terminate an agreement to develop Pargluva in October, stating that successful regulatory approval and commercialization of the type 2 diabetes therapy would require additional clinical trials that could take up to five years to complete (² Also see "Pargluva Panic: Need For Additional Trial Prompts Merck To Drop Partnership" - Pink Sheet, 31 October, 2005., p. 3).

BMS is still evaluating whether or not to pursue Pargluva, but during a press meeting in November, Worldwide Pharmaceuticals President Lamberto Andreotti cautioned that delivering truly innovative products is risky because it requires going "where others have not been" (³ Also see "Pargluva Effect: Bristol Foresees More Independent Scrutiny Of Trial Data" - Pink Sheet, 28 November, 2005., p. 5).

Pfizer's pipeline also faced setbacks this year when its injectable COX-2 inhibitor parecoxib and the osteoporosis prevention agent Oporia (lasofoxifene) were the subject of "not approvable" letters from FDA.

CEO Hank McKinnell said Pfizer's development productivity had been impacted by the risk-averse environment at FDA (⁴ Also see "Pfizer Parecoxib, Oporia Setbacks Reflect Tougher FDA Stance, CEO Says" - Pink Sheet, 24 October, 2005., p. 17).

Despite Yamada's call for increased R&D funding, the GSK exec said additional spending is not necessary to bring the company's current projects, including the oncologics Tykerb (lapatinib) and pazopanib, to market (see ⁵ Also see "GSK Oncology Pipeline Expansion Means Healthy Phase III Program In ’06" - Pink Sheet, 5 December, 2005.).

"You should not take from this that we need this extra money to push our pipeline through. We do not," Yamada maintained. "We believe that our current model allows us to progress our existing pipeline," he stressed.

Yamada said that additional R&D funding would be used by GSK to take advantage of new opportunities. "I think if we just spent it internally, it would be a mistake," the exec said.

"I believe if we get this new money, we are going to do a lot of spending externally, where there are many, many opportunities to look at, and then allow this incredible engine that we have to move these opportunities forward into the marketplace."

Rx Industry May Need To Inject More Funds Into R&amp;D – GSK Exec

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Rx Industry May Need To Inject More Funds Into R&D – GSK Exec