Where's the R&D?

Traditionally, R&D has been considered a core asset for drug companies, both large and small. But commercial drug companies now appear to be reconsidering the value of their R&D organizations. Both Sanofi-Aventis and Valeant Pharmaceuticals recently announced cutting their R&D budgets in half. The moves are not entirely surprising. R&D productivity has been declining over the past several years, and internally developed compounds have a lower rate of success when compared to licensed compounds (Leerink Swann, March 4, 2009). As the risks and costs of drug development increase, more drug companies will likely reduce internal programs and essentially "outsource" R&D, so that management can focus resources on commercial development. One thing is for certain: look for licensing/partnering activity to expand significantly.