Can the troubled big pharmas cure themselves?

British manufacturing retains few world contenders, but thanks to AstraZeneca and GlaxoSmithKline it still walks tall in the pharmaceuticals sector. However both firms recently had bad news for investors.

British manufacturing retains few world contenders, but thanks to AstraZeneca and GlaxoSmithKline it still walks tall in the pharmaceuticals sector. Without the sector, our trade gap would be even worse in 2005, the UK pharmaceuticals industry's exports were valued at £12.1bn against £8.7bn for imports. However, both flagship carriers recently had bad news for investors, reflecting what the FT's Lex calls "the predicament of rising immediate earnings but fading long-term hopes". Astra cancelled further development of a stroke treatment after disappointing clinical trial results and GlaxoSmithKline revealed that progress on several major new drugs, including one for cervical cancer, had been set back.

As Graham Searjeant observes in The Times, the industry is one of "extraordinarily high risks as well as sometimes almost offensively high rewards", so setbacks must be anticipated. It can take a decade for a new drug to move from conception to market launch. Even when it reaches the clinical trials stage, there's an up to 90% chance it won't clear the final hurdle. What's more, the authorities are increasingly reluctant to authorise new treatments unless convinced that there is no risk of harmful effects on patients. Even if a drug does make it, its profitable lifespan is limited as cheaper, generic rivals will follow once patent protection is removed.

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