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Dec 3, 2008

The New Face of Pharma R&D?

  • The bank formerly known as investment giant Goldman Sachs (now a commercial bank with investment banking operations) says it is ready to start funneling hundreds of millions of dollars into a new hybrid R&D model that will be used to advance early- and mid-stage drugs in the biopharma pipeline. Does this mean the funding gap can be bridged? Has someone on the money side been paying attention?

    As former finance director of AstraZeneca, Jon Symonds (now a managing director for Goldman in London) says pharma companies will be able to assign early-stage programs to an R&D pool overseen by a group of financial experts, scientists, and CROs. This new research model would both share the risk of drug development as well as cut the costs associated with R&D—an enormous expense and frustration for a slate of pharma companies that have had little to boast about in recent years.

    This investment vehicle represents a bold departure for pharma companies, which traditionally have financed R&D from a rich stream of drug revenue. But Symonds notes that the current economic crisis has made it imperative to find fresh sources of capital to back development at a time when many pharma companies are trapped in expensive late-stage trials with little left over to back early-stage research programs.

    Another aspect to be thought about is what happens when competing interests are pooled in this investment vehicle. There is an opportunity to benefit from not duplicating research but at the same time profitable avenues will be seen by all fund members. Furthermore it also means pharma will not be able to grab the entire share of the profits.

    In this age of slumping investment returns I for one applaud the innovation this represents. Hopefully this turns out to be a win-win situation for both pharma and finance. I want to go one further and say venture capitalists should be able to pool money into it as well.


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