Changes the European pharma industry faces in 2014
The last few years have been very difficult for pharmaceutical companies in Europe, but there are signs to suggest things are improving as we move into 2014.
With the eurozone economy starting to grow - albeit slowly - businesses will be more confident about bringing new drugs and treatments to market. The shape of the continent's pharmaceutical industry is likely to alter in the next 12 months, although these changes will happen gradually.
The pharmaceutical industry has mounted a recovery in 2013, following a number of bleak years during the financial crisis.
According to Fitch's latest ratings report, branded drugs will record single-digit growth in 2014 and the agency describes this as a "stable" upturn. While the demand for treatments is expected to increase, this will be offset by patent expirations, weak employment in the US and cost-containment policies in Europe.
The latter is arguably the biggest challenge that pharmaceutical firms will need to deal with in the new year. Drug research and development (R&D) costs have soared and success rates remain relatively low. The European Commission is keen to ensure money is not being wasted on projects that are unlikely to yield positive results and has reined in public pharmaceutical spending as a result.
These measures were outlined in 2012, so firms have had plenty of time to prepare themselves. Despite this, companies are still adapting to this relatively new approach and will continue to do so in 2014. Fitch believes businesses will reduce their R&D spend in the new year and reassess their administrative functions too.
More corporate acquisitions?
Although R&D funding is being lowered across Europe, the recent upturn in economic output could lead to a greater number of corporate acquisitions and mergers.
Pharmaceutical companies know the best way to overcome R&D funding shortages is to collaborate more closely with experts from other organisations. Fitch also predicted more "bolt-on acquisitions" would be seen in 2014. This is the term given to a takeover where the buyer intends to merge the new company into one of its existing departments.
Some large multinationals are also establishing specialist global networks that enable them to bring the best researchers from around the world into one, easy-to-manage group. GlaxoSmithKline's (GSK's) new Oncology Clinical and Translational Consortium - which was launched in December 2013 - is a good example of this.
Featuring six leading cancer centres in the US, France, the Netherlands, Canada and Spain, the collaborative effort will enable the firm to deliver innovative new patient therapies. Commenting on the venture, Rafael Amado, Head of Oncology R&D at GSK, said: "The consortium together with GSK will design and execute research programs in a focused and expeditious way, allowing us to potentially develop new diagnostic tools and medicines to better treat cancer patients."
This type of cooperative project is likely to be more popular in 2014.
Funding will not dry up completely
Although drug developers might need to assess the feasibility of drug R&D projects more carefully in the next 12 months, there are still a number of funding options available.
Part of the EU's Horizon 2020 funding programme between 2014 and 2020 will focus on the medical sector - especially personalising health and care. This particular field will receive €549 million in 2014, which will be used to help medical practitioners make better use of big data, implement new diagnostics tools and launch more effective disease prevention strategies.
A statement from the European Commission in December 2013 read: "Funding in this area also aims to deliver breakthrough research and innovation in poverty related and antibiotic resistant infectious diseases (e.g. vaccine platforms for HIV/AIDS and tuberculosis)."
Concessions will also be made in certain areas, with the European Medicines Agency recently announcing that fee reductions for orphan medicinal products will be revised from January 1st 2014. These savings will apply to large companies, as well as small and medium enterprises.
Clearly, changes are expected in the European pharmaceutical industry in 2014, with firms predicted to curb their R&D spending, but the industry is unlikely to alter too radically. As the eurozone economy continues to heal, it is probable that pharmaceutical firms will grow at a steady pace.