Pharmaceutical companies are among the most profitable businesses in the world, and employed some 520 000 people in Europe 2003. I read an old story about "the battle for control of Bayer". It's just the latest in a series of corporate partnerships, mergers and hostile takeovers that have shaken up the drug industry in recent years.
What happened to Bayer? Need to check that out later. Why such urge to merge? One reason is that developing drugs has become both harder and more expensive than ever. It takes on average 15 years to bring a drug to the market for inception.
The cost of developing a drug averaged $168 million in 1991, $365 million in 1997 and $650 - 800 million in 2003. One reason for the search for partners is that new drugs in the pipeline have fallen off dramatically, even though companies are getting bigger.
In 1987 the U.S. Food and Drug Administration had 60 new drug applications; in 2000 it just had 30. The bottom line is that it's really hard to bring out new innovations.
There has bee a tremendeous amount of restructuring in Europe as well. The European Agency for Evaluation of Medical Products (EMEA) had just 31 new drug applications 20002, compared with 58 in 2001.
Never has so much money been spent on R&D and so little outcome. R&D costs as a percentage of drug-company sales were 12 % in 1970, 15% in 1990 and 20% in 2003. Probably even more today.
The block-buster products have to pay for those 60% that never bring in the money spent for R&D and launching them on the market. Returning a profit isn't a simple task. The upsurge in marketing costs is another risk factor.