The perfect storm

TOP 1000/PHARMA:A GLANCE through the list of pharmaceutical companies in the Top 1,000 might indicate a sector experiencing a period of stability.

Almost half the 50 pharmaceutical businesses listed are parts of the world’s top 15 drug companies, and most have featured in this same list over the past few years. But while the list shows that bulk manufacture remains a key area for Irish pharmaceuticals, the figures fail to reflect the global shift in the sector. Merck’s European president Stefan Oschmann recently referred to the industry environment as a “perfect storm”, noting a drop in research productivity, more stringent regulatory oversight and a changing relationship with the consumer.

“You look at the overall output of approved new molecules of the pharma and biotech[nology] industries worldwide – significantly fewer products [are] being approved. Regulatory agencies are. . . more concerned about potential risk than about the benefit a novel medicine could bring.”

On one hand, this has pushed up development costs; on the other, those with pipeline gaps and imminent lapsing of key patents are chasing pipeline by acquisition.

With most major players having a presence here, it is inevitable that we will feel the impact of broader industry trends – most notably, a renewed cycle of consolidation and a focus on pipeline development.

The two are interrelated, with the search for new drugs by established pharma companies with strong cash reserves who face impending patent expiries on key drugs being a feature of deals that have seen Pfizer pay $68 billion (€48 billion) for Wyeth, Merck agree terms on a $41.1 billion (€29 billion) acquisition of Schering-Plough, and Roche acquire the part of Genentech it did not own for around $46 billion (€32.4 billion).

Mergers in the sector hit a 10-year high in the first quarter of 2009, when merger and acquisition (M&A) activity generally was down by a third. A feature of recent activity is the growing profile of biotechnology.

Traditional pharmaceuticals were based on the use of simple molecules. More recently, drug firms are moving towards more complex biologics that can be more difficult to work with but promise a more effective approach to everything from irritable bowel syndrome (IBS) to neuroscience.

The work of Ireland’s largest indigenous drug firm, Elan, is a case in point. It began as a contract drug manufacturer that also reworked existing drugs into new therapies, but now focuses largely on neurosciencebased biotechnology.

It has developed, in a joint venture with Biogen Idec, what is acknowledged as the most effective – if high-risk – therapy for aggressive multiple sclerosis. As it looks to establish the scale

necessary to deliver on its ambitions, Elan is currently assessing options that could see it taken over or, more likely, see a larger firm acquire a significant stake in the company.

Elan’s influence is also evident in the number of its former executives fronting other pharma companies in Ireland, including spin-off Merrion Pharmaceuticals, which specialises in

drug delivery technology. Merrion, headed by former Elan chief financial officer Tom Lynch, this month reported positive results on tablet technology that could assist in the early treatment or prevention of breast cancer.

AGI Therapeutics, led by former Elan research and development (R&D) executive John Devane, has been working to develop treatment for gastrointestinal conditions. Seamus Mulligan, the man who led the asset disposal operation at Elan during its most recent crisis, is now fronting Azur Pharma, a company focused on women’s health.

But it’s not just Elan. Ireland’s cluster of pharmaceutical companies has created a host of smaller research-based firms which often begin life in universities. Many are moving into the commercial arena. Opsona, a Dublin firm founded by three Trinity College-based immunologists, has just secured more than €20 million in second-round funding as it looks to start clinical trials on approaches to auto-immune and inflammatory diseases.

Alimentary health, whose genesis lies in UCC’s Alimentary Pharmabiotic Centre, has gone one

further, with Procter & Gamble recently launching a daily dietary supplement across the US based on a probiotic developed by the Cork team that promises to ease the symptoms of IBS. Prof Eamonn Quigley, one of the lead investigators behind the project, says Ireland is gaining an international reputation for its work in the field of gastroenterology.

As these companies grow, or are snapped up by larger groups, they will only accelerate the trend towards biopharmaceuticals. And while Ireland has yet to have many indigenous pharma firms in the upper reaches of the Top 1,000, the presence of such innovation will help ensure the global leaders in the sector continue to invest here.