Healthy Skepticism Library item: 14744

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Publication type: news

Jack A.
Goldman in talks over funding for pharma group
The Financial Times.com 2008 Dec 2
http://us.ft.com/ftgateway/superpage.ft?news_id=fto120220081651035711

Full text:

Goldman Sachs is in talks to provide hundreds of millions of dollars of funding to a large pharmaceutical company, in the first evidence of a new business model for the sector that will see financing shifted away from funding companies and towards targeted co-development of specific medicines.

Jon Symonds, managing director at the investment bank in London and former finance director of AstraZeneca, the Anglo-Swedish pharmaceutical group, said a first deal to create a new hybrid model of research and development should be finalised early next year.

Speaking at the FT Pharmaceuticals Conference, he said that the deal – which will be with a large, unidentified drug developer other than AstraZeneca – reflected the desire for even large companies with strong sales on existing drugs to seek funding for future development.
The move by Goldman reflects continuing and diversifying efforts to raise new funds despite the deteriorating market conditions in recent weeks.

It comes in response to the fast-rising costs and growing difficulties of bringing innovative new drugs through regulatory approval into healthcare systems, as existing medicines go off-patent and are subject to fresh generic legal challenges and pressure on pricing.

Mr Symonds said the large pharma companies were “trapped in their pipelines” by substantial commitments to costly late-stage clinical trials, with only limited funds for earlier stage medicines.

“There is a genuine shortage of capital,” he said.

However, their investors were reluctant to endorse new rounds of capitalraising, after disappointing returns from previous rounds of research onexperimental drugs that failed.

He said Goldman Sachs’ model therefore involved a different approach, creating a “research pool” into which pharma companies would place a range of experimental drugs in a single therapeutic area in early-stage phase 1 and 2 trials, where their specialists would work alongside external experts including scientists, chemists and clinical research organisations.

The action would help create more flexible, transparent and cheaper drug development, freed from large bureaucracies and heavy overheads. It would also share the high risks of new drug development with outside partners.

He said the model would potentially allow competing pharma companies working on similar drugs and duplicating research areas toall pool resources in this way.

“If we deliver one, there is huge appetite because capital is in pretty short supply,” Mr Symonds said.