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Strategic Analysis of World Drug Discovery Spending
Frost & Sullivan, Dec 2003
Slow Growth of Pharmaceuticals Market Significantly Affects R&D Spending
The most pervasive reason for the slowdown in drug discovery spending is the sluggish growth of virtually every segment that contributes to product purchasing. The top 20 pharmaceutical companies dedicated $39.3 billion to R&D spending in 2002, of which 32 percent was spent on pre-clinical development. This translated into R&D product purchases of approximately $6.6 billion. As pharmaceutical top line grows at 5 to 6 percent, R&D expenditure is not expected to increase at more than 6 percent.
Drug discovery spending is driven by three major forces: the pharmaceutical industry's need to continue to produce novel therapeutics, the biotech industry's need for continued R&D, and academic/government research, says the analyst of this research service. Advanced study and development of pharmaceuticals and therapeutics requires a significant expenditure. The R&D spending is not solely dedicated to product purchases as overheads and the payroll represent significant expenses.
In 2002, global drug discovery spending was estimated at $19.6 billion. This number is expected to reach $25.1 billion by 2006, at a compound annual growth rate of 6.3 percent. The National Institutes of Health's (NIH) budget is the single largest contributor to research product sales. Market growth will be significantly affected by a substantial decrease in the growth rate of the NIH budget, as well as a slowing of pharmaceutical and biotech R&D spending.
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