M&A: The New R&D for Big (and Little) Pharma

Big Pharma isn't the only sector of the life sciences market seeing action. Little Pharma has seen its own flurry of acquisitions lately. What's driving the market? Many factors are at play here, but a rising costs of R&D could be considered a primary factors driving the rush to acquire competition rather than develop from within. 

Take a look at simple economics: it now costs an average of $2.5 billion* to bring a new drug to market. Couple that with a low possibility of it becoming a true blockbuster product (defined as $1 billion in annual sales) and it makes such R&D investments increasingly risky. Acquiring a lean start-up or mid-market company with a runaway hit makes great economic sense for bigger companies. 

When smaller and mid-sized biotech firms absorb the risk - financial and otherwise - of lab development and clinical trials for new pharmaceutical advancements, it paves the road for acquisition by bigger players down the road. In today's highly competitive race for optimum health & well-being, everyone is on the hunt for the next breakthrough product. In this environment, the nimble firms whose experimental developments yield viable products will quickly gain the attention of those looking to add successful innovations to their existing array of products.

This is great news for small and mid-sized players considering a sale or opening themselves up for investment. M&A offers tremendous value to those on the cutting-edge of biotechnology willing to innovate and take on the risk of product development. Big companies acquiring upstarts or smaller firms win by cutting down on rising R&D costs. We benefit when innovative new medical advancements are proven successful and become widely available. It's a win-win for all.

(* via Boston Globe)