By Ben Hirschler
LONDON (Reuters) - Drug industry productivity is finally improving after years of research disappointment, as drugmakers shift their focus from mass markets to making medicines for rarer, under-treated diseases.
Data from Thomson Reuters published on Tuesday showed more new drugs are reaching the market and that the industry has been enjoying higher success rates in the costly final stage of clinical development.
The number of innovative medicines, or new molecular entities, launched globally in 2011 hit a 10-year high of 31, up from 21 in 2010.
Last year's entrants included significant advances, such as new treatments from Roche and Bristol-Myers Squibb for melanoma, the first new drug for lupus in half a century from GlaxoSmithKline, and two new hepatitis C drugs from Merck and Vertex Pharmaceuticals.
The outlook is also improving for the next wave of products, with the number of experimental drugs submitted last year for regulatory approval - the final hurdle in getting to market - nearly double the 2007 level.
Furthermore, the tally of drugs terminated in the final Phase III stage of clinical trials dropped markedly, to 45 in the last three years from 53 in 2008-10, according to the 2012 Pharmaceutical R&D Factbook from Thomson Reuters unit CMR International.
The global pharmaceuticals industry, which generated record sales of $880 billion last year, still does not have enough new drugs to replace all those facing generic competition in the biggest wave of patent expirations in history.
But the data paints a more encouraging picture for an industry that has often exasperated investors by failing to convert tens of billions of research dollars into a reliable stream of new products.
Turning the juggernaut will not happen overnight, however, since industry returns on research and development (R&D) nearly halved between 1990 and 2010, according to a KPMG analysis last October.
NOT A NUMBERS GAME
"There has clearly been a downward trend in R&D efficiency in the past but what we are seeing now are some indicators that may be reversing," said Chris McKenna, vice-president for professional services at Thomson Reuters Life Sciences.
"New molecular entity output is improving and the number of projects going into clinical development is declining, which indicates the industry is moving away from a numbers game and is focusing on better-quality candidates ... we probably need a couple more years to see if it is a sustained pattern."
R&D expenditure on prescription drugs has effectively plateaued in the past four years, after decades of relentless increases, with CMR data showing leading drugmakers spent an aggregate $71.05 billion in 2011.
That was 2.5 percent more than in 2010, although part of the rise reflected weakness in the dollar, since a large part of global R&D cash is spent in euros and Swiss francs.
Drug companies these days are adopting a much tougher approach to R&D spending by cutting budgets and reallocating resources to the most promising areas, including more external projects.
The pace of R&D budget cuts varies considerably between drugmakers, with those such as Pfizer and AstraZeneca facing the heaviest patent losses also wielding the axe most extensively.
That leaves Swiss firms Novartis and Roche dominating the R&D spend table, with Novartis the biggest single investor in this area last year with a budget of about $9 billion.
Roche and Novartis are powerful players in cancer medicine, the field attracting the highest investment of all therapeutic categories.
Oncology accounted for 23 percent of pharmaceutical R&D spending in 2011 and, while the number of experimental drugs across all disease areas declined from 2009 to 2011, the volume of cancer products in development held broadly steady.
By contrast, the pipeline volume of new cardiovascular and nervous system drugs - two areas that contributed past blockbusters in the form of cholesterol fighters and antidepressants - both fell by more than a fifth.
(Editing by David Hulmes)