Wall Street discourages drug R&D

Dan Primack

Fortune

Wall Street is killing Big Pharma’s future, said Dan Primack. When Pfizer announced this year that it was slashing spending on research and development, its shares rose more than 5 percent. When rival Merck said it was keeping its R&D spending level, its shares fell 3 percent. The message was clear: “Stop spending so much money to create new drugs.” Investors apparently believe it’s cheaper for pharmaceutical giants to get promising new medicines by buying start-ups. But that’s a dangerous elevation of “short-term dollars” over “long-term sense.”

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Already, the venture capital that fuels those start-ups and “drives new drug development” is running dry. This year, 17 percent fewer early-stage start-ups received VC funding than did so last year. And some major VC firms are abandoning the pharma sector altogether, saying the FDA’s drug-approval process is too long and uncertain.

If Big Pharma continues to slash R&D budgets, we’ll face “a looming imbalance” as the demand for new drugs far outstrips supply. Big Pharma needs to spend whatever it takes to improve Americans’ health instead of “succumbing to Wall Street’s worst instincts.”