Dr. Kafir Lozato: The global pharmaceutical market will shrink by 2.5%-3.5%

In a lecture he gave as part of the Biomed 2009 conference, Lozato says: "The dominant trend is outsourcing in drug development"

"More and more pharmaceutical and biotechnology companies today prefer to outsource the process of research and development in the field of pharmaceuticals," said Dr. Kafir Lozato, managing partner of the Lozato Group, which specializes in the field of intellectual property. Dr. Lozato said these things at the "Biomed 2009" conference.

According to Dr. Luzzatto, outsourcing helps pharmaceutical companies to stockpile more potential drugs in the pipeline, speed up the drug approval process and optimize it, and at the same time control the huge development expenses. "This is one of the main ways today to control the huge development expenses of new drugs. This also allows companies to focus and divert R&D resources in their core activities," states Dr. Luzzatto, who says that this led to the closure of some basic research units in many of the world's pharmaceutical corporations. Today, most pharmaceutical companies are at the limit of their research capacity and cannot expand their research units, which requires the hiring of additional professional personnel, sophisticated laboratories and equipment, and hence the growing need for outsourcing.

Dr. Kafir Lozato emphasized that outsourcing in the field of drug development has become a dominant trend in the last five years and the market segment in this field originating in the US alone is currently estimated at 12 billion dollars. Within the set of processes offered for outsourcing, a share of 20% deals with the identification and testing of potential drugs.

According to him, large pharmaceutical companies and large biotech ventures will continue to compete for the acquisition of ventures and companies with an attractive development pipeline. Agro-technology companies will also increase their interest in acquiring companies and new developments in the field of biotech because of the global food crisis. Likewise, companies engaged in the development of biodiesel and plant-based fuels are in a similar trend, as are companies in the field of green energy and green solutions.

Dr. Luzzatto also stated that according to various estimates, the global pharmaceutical market - with a sales volume of 773 billion dollars (in 2008) - will shrink by 2.5%-3.5% in 2009. The share of the USA in the market will decrease by 1%- 2% thanks to the introduction of cheap generic drugs. According to him, the emerging markets in the world also rely more and more on generic medicine, and the growth in these markets is what slows down the market contraction process.

One of the key insights that Dr. Lozato draws from the emerging new market is that companies that have adopted biotechnological developments and expanded their product portfolio are in a more favorable position than companies that relied only on chemical development. Biotechnological products are more sophisticated, more difficult to copy and more expensive to develop. Despite this, today 22 biotechnological drugs on the market have a turnover of one billion dollars or more each. This is also one of the reasons why multinational corporations turn to Israel in search of biotechnological developments, and this is because of the high level of R&D and the large number of start-up companies in the field.

Referring to the field of intellectual property protection, Lozato clarified that it is not only the patent protection in itself or the lack of it that bothers the big investors, but sometimes overly aggressive protection. According to him, quite a few entrepreneurs and inventors try to cover in the patent application as many possible future applications of the medicine, or a certain product, based on current forecasts, and without the possibility of supporting the process. Such broad coverage based on such broad predictions is useless and may even sabotage important key applications of the drug or product in the future. The human desire of the initial investor to secure a wide commercial potential in the future, combined with the lack of understanding regarding the schedule required in the development of products in the field of life sciences, may turn out to be ineffective and even sabotage the completion of the development of the drug and obtaining investors.