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Longer drug approval times and mergers make for a bumpy ride
Increased scrutiny by federal drug regulators and continued mergers and acquisitions activity could curb expansion in biotechnology and pharmaceutical industries, according to analysts and economists. A capacity constraint caused by a shortage of manufacturing facilities also could chill the overheated biotech market and job growth as companies exhaust their three-year funding cycles in the next few years, cautions Robert Toth, portfolio manager of the medical technology fund of EGM Capital in San Francisco. The Food and Drug Administration approval of treatments tarries because of organizational problems and because of a renewed safety focus.
"There is no FDA commissioner, no champion for the agency right now," Toth says. "For the first time in four years, in 2000 the FDA spent a long time in reviewing and approving new drugs. It was a pretty dramatic slippage. Biotechs, in particular, depend on rapid drug approvals from the FDA, because they do not have the large cash reserves to finance lengthy drag discoveries, according to Toth. The biotechs are affected to a greater degree than the big pharma companies, [because] they tend to try and get their drugs approved on less data."
Once a drug has been approved, companies can easily spend $250 million or more to build production facilities, and investors are reluctant to provide the funding until the approval is assured. Meanwhile, both big pharma and small biotech companies continue on the mergers and acquisitions track in the race to overtake their competitors in AIDS, Alzheimer's and cancer research. Consolidation remains a long-term shadow on the bright jobs picture for the industry--intersections in research operations …