Value Chain Management

The new alliance between Bayer AG and CuraGen Corp. to spend some $1.34 billion on target discovery and lead optimization raises some provocative questions about the productivity of genomics-based drug discovery. Indeed, a superficial reading of the project would lead to the conclusion that the partners will achieve no better than historical spending rates to get two drugs to market.

But these surface assumptions are in part simply a way to manage external expectations. And if such conservative metrics do not reflect improved success rates in this genomics deal, the partners' forward-looking calculations reveal their underlying belief that genomics will allow them to develop products more efficiently, even if they cannot put a number on its value.

Equally important, the deal helps illustrate BAYG's philosophy about the value and sustainability of the genomics toolkit, which pieces of the value chain it should outsource, and which core competencies should be nurtured in house.

The cost of drug development

According to BAYG, the cost of drug development has risen over the last decade to about $750 million per product, from target identification through approval. On the surface, the deal with CRGN does nothing to change this.

In the

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