Combinatorial Chemistry Market to Reach $852 Million in 2009

The global combinatorial chemistry market is expected to show a compound annual growth rate of 6.9% from 2002 to 2009, rising from US$535 million to $852 million, according to a new report from Frost & Sullivan (London, UK), an international market analysis firm.

Reduced R&D spending by pharmaceutical and biotech companies, the biggest consumers of combinatorial chemistry services, is currently having a negative impact on market growth. Ways to offset this impact include shifting the process of compound synthesis to low-cost countries in eastern Europe and Asia-Pacific to conserve resources, and setting up in-house drug discovery programs to help companies develop leads, which can then be leased out to pharmaceutical and biotech companies.

"Investing in internal drug discovery programs can help companies leverage in-house expertise in high throughput screening and lead optimization,” observed Isaac Meek, an industry analyst with Frost & Sullivan.

In a related opportunity, companies can consider licensing their drug discovery tools, including software and instrumentation, to pharmaceutical and biotech companies. As opportunities to enter into shared-risk agreements with big pharmaceutical firms decrease, combinatorial chemistry companies can consider developing similar agreements with drug discovery biotech firms instead. Biotech companies in search of candidates for identified targets are far more likely to enter agreements that require the payment of future royalties and licensing fees than increasingly cost-conscious big pharmaceutical firms.

Growth prospects for the combinatorial chemistry markets are expected to become brighter as sustained genomics and proteomics research yield an increasing number of validated targets. In addition, as pharmaceutical companies feel growing pressure to identify and develop new therapies in order to fill empty pipelines, their R&D spending is likely to increase correspondingly.

As a result, the combined R&D expenditures of drug discovery biotech and the top 20 pharmaceutical companies, which reached $57 billion in 2002, is expected to top $73 billion by 2006. R&D spending of the top 20 pharmaceutical companies is expected to continue growing at about 6% through 2006, although the percentage dedicated to combinatorial chemistry services is not expected to increase over the period 2002-2009.

Conversely, the growth rate of biotech R&D spending is expected to decrease over the same period. However, the consumption by biotech companies of combinatorial products and services is projected to increase as a percentage of their total R&D expenditures.

Major technologic trends such as the development of libraries containing complex natural product-like compounds are expected to strongly influence the direction of the combinatorial chemistry markets. Market preference also seems to be leaning toward smaller, more focused, "parallel” libraries, which yield greater value. Companies that focus on the continued development of such libraries as well as on contract discovery services for big pharmaceutical companies can expect to find substantial growth opportunities.

In keeping with the growing customer demand for complete drug discovery solutions, many combinatorial chemistry companies are shifting to an integrated research model that enables them to offer an extensive range of services and software products. This rising trend will particularly favor large companies.

In the United States, the focus of the U.S. National Institutes of Health (NIH) on molecular libraries and imaging is expected to drive the adoption of small-molecule research. This initiative is expected to be instrumental in giving public sector researchers access to compound libraries and has the potential to drive the market through lead optimization research.




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