With all the handwringing over dry pipelines, clinical trial failures and few regulatory approvals, a pair of Bear Stearns venture capitalists published an interesting analysis in the latest issue of Nature Reviews Drug Discovery and found that pharma and biotechs* may just improve their odds if they worked together more often.

They analyzed the origins of drugs approved by the FDA and those failing in Phase III trials between January 2006 to December 2007. Here’s what they found: Of the 103 FDA approvals, 47, or 45 percent, were from biotech; 16, or 16 percent, were from pharma-biotech alliances; and 40, or 39 percent, were from drugmakers (four of which were acquired or licensed from biotechs). In short - 67 NDAs, or 65 percent, originated from biotechs.

They also segmented drugs by innovation level and found this: 30 percent of all FDA approvals were novel drugs or new chemical structures; 30 percent were line-extensions and 40 percent were ‘me-toos.’ Of the novel drugs approved, 52 percent came from biotechs, while 71 percent of approvals in the line-extension/me-too category came from biotechs, they wrote.

It’s not all rosy, though. Overall, they found that for each FDA approval, there was, on average, one Phase III failure, and 95 percent originated with biotechs. When considering only novel drugs, the failure rate was even higher, with 1.6 Phase III failures for every approval. Novel drugs or those with new chemical structures developed by biotechs fared worse, on average, with 4.7 failures for every approval (9 approvals, 42 failures). Biotechs had a better Phase III track record with me-toos (20 approvals, 17 failures) and even better with line-extensions (18 approvals, 9 failures), they wrote.

A few interesting observations: About 40 percent of all approved products were sourced from biotechs, either through collaborations or acquisitions. Alliances didn’t contribute to as many approved novel drugs as biotechs, but had significantly fewer failures. Many clinical failures in biotechs are the result of underfunding, which goes hand in hand with less than optimal clinical staffing and clinical program design.

The data here indicate that drugmakers haven’t “highly productive in achieving FDA approval of new drugs in the past 2 years; however, products from pharma that have reached Phase III trials have had a high rate of approval. In the same period, the biotech industry has been more productive in producing approvable products across all three innovation categories we classified,” they wrote.

In short, they recommend that drugmakers look at fallen angels - biotech meds that failed in Phase III; seek to more co-promotion opportunities, and examine niche products more carefully. And for a seasoned scientist’s take on all this, stop by In the Pipeline, where Derek Lowe argues the differences may not be so great.

* Biotechs were defined as those included in the American Stock Exchange Biotech Index and/or the Nasdaq Biotechnology Index

Hat tip to In The Pipeline