As FDA speeds drug approval, VCs pour cash into pharma: report

Thanks to "drastically improved predictability and access" for drug approvals by the Food and Drug Administration, following changes to the Prescription Drug User Act and FDA's own Critical Path Initiative, drug approvals are way up and "investment capital is pouring into life-science tools and drug R&D," Paul Knight, pharma analyst at Janney Capital Markets, tells clients in a report this morning. He expects drug sales for the Top 12 pharma companies will rise and accelerate, starting this year, after dropping in each of the past three years.

FDA Phase III approval rates (approvals/application/year) rose to 78% in 2013, up from 46% over the previous 10 years (following the Vioxx scandal that made FDA extra cautious), Knight writes, after meeting last week with FDA economists who have been updating agency data.  New FDA "molecular entity" (chemistry-based drugs) "were the strongest in over 17 years" in 2014, Knight writes, with 41 approvals, up from an average of 27 a year for 2003-13. 

Thanks to FDA's "increased cooperation and innovation," venture capital investments in drugs rose 29% in 2014, Knight added, citing data from PricewaterhouseCoopers LLP and the National Venture Capital Association. That data shows venture firms invested $8.6 billion in 789 drug deals last year, up from $6.8 billion last year and the most since the record of $9.6 billion in 2007.

Analyst Knight is urging investors to consider buying stocks like Thermo Fisher, Bio-Techne, Harvard Bioscience, Regeneron and Acceleron on expectations their therapies are more likely to make it to market in time to enrich investors.