Combinatorial chemistry products and services represented an estimated $535 million market in 2002, and are projected to reach $852 million in 2009, at a compound annual growth rate of 6.9 per cent, according to Frost & Sullivan.
At present companies competing in the current difficult environment are exploring several strategies to conserve critical financial resources, such as shifting the process of compound synthesis to low-cost countries in Eastern Europe and Asia Pacific, notes the report, called World Combinatorial Chemistry Markets.
Additionally, it notes, some have set up in-house drug discovery research programmes to help them develop lead compounds, which they can then license out to pharmaceutical and biotech companies.
"Investing in internal drug discovery programmes can help companies leverage in-house expertise in high throughput screening and lead optimisation," according to F&S industry Analyst Isaac Meek.
In a related opportunity, companies can look at licensing drug discovery tools - including software and instrumentation - to pharma and biotech companies, he said.
One factor affecting the sector is that opportunities to enter into 'shared-risk' agreements with big pharma companies are decreasing. Combinatorial chemistry companies must 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 Pharma," the report notes.
Companies can also explore the possibility of generating shared-risk agreements from existing contract and catalogue business, it adds.
Meanwhile, 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. And 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.
R&D spending drought set to end?
Accordingly, the combined R&D expenditure of drug discovery biotech and the top 20 pharmaceutical companies - which touched $57 billion in 2002 - is expected to top $73 billion by 2006.
R&D spending of the top 20 pharma companies is anticipated to continue growing at approximately 6 per cent through 2006, although the percentage dedicated to combinatorial chemistry services is not expected to increase over the forecast period (2002-2009).
Conversely, the growth rate of biotech R&D spending is expected todecrease over the same period. However, biotech companies' consumption of combinatorial chemistry products and services is projected to increase as a percentage of their total R&D expenditure.
Major technological 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 focussed, 'parallel' libraries, notes the report.
In fact, significant advances in informatics and modelling are enabling researchers to develop such libraries, which yield greater value.
Companies that focus on continued development of such libraries, as well as on contract discovery services for big pharma, can expect to find substantial growth opportunities.
In keeping with 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 favour large companies.
Meanwhile, the US National Institutes of Health's (NIH) focus on molecular libraries and imaging is expected to drive the adoption of small-molecule research. And 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 optimisation research.