A New lease of life for Big Pharma, by David Stevenson, writing for MoneyWeek

Few people ' or businesses ' were buoyed up by last week's UK Pre-Budget Report (PBR). But bosses in one sector had big smiles on their faces. The Chancellor's decision to slash corporation tax on income derived from patents to just 10% was great news for Britain's big pharma firms (The Pharma Letter's passim). But while the tax break is good news, it's far from being the only reason to buy big pharma for 2010.

Big drug-makers have fallen out of favor with investors over the past decade. Small wonder. The $780 billion global market for prescription drugs is now growing at just 5% a year. And patent expiries have been high on the worry list. By mid-2009, says Moody's, scheduled patent expiries for big pharma were running at 25% of drug portfolios, from 17% at the end of 2007. A full $135bn in prescription drug sales will lose patent protection in the next five years, says Alan Sheppard of research group IMS Health.

And as we said a fortnight ago, drug firms are tiring of trying to produce blockbusters. It can take 10 years to get a new drug to market. Then within a few years, sales and profits are savaged when cheap generic clones are launched as patents expire. So both research spending and new product applications have fallen. Product liability litigation has also been costly. Wyeth, now owned by US pharma giant Pfizer, has had to set aside some $21 billion to resolve product liability claims for diet drug Fen-Phen. Merck will pay $4.85 billion in claims over its withdrawn painkiller Vioxx. GlaxoSmithKline has paid almost $1 billion to resolve lawsuits over its antidepressant Paxil since the latter's introduction in 1993.