View from City Road: Brave new world of drug development

Coming soon to a stock market near you: The Rocky Horror Drug Show, Part Two. Anyone who thinks governmental healthcare reform introduced an unbearable level of uncertainty into the business of investing in pharmaceutical companies is in for a shock.

The accelerating pace of genetic understanding is increasingly undermining traditional drug research and development techniques. R&D is still almost as much of a hit and miss affair as when the legendary mould chanced to find its way on to Mr Fleming's petrie dish.

But genetics offers the possibility of identifying - and modifying - the genetic processes causing the cell to misbehave. Drug development should, in theory, become a much more analytical affair, concerned with identifying and modifying the gene behaviour causing the problem.

The big drug companies, funding enormous R&D budgets, are increasingly aware of the revolutionary consequences of such an important change. Among the cleverest moves have been the Swiss group Roche's acquisition of a stake in Genentech, the grandaddy of all biotechnology companies, and SmithKline Beecham's recent deal with the Human Genome project's patriarch, Craig Venter.

The big R&D spending pharmaceutical companies will have to adapt. Until the white heat of this latest technological revolution starts to cool, the smart money may find its way into companies such as Amersham. They will make their money supplying the tools that will manufacture this brave new world.