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"It was an accident" is never a phrase that you want to hear in the laboratory -- well, almost never.
After all, taking an experimental drug from the fume hood of a chemistry lab all the way to FDA approval isn't easy, and any setbacks along the way can be costly. In many cases, it can take an experienced team more than a decade and a billion dollars before a new medication reaches the market. That may surprise you, but take a peek at how much today's biggest pharmaceutical companies are spending on research and development every quarter. Pfizer (NYSE: PFE ) plowed $1.6 billion, or 13% of its revenue, into R&D in the third quarter of this year, while Merck devoted slightly more to its development efforts. These companies and their shareholders naturally hope that some of the experimental compounds in their pipelines will get FDA approval and eventually join the billion-dollar "blockbuster drug" club, but there are no guarantees that this will happen. The human body can be a mystery, and research programs don't always work out as planned.
While failure in clinical trials can spell disaster for drug developers, some of the most groundbreaking medications were discovered entirely by accident. You may already be familiar with some prominent examples, such as the story behind Alexander Fleming's discovery of Penicillin, but let's look at three more obscure instances of random drug discovery that have helped thousands of patients and been a boon to drugmakers like Pfizer and Allergan (NYSE: AGN.DL ) in recent years.
Little blue pill, humungous profits
More than 20 years ago, scientists at Pfizer had designed a small molecule, called UK-92480, to treat various heart conditions, like high blood pressure and angina. In early clinical trials, the chances that this drug would become an effective cardiac treatment looked slim, but clinicians did notice an unexpected side-effect in male patients ... a, well, very pleasant side-effect.
Pfizer quickly realized this drug was more potent at aiding blood flow in one particular part of the body, and its commercial potential as a treatment for erectile dysfunction, or ED, soon became clear. Under the brand name Viagra, this became the first orally administered treatment for this indication. Viagra hit U.S. pharmacies in 1998, and sales exceeded a billion dollars in its first full year on the market. The product continues to be a key sales driver for Pfizer and brought in $945 billion in the first half of this year alone.
The discovery of Viagra undoubtedly helped thousands of patients and made a direct impact on Pfizer's top line, but some may not realize that it also created a completely new market opportunity for other drugmakers. Eli Lilly (NYSE: LLY ) , for instance, sells a rival ED drug called Cialis, and it's currently the company's fourth best-selling product. It took in more than a billion dollars in the first half of 2013, and it's helped prop up Lilly's revenue as it deals with generic competition for fading blockbusters such as Zyprexa. VIVUS (NASDAQ: VVUS ) is another company entering this lucrative market. This biotech is known more for its obesity medication Qsymia, but it recently inked a partnership agreement with Auxilium Pharmaceuticals for its ED drug Stendra. The deal could be worth $300 million if all milestones are met, and while the drug's efficacy could attract some patients, it has to go up against Pfizer and Eli Lilly's massive marketing teams. It will also have to face cheap generics when Viagra and Cialis lose exclusivity in a few years.
A "toxic" asset
Let's move from the ED market to the cosmetic industry and a deadly protein called botulinum toxin.
Scientists throughout the 20th century experimented with very small doses of this dangerous protein to better understand its mechanism of action, and they surprisingly discovered a wide range of medical applications for it. Botulinum toxin was used for the treatment of muscle spasms for several years until opthamologist Jean Carruthers noticed that the drug also smoothed out wrinkles in her patients' foreheads. Dr. Carruthers teamed up with her husband -- a dermatologist -- and was among the first patients to try out the drug's effectiveness as an aesthetic treatment. Despite the initial skepticism, the drug is well known today as Allergan's wrinkle-fighter Botox. Patients started using Botox for cosmetic uses back in 2002, but it's still a massively popular product, and sales reached nearly $1.8 billion in 2012. Allergan investors should also know that while Botox is widely known for cosmetic uses, it's also used to treat eye disorders, migraines, and a host of other medical problems. Each year, more than half of the product's sales actually come from its non-cosmetic uses.
A wartime discovery
For our last -- and most dramatic -- example, let's go all the way back to World War I. Mustard gas was undoubtedly one of the most vile chemicals synthesized by humankind at that point in time. It was responsible for thousands of deaths, and as the United States was entering the Second World War decades later, researchers at Yale University started to explore how nitrogen mustards work biologically in an effort to find antidotes.
In the course of their research, which has been chronicled in the Yale Journal of Biology and Medicine and (for science nerds like me who want to know more about the chemistry behind these drugs) in the book Quest for the Cure, scientists found that nitrogen mustards could also be used in the treatment of lymphoma, a type of blood cancer. This compound has been phased out of chemotherapy regimens over the years, but it's incredible to think that a derivative of one of the most poisonous chemicals became one of the very first cancer-fighting drugs.
Foolish bottom line
Luck played a heavy hand in the discovery of the drugs discussed in this article, and these examples underscore the idea that it's a fine line between "oops" and "eureka" when it comes to innovation in the drug discovery business. Pharmaceutical companies use a number of different approaches when searching for new medical breakthroughs, from computer-aided drug design to exotic natural sources, but at the end of the day, innovation can't always be planned. As an investor, it's important to keep tabs on the R&D budget of big pharma companies, but it's equally important to look beyond the numbers and realize that this process can't always be planned. Instead of just looking at a company's overall R&D budget, ask yourself how that company is using that capital to spur innovation, and whether it has leadership with the vision to explore accidental discoveries like these.
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