Herceptin, the first drug developed from a genetic discovery, had sales of $346.6m last year. Based on the finding that some aggressive breast cancers over-expressed the Her-2-neu gene, it offers hope to women who carry the mutation.

Her-2-neu was discovered by cancer researchers in the early 1970s but the use of genomics for drug discovery only started in earnest in 1993 when SmithKline Beecham (SB), then the world's 12th largest pharmaceuticals group, signed a collaboration deal with Human Genome Sciences (HGS), a one-year-old US biotech company.

Nine years later, HGS has a database of 14,000 genes linked with diseases and the first compounds are entering the clinic. But the jury is still out on whether genomics will give big pharma the boost in R&D productivity it desperately needs right now.

Most of the top pharmaceutical companies have followed SB's lead, investing heavily in genomic technology. Most typically spend about 20 per cent of their research budgets on genomics. Much of the cash goes to biotech companies.

Novartis, the Swiss group outsources about one-third of its research budget. Bayer, which saw its pharmaceutical sales fall last year, can take comfort from one of the best early-stage research pipelines in the industry - as a result of substantial investment in genomics.

But, so far, Bayer and GlaxoSmithKline are the only leading pharmaceutical companies to have genomic compounds in development. That is not a huge number of projects considering the companies involved have committed more than $1bn between them to genomics.

Jo Walton, pharmaceutical analyst at investment bank Lehman Brothers, says the drugs in development are just the tip of the iceberg. Pharmaceutical companies, she says, now have so many possible leads they cannot possibly afford to develop them all.

"There has been a dramatic increase in the number of leads that people are developing," says Ms Walton. And sorting the good leads from the bad could be costly.

The costs of researching a new drug is estimated to be about $800m. That, however, could be cut by more than 30 per cent by genomics, according to a report by the Boston Consulting Group.

But a report by Lehman Brothers and McKinsey, the consultants, concludes that various obstacles - not least screening thousands of dead-end leads - could double the average development cost of a new drug.

"The cost per molecule is going up because the novelty rate is going up. So the success rate is likely to be going down," says Ms Walton.

Paul Herrling, head of research at Novartis, says genomics improves the design of drugs by pointing to disease-relevant targets. But he admits it is too early to say that will lower failure rates when they enter clinical trials. "Hopefully, yes," he says.

Alan Kingsman, chief executive of Oxford BioMedica, says more focused approaches are needed to target genes that are mechanistically linked with disease rather than just those associated with disease. "These approaches would reduce the need for extensive validation and accelerate drug development," he says.

Many companies have turned to bioinformatics for the answer. Biotechnology has become the biggest user of civilian computing power as researchers organise and integrate information about genes from many different sources and formats.

Meanwhile, the revelation that the human genome contains only about 30,000 genes, rather than the 100,000 that scientists had predicted, has thrown the emphasis of medical research on to subtle changes in genes or the proteins, enzymes and receptors they code for, in an effort to explain their role in disease.

Companies such as Pyrosequencing and Epigenomics, are looking for genetic changes that make individuals susceptible to diseases, while Oxford GlycoSciences is searching for differences in the proteins made by diseased and healthy cells in the hope they might be the targets for new drugs.

Roche, the Swiss company, is doing its share of gene scanning but it has put most of its efforts into a collaboration with deCode, a company that has access to Icelandic health records. Most Icelanders can trace their origins to the Viking settlers, allowing deCode to track disease genes through patients' family trees.

The collaboration has already located genes for schizophrenia, rheumatoid arthritis, obesity and anxiety. DeCode has gone from the first study of a family group to potential new drugs in just three years, something that would have been unthinkable five years ago, let alone in 1993, when SB made its move into the brave new world of genomics.

Jan Leschly, former CEO of SmithKline Beecham, says the collaboration with Human Genome Sciences was one of the smartest moves of his 10 years with SB. "We were willing to take the risk at a time when nobody understood what we were doing," he told the FT.

Herceptin has already touched the lives of many cancer patients. There is no doubt genomics will save many more of us in the future. But until more of them enter clinical trials, the huge investment is unlikely to contribute much to the valuations of pharmaceutical companies developing them. Only one in 10 drugs makes it through clinical trials. "Most fail until phase two trials. We will not know what the failure rate is in phase two - and phase twos are expensive," says Ms Walton.

Until the drugs reach that stage - still several years away - it is impossible to say if genomics is improving productivity.

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