Developing a new drug from scratch is a long and expensive process fraught with risk. For every medicine that reaches the pharmacist’s shelves, there are hundreds that never make it.

Large pharmaceutical companies plough significant amounts of their income back into research and development. Smaller firms, like biotechs, need backers with deep pockets and strong nerves. In an increasingly difficult venture capital market, financiers are focused on quick returns and low risk.

For companies large and small looking to build or augment their drug portfolio, the alternative is to acquire drugs from other pharmaceutical companies.

This can be done by in-licensing, purchase of the rights to the drug, or even acquisition of the company that makes it. Such treatments can be drugs already on the market, or late stage medicines needing final development and approval.

Based at the Magdalen Centre on Oxford Science Park, EUSA Pharma was formed in 2006, to acquire a portfolio of drugs for oncology — solid tumours— pain control and critical care. These three areas are complementary.

Chief executive and founder Bryan Morton said: “I had spent 30 years in big pharma and I wanted to get away from the rat race. I found a private equity backer and bought the European sales and marketing business of Elan Pharma for £83m. We called the new company Zeneus Pharma, and improved the range on offer. This included oncology and anti-infection treatments.

“Our success attracted the attention of a US company wanting to expand into Europe and we were bought out by Cephalon for £250m. My backer was keen to sell, as it gave them a three-fold return on investment within two years. I decided not to stay on, then used my experience to found EUSA.”

As the name suggests, the company has a presence in both Europe and the USA, two of the world’s biggest drug markets. Funded by a number of venture capital firms, including well-known names such as 3i and Essex Woodlands, EUSA is building a rapidly-expanding portfolio.

One drug is Erwinase, a treatment for acute lymphoblastic leukaemia. This is registered in the UK, but not currently elsewhere. In unregistered countries, the drug can be made available to named patients.

Another is Collatamp, a collagen sponge impregnated with antibiotic that is placed in the wound to prevent post-operative infection, and has already shown encouraging results in colorectal and other abdominal procedures.

A similar device containing the anaesthetic ethocaine for post-operative pain relief is undergoing phase two clinical trials.

The business model is to use the same infrastructure to support the growing range. With that support paid for by the initial purchases, new products show increased profitability.

By March 2008, EUSA had completed four major deals involving in-licensing, drugs rights purchase or company acquisition. In the fourth deal, the company bought US oncology specialist Cytogen. Now five further deals are in train.

“We are looking for speciality drugs, but we’re also very focused on drugs that will have worldwide sales of between £35 and £70m,” said Mr Morton.

“Drug companies traditionally do research and development, we do search and development, prospecting new targets for acquisition and developing late-stage products.”

While the EUSA team keeps its ear to the ground for what’s new, prospects frequently come to them via brokers, bankers and their network of contacts.

About 30 products a quarter are evaluated, of which perhaps two will be selected.

That selection process is swift and sure. Mr Morton and three colleagues look first at the strategic fit, then the therapeutic fit, and lastly, at the science behind the drug.

Mr Morton joked: “I often think we should patent our selection procedure. We move very fast. The quickest deal was done in six weeks and the longest we’ve taken was 12 weeks.”

Those deals can be outbound, too, divesting themselves of products bought as part of an agreement but not a fit for EUSA.

Sales are only to major hospitals and treatment centres, not to GPs.

“It’s a deliberate strategy — our customers are specialists in their field and represent 60 per cent of the market,” explained Mr Morton.

The sales teams are also quite special. In addition to the normal well-qualified sales staff, there are medical science liaison officers in Europe and the US.

Highly trained on the products and in the science, the officers sell peer-to-peer to key opinion formers. Highlighting the pivotal nature of the sales team, of EUSA’s 250 staff, 80 are in European sales and 60 are in the United States. While most head office functions are in Oxford, some are US-based.

Mr Morton added: “We see the credit crunch as an opportunity. There are companies out there finding life a struggle and keen to sell. We’re keen to buy, we want to be a $1bn company by 2011.”