NEW YORK - Large drug companies have inherent advantages -- including cash to conduct expensive drug studies and to assure survival when trials fail -- that will be increasingly important in coming years, senior executives of Wyeth and Merck and Co said on Tuesday.

The bigger-is-better arguments were offered by Mervyn Turner, Merck's chief strategy officer, and Thomas Hofstaetter, Wyeth's senior business development strategist, at the Windhover Pharmaceutical Strategic Alliances conference in New York.

But Hofstaetter, whose company is slated to merge later this year with Pfizer Inc, the world's largest drugmaker, cautioned that some players eventually will reach growth limits.

In order to be really successful and realize the value of your assets in a reasonable period of time, you need to have critical mass globally and in key markets, Hofstaetter said -- gaining size through mergers and acquisitions.

The industry will go through more cycles of consolidation but these very large companies will break up again into smaller size, he predicted.

Because prescription drugs have limited years of patent life, companies able to spend hundreds of millions of dollars to test them for multiple potential uses in that brief period are best poised to generate big sales, both executives said.

Patent life is finite. You have to exploit it or you lose it. That's when size is important, said Hofstaetter. He noted that large companies often must partner with one another to defray huge costs and risks of late-stage studies.

Far more medicines are entering early-stage studies thanks to identification of proteins believed to cause disease, which are drug targets. Even so, the number of medicines entering and succeeding in late-stage trials remains paltry, Turner said.

Early-stage is a democracy; late-stage is a terror. More often than not in late stages, we didn't understand the disease as well as we thought we did, Turner said. So you have to have size, I think, to buffer against those late-stage shocks.

Turner, whose company is slated to acquire Schering-Plough Corp in coming months, said an average of only about three drugs are approved in the United States each year that have important new methods of action, a statistic that has not changed in the past decade.

Big companies have the resources to conduct their own array of studies while aggressively licensing or buying drugs from other companies, Turner said.

Merck, which forged only about 10 deals with other drugmakers in 1999, now does scores of such transactions each year -- bolstering its lineup of experimental drugs.

We're always looking at the next hurrah. Each time we hope this is what will provide that critical insight into disease, Turner said.

Jean-Luc Belingard, chief executive of French drugmaker Ipsen, offered a counterpoint to the big-pharma dogma, saying a profusion of small and mid-sized drugmakers will continue to exist and thrive as long as they have the right strategies and technology.

Ipsen focuses on hormone-dependent cancers; we compete against some of the big guys and have a market share comparable to them because this is so specialized, he said.

It seems like everyone thinks of one single model in pharma -- about size and critical mass. Does it correlate with added value? It has yet to be proven or documented. (Editing by Steve Orlofsky)

Pfizer