The development of a new drug
for the treatment of variety of nervous system disorders indicates
that the university's research funding is producing real results.
The development--indicates is the main Subject --verb pair in the sentence and
of a new drug is the prepositional phrase which modifies the noun/main subject development
in a sentence the noun/pronoun within the prepositional phrase CANNOT be the MAIN subject of the sentence. Thus main verb indicates agrees with development and NOT DRUGS
Hope this helps.
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