Off On the Right Hand in 2009
This year's J.P. Morgan Healthcare conference in San Francisco took a sinister turn. When Genentech's Art Levinson took the stage, he pointed out that the DNA helix on the official meeting logo, splashed on every badge, had a left-handed spiral--something that doesn't occur in nature. Oops!
Kudos to Levinson on his powers of observation. But perhaps the meeting organizers were making a symbolic rather than a literal statement. It seems like biotech's corkscrew has been spinning endlessly into the ground over the past year, and the question at this year's meeting, the unofficial kickoff to the life science's Year of the Ox, is whether we're soon going to see change we can believe in.
Certainly at ground level the industry will see unavoidable change. Biotech companies will have to continue to do more with less, and that unfortunately means some companies will probably pursue more "Hail Mary" phase 2 programs that push compounds into pivotal trials before enough is really known about them. The upshot will be more risk pushed onto shareholders who probably don't appreciate the difference between a well-vetted phase 2 program and a quick "shot on goal." And that could in turn increase the perceived risk of drug development and further depress investment dollars, a vicious cycle in the making.
Not that this is unavoidable. Personally, I'd like to see venture capital investment more focused on developing platform technologies and less on leveraging the single-product opportunities that have been so popular over the last few years ...and that again leave shareholders with more risk that I think they typically appreciate.
But the real change may need to come from Big Pharma. These leaders, generally well funded and selling products that remain in demand even in recession, have been relatively safe havens of late. But while greater scale increases the efficiency of many things, it doesn't increase creativity nor, it appears, R&D productivity. The engine of their future success remains firmly rooted in the biotech industry, and they need to get the best out of it.
Doing that--and getting the most for their own shareholders in the process--calls for more risk-taking. Why on earth aren't big pharma companies buying up or licensing depressed biotech assets at a breakneck pace? It seems like the same guys who are afraid of a hostile bid or a risky acquisition will happily overpay for a company once an outside activist steps in and puts it "officially" up for sale. The same folks who'll fork over 14 times sales for a commercial product don't want to take a gamble on a phase 3 program, even when the risk-discounted value is through the roof. No one wants to be associated with the big investment that blows up in a clinical trial six months or a year later. Indeed, these are truisms of the industry, but only because current culture and promotion practices so faithfully punish risk-taking. Not surprising, then, if the world's largest pharma companies find their upper ranks swelled by the overly cautious.
So here's a wish for the New Year: Let's see Big Pharma grab the Ox by the horns and leverage a position of strength into something that can benefit the entire life sciences industry.
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