There Goes Wall Street
It’s difficult to even think about the life sciences industry these days...many of us have one eye glued to CSPAN and the other to our dwindling 401(k) accounts. Drug company execs that recently toured Congressional committees to answer questions about manipulated clinical data and unethical promotional practices just got seriously upstaged. How can they compete with a new class of banking CEO that brings irresponsibility to an apocalyptic new zenith? For members of Congress, needling Jeff Kindler about Robert Jarvik‘s kayaking experience just doesn’t hold much appeal when you can haul in former Lehman Brothers CEO Elmer Fudd--er, Richard Fuld--to talk about how this wascally cwedit cwisis just snuck up on him. That’s why Henry Waxman (D-Calif.), normally fond of calling life science execs on the carpet, couldn’t resist calling in Fuld and former AIG heads Robert Willumstad and Maurice “Hank” Greenberg for the first of what will doubtless be an endless series of post-mortems on how this all happened. (Hint for Congress: Guess who gets to pass laws deregulating financial derivatives?)
It seems almost small-minded to think merely about how Wall Street‘s woes will impact the life sciences industries. But let’s go ahead and do it anyway--after all, if we’ve learned anything from these banking executives, it’s that even the fate of the global economy shouldn’t outweigh our own self-interest.
The good news is that Big Pharma, by and large, doesn’t need much credit these days. Pfizer could almost have swung the bailout of Bear Stearns single handed, using the cash on its balance sheet. While it’s true that those cash hordes aren’t gaining much interest these days, these companies are not by and large going to find it difficult to conduct business as usual. In fact, they may even finally find a bit of love as the “defensive” investments they were once traditionally regarded to be.
But what about their smaller biotech brethren? These companies have lately been thought of as having relatively strong hands in a “seller’s market” hungry for drug candidates. The tables may have turned. Companies that were hoping for a billion-dollar buyout to save their bacon may have longer to wait. Biotechs with the cash to keep developing their pipelines internally over the next couple years will probably come out of all this just fine. But those companies looking to Big Pharma for funding better know that the business development guys on the other side of the table can smell desperation a mile away. Money’s tight, credit is tough to get, the public markets are skittish, and there aren’t any major investment banks left to grease the wheels. Deal making will stay busy, but the terms for biotech may not be so easy going forward.
And that’s how greedy bankers, clueless legislators, and irresponsible lenders and borrowers can hurt something as far flung as the biotech industry. It’s a small world, after all.
--Karl Thiel
