Summary:To begin, session moderator Joseph Boystak laid out a brief summary of the Biotech/Pharmaceautical market of the last three years. It showed a sharp decline from its booming $37.2 billion in 2000 to a mere predicted $6.8 billion for 2003. Yet, Boystak was optimistic about where the industry is headed in the near future.
"Many companies are going to find themselves within a purely Darwinian environment," stated Boystak. The rise of small companies with market caps of less than $250 million can be seen as quite dramatic. The formation of strategic alliances will prove themselves important as well in 2004 and 2005.
To begin the panel discussion, Dr. Anna Barker directed her comments specifically toward the relationship between technology and cancer. The National Cancer Institute, which she represents, is working toward cutting off cancer in its early stages, rather than spending too much money too late. She believes that with their $4.6 billion budget, the NCI, "should be doing significantly more," and went on to say, "We are at an inflection point that will require an enormous amount of change in the system." The fact that there are thousands of potential targets for new drugs poses a significant threat due to the difficulty of creating an attractive market.
Dr. Barker went on to talk about the "big problems" facing the industry today. She pointed out that there is a lack of communication among scientists, which yields slower drug development. And as usual, the FDA is an issue. The fact that the FDA only approves "survival" cancer drugs is a wall that must be taken down in order to march forward. Barker made clear that prevention drugs were the future and that partnerships might absolve some of the risk involved in the current market.
Dr. Charles Homcy was the next panelist to address the audience. He posed an important question immediately, "Why haven′t we seen many new innovative products?" The main reason, he suggested, was the number of targets already met. In the 70′s, the industry set a large number of targets that were unable to be achieved until very recently. He stressed that "We can′t wait to build a biological scaffold. We don′t have 30-40 years to reach targets." Finally, Homcy stated that the industry must find new techniques and set targets that are within the industry′s grasp.
Dr. Leonard Firestone provided the audience with "a view from the frontline" of the small pharmaceutical company sector. He referred to the relationship between the large and small companies as "symbiotic" in behavior, as it is a much smaller task to manage funds and identify costs of drug development at the smaller scale. Firestone was very straightforward in saying that the smaller companies do not possess the option of sticking with what looks to be a failing drug. Due to their decreased size, the exit strategy that they abide by is much different and yields far fewer losses. In closing, Dr. Firestone stressed that, "These companies are crucial to the industry. We cannot afford to starve companies of this size."
Next was Dr. Richard Bank who began by describing his feelings about the industry as "very optimistic." To explain the sharp decline following 2000, he said that the slowdown in the number of new drug approvals was directly related to the absence of a "captain of the ship." Bank felt that with the chaos and movement of positions within the FDA, many drugs awaiting approval were passed over. Yet, the FDA was not entirely to blame. The fact that there was a significant decrease in phase two clinical trials suggested that companies might have been rushing in to the development process and not being cautious enough to ensure approval.
Mr. William Slattery followed with his views of the current situation from an investment standpoint. He too, was optimistic and presented the audience with his favorite company, Genentech. With numerous drugs awaiting approval this year, Slattery pointed out that Genentech′s asthma drug Xolair has the potential to bring in $250 million in revenue. Alongside Xolair were Tarceva, Avastin and the much talked about 2C4. Mr. Slattery closed by saying, "I think that the future will be held with many opportunities, both long and short."
Lastly, Alan Mendelson decided to concentrate on the increase in mergers and acquisitions within the biotech and pharmaceutical industry. A promising deal appeared to be Amgen′s purchase of Immunex for close to $16 billion, one that is predicted to produce $9-10 billion in revenue within two years. Other deals mentioned include Johnson and Johnson′s acquisition of Scios for $2.4 billion, along with HYSEQ and Variagenics merging to create Nuvelo. These deals, Mendelson said, are paving the way for the future of the industry and that the driving force behind these deals is, "Products, products, products."
Boystak noted in closing that the "number of strategic alliances has increased," and that biotechnology and pharmaceuticals is an "industry with terrific promise."
