The BioWorld Interview Part II: Bio-Pharma Partnering Not Even Close to Peaking in 2009
In the second part of an interview exclusive to Partnering News, BioWorld’s Senior Managing Editor Michael Harris shares insights from the upcoming BioPartnering Report 2008.
Author of this industry benchmark publication, Harris in the first part of the interview notes “that in 2008 deal-making continues to overshadow drug development and ‘the deal is still the thrill’ as the defining industry trend.”
Partnering News: Can the biopartnering model support both industries long-term, regardless of the return of the conventional venture capitalist (VC) community to biotech?
“VCs are in a defensive posture, but big pharma is going all out with an offensive move to sign up and score with biotech’s playbook.
Pharma, with revenue of USD 694 billion in 2007, and projected revenue of USD 738 billion in 2008, has been annually growing over the past decade toward a benchmark that would make it a trillion-dollar market around 2015. That growth is predicted to continue in spite of pharma’s patent expiry issues that will peak during the same period, according to data in the BioWorld Top 25 Biotechnology Drugs Report.
It is no small feat to out-perform the economy in volatile times, but biotech, has managed that task throughout most of this decade and especially and most impressively, over the past year as the U.S. economy, in particular, meanders in an unofficial recession.
Biotechnology, which lost 50 percent of its stock value from 2001 through mid-2002, has gone no direction except up since then, rendering it, an USD 83 million market in 2007 and one of only a few markets that can be considered as close to a safe investment as there is now.
Biotech is risky, but, to the advantage of both sides, pharma understands drug development more than most VCs and it has enough capital and corporeal resources to compensate for, and survive the current lull in conventional VC funding and the shuttered IPO window. Even when the traditional venture market returns to biotech, pharma, with money and resources, still will have twice as much to offer… and by then, also a track record of success and trust with biotech.”
Partnering News : Is the partnering trend peaking? Can this current level of deal-making activity be maintained?
“It is growing, but I don’t believe it is even close to peaking. The two predominant components that facilitate partnering—innovation and resources—are set in place to indefinitely remain relevant. Biotech’s front-end innovation and pharma’s finishing-level infrastructure comprise the foundation for an enduring trend, but another indicator of longevity includes the growing number of annual partnering conferences and the increasing number of attendees seeking insight and involvement in the phenomenon. Attendance at a sampling of such major partnering events has shown more than 600 percent growth.
Partnering is working for both sides and is buoyed by the strong suits of both participants to such an extent that the return of VCs and IPOs may only serve to offer competition for big pharma, but not necessarily to overtake partnering as the primary financing trend.”
Partnering News : Will such trend longevity result in the scenario in which the two markets eventually merge into one?
“Although there will be some mergers, I project growth in that area to be relatively flat, as the two markets will remain generally independent and will maintain the partner relationship model.
Biotherapeutics are forecasted to be the fastest growing sector of the pharmaceutical industry, with the biggest pharmaceutical companies projected to generate at least 60 percent of their revenue from biotechnology products by 2010. All the big pharma companies want to be more ‘biotech-like’, but are not keen to absorb the entire industry. Pharma can benefit more without the added pressure of incorporating and tacking on the operations of the companies in the more highly complicated biotech business.
The investment commitment of big pharma and the financial results and additional products that are almost assured to come from its biotech ventures will almost certainly lure traditional VCs back to the biotechnology drug market in significant numbers, as bio-partnered projects begin to yield results. VC competition will increase the options for biotech’s progress and present enough competition to oblige big pharma to further hone its negotiation endeavors to secure the best candidates for drug agreements, thus further strengthening both the pharmaceutical and biotechnology markets as stand-alone entities.”
Partnering News : What factors will most implicate the future of biopartnering?
“Biotech’s ability to maintain innovation and big pharma’s aptitude for re-learning R&D will likely determine its future. The general biotech industry has never really even come close to running out of innovation, while big pharma, though faced with problems—both immediate and imminent—is not close to running out of money or resources.
The closest this dynamic has come to contentiousness is ‘We don’t think your takeover offer is enough, so let’s just continue in our R&D deal until negotiations become more equitable.’ The bio-partnering trend is about as mutually beneficial and custom-fitted to the needs of the participants as any across all industries.
The hope is that big pharma will eventually regain the capacity to stand on its own R&D feet once again. Its calculated strategy is to mine biotech’s late-stage candidates to fulfill the present and near future agenda, then invest deeper in early-stage and even preclinical technologies, such as the emerging potential of gene therapy applications, that can meld with stalled pharmaceutical compound pipeline trials and resuscitate them back to life, and on to market.
Also, the prevalence of chronic disease is expected to increase by approximately 14 percent annually through 2015, with as much as 22 percent growth in incidence in leading diseases such as diabetes, heart disease, arthritis and cancer. More than their pharma counterparts, biotechnology drugs are on the front lines in addressing these diseases with their lineup of currently marketed therapeutics. Also, because of the highly regarded, investment-worthy and clinically promising potential of the candidates that constitute their next wave of products, the industry is also in the most advantageous position of all drug development industries to capitalize on the rapidly proliferating disease market that is growing with almost unbridled speed into epidemic situations. Pharma has acknowledged that these biotech drugs represent its most expedient opportunity to maintain its own relevancy. This acknowledgment is a factor in propagating the tenure of bio-partnering.”
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BioWorld BioPartnering Report
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BioWorld Top 25 Biotechnology Drugs Report 2008
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