Friday, April 2, 2010

Keep Your Money

The MassBio Annual Meeting was held Wednesday and Thursday of this week in its new venue. For the second year, the meeting took place at The World Trade Center – a welcome change from the Sheraton, where it seems as if it has been since I was a green Senior Associate at Feinstein Partners (about 100 years ago). The format was pretty much the same as it has always been – plenary sessions and some breakouts.

Some of the panels were better than others. Deborah Dunsire moderated a fireside chat with Henri Tremeer and Jim Mullen. If you believe what they said, no entrepreneur and no investor would set foot near any biotech company. You’d be better off keeping your money.

The article in the Globe about the panel, which has been widely picked up by other outlets, latched onto the apparent major difference in their opinions about the effects of healthcare reform on the drug business. Maybe it depended on where you sat, but while I agree that they said different things, I didn’t see the great chasm that was described in the article. Here’s what I did hear:

  • Henri, who is an expert in this regard, managed to not answer a single question that was asked of him. His preference is to wax on about how great Genzyme is, and to actually take pride in the fact that he has been at the helm for 35 years.
  • He proclaimed that there is now an international marketplace for talent. That might be true if you’re Genzyme or Biogen, but try recruiting someone from overseas for a venture-backed startup in Cambridge.
  • He told us that it's important to be sensitive to cultural differences while maintaining the organizational culture. In other words, get Asians to work in Asia, Germans to work in Germany. Thanks. Didn't we learn that lesson when Nissan (back when it was Datsun) sent Japanese managers to market their cars here in the US? In a culture where people take their shoes off before getting in their cars, they couldn't understand why the US cars' seat belt retractors were failing until they got them back to the lab in Japan and found a month's worth of french fries mangled inside them.
  • It’s better to be lucky than smart. Henri’s sage advice? “Don’t work on things that don’t work.”
(ok, enough Henri bashing; there were some takeaways)
  • Jim made the somewhat provocative statement that everyone is abandoning cardiovascular drug development because the agency has made it impossible.
  • The old saw about “US = 60% and ex-US = 40% of sales” is no longer valid. Emerging markets (think India and China) will soon totally eclipse the US market in numbers of patients. However, I can’t believe they’ll all have the same diseases as us (think genetics, environment), which is good and bad. Bad for currently marketed drugs, good for R&D and discovery of new therapies (read: good for the industry).
  • One of the best points was one made by Jim – don’t forget that no matter how big your company is, there is always more R&D happening outside your company than inside. Collaborations and partnerships are the lifeblood of this industry.

We may finally be at a point, as is said to be at hand during every economic downturn, where Big Pharma will finally see Biotech as providing its near term pipeline. Pfieth has cut nearly 20,000 jobs – 6 of 20 R&D sites worldwide. When Big Pharma starts cutting R&D, I start getting nervous. However, coupled with the constipation in the investment community, there may well finally be some early stage Biotech assets that will end up in Pharma and be carried through to market. On Michael Lytton’s panel, he aptly characterized the current Biotech venture capital community as project finance, and the current state of R&D as S&D (Search & Development). Good call.

There’s an old saying that if aspirin were discovered today, it wouldn’t be approved. I wanted to ask them if Cerezyme or Avonex were discovered today, would anyone invest? Oh, but silly me, there were no audience questions. I can only guess. First question: “So, what do you guys think of Carl Icahn?” Second question: “This is to Henri. Henri: what the hell is going on in Allston?” I guess the organizers didn’t want any bloodbaths in the meeting hall.

To add insult to injury, the morning after the meeting, Richard Pops writes a piece in Xconomy about PDUFA 5 – another disaster in the making.

On a different panel, Tim Coetzee, PhD, President of FastForward, part of the National MS Society that funds drug development projects (as opposed to never-ending academic research morasses), made a chilling observation. There are 200 compounds in development for MS. There are 2.5 million people with MS worldwide. Do the math. There aren’t enough patients to do the trials.

What’s an entrepreneur to do? There’s no money, no blockbusters left, the FDA won’t approve any drugs and there aren’t enough patients to do a trial.

The hopeful thing that I got out of all this is that all the assets that are not being funded now will be highly sought after in a few years. Arguments that the venture model for Biotech is broken appear to have more validity now than they used to. But that, to me, represents opportunity. I have confidence that Yankee ingenuity will drive the development of novel funding mechanisms. Look at the PXE story. An incredibly rare disease, the parents and other patient advocates took the bull by the horns and funded an investigator to identify the gene that causes the disease. What was so clever was that they pre-negotiated rights to the intellectual property coming out of the research. This and other novel funding mechanisms are what are going to have to be developed to get us out of this mess. The good news is that you can’t stop innovation, no matter what the economy.

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