|
Carl B. Feldbaum
from BIO News February-March 2003
As BIO prepares for February's annual CEO & Investor Conference in New York, it seems almost as if we have come full circle. In 1998, when we began planning the first such meeting, biotechnology was mired in a slump that had begun with a handful of high-profile product failures.
Back then, the macroeconomic picture was unfavorable for biotech as well. The spectacular and seemingly effortless returns of the dot-com and telecommunications sectors were siphoning off the bulk of venture-stage investment, while traditional health-care investors were drawn to the steady, double-digit growth of large pharmaceutical companies.
How could biotechnology compete in this environment? Without the dizzying returns of high-tech or the apparent low risk and high returns of Big Pharma, what could we offer?
At BIO, we knew our companies had technologies that could revolutionize drug discovery and deep pipelines of products that could revolutionize health care. Biotech companies were developing therapies for neurological disorders, various cancers, cardiovascular disease, metabolic disorders, infectious diseases, autoimmune diseases and dozens of rare disorders. The markets for successful medicines are large and stable (as pharma's growth amply demonstrated).
In other words, we knew biotechnology had a great story to tell. Unfortunately, the traditional investor conference format-an unrelieved, numbing parade of disconnected company presentations-is not conducive to conveying the bigger picture.
Among the innovations we introduced with that first meeting were panel sessions on distinct therapeutic areas and approaches, featuring CEOs, analysts and clinicians. Those sessions, plus a heavy lineup of CEO roundtables, framed the individual company presentations as part of larger narratives. We talked about how biotechnology could be used to treat cancers or neurodegenerative diseases, how new genomics, screening and informatics technologies were changing drug discovery, and-not the least-about the strategies for making bioscience a successful business.
That early 1999 conference proved a rousing success and helped reignite investor interest in the life sciences. We had obviously filled an important niche among the fall/winter slate of annual investor conferences, and we knew immediately that ours would be a permanent addition to the calendar.
As we enter the fifth CEO & Investor Conference, the biotechnology industry is in the throes of another downturn, presenting BIO with a similar challenge to frame the biotech story, albeit against a very different backdrop.
Today, the overall economy is much weaker than in early 1999, and the investor cynicism sparked by the collapse of the tech-bubble and the scandals of 2002 shows no sign of subsiding. Broader economic indicators have been trending downward, and state governments are facing budget crunches of a scale not seen for decades.
And yet the biotech industry overall is stronger than it was five years ago, thanks in part to a capital injection of more than $70 billion over that period. That unprecedented investment has been plowed into research and development, not SuperBowl ads and other dot-com era excesses.
Over the last five years, the industry has demonstrated its ability to win product approvals, bringing dozens of additional biotechnology medicines and vaccines to the market. Approximately 60 biotech companies have earned FDA approvals for biomedical products-which have helped more than 300 million patients worldwide-and a growing number are profitable.
Even in 2002, a dismal year for the industry on Wall Street, biotech companies garnered more than $11 billion in new investment, forged more than 900 new commercial partnerships and earned 35 FDA approvals. Another 31 new drug and biologics licensing applications are pending, and some 370 products are in clinical development. Those products, most of them for diseases associated with aging, will find eager markets as the baby boomers retire.
In short, rumors of this industry's decline have been greatly exaggerated.
And yet, even as we at BIO work to counter pessimism about the industry, we must not trivialize the dire economic challenges biotechnology faces over the next 12-18 months.
A spate of product disappointments, the ImClone story and a general economic slump all took their toll on biotechnology in 2002. The Nasdaq Biotech Index fell 45 percent, and almost 90 percent of biotech companies were down for the year. For firms whose stock prices have sunk below $5, financing is difficult to obtain, and those below $1 are in danger of Nasdaq de-listing.
Already, 63 out of 341 public companies tracked by Ernst & Young in 2001 have gone bankrupt or were delisted, and another 123 now have less than two years' worth of operating cash on hand.
Established industries, including the large pharmaceutical companies, have the cash flow to weather Wall Street turbulence, but the majority of biotechnology companies depend on investors, whose disfavor translates eventually into R&D cutbacks. Indeed, dozens of biotech companies, including many whose research is succeeding, announced restructurings in 2002 to conserve cash and focus on crown jewel programs.
Biotech stocks have partially rebounded from their summer nadir, but the consensus among industry watchers is that the IPO window may not reopen until late this year. In the meantime, a wide swath of young and mid-tier biotech companies need fresh capital to take research and products to the next level.
BIO is responding to this crunch by initiating new investor and partnering meetings-just as we did in 1999 with the first CEO & Investor Conference-by stepping up outreach to investors and the financial media, and by pressing for policy changes-such as a refundable credit for net operating losses related to R&D-that could give middle-tier companies the boost they need to keep going until investors rediscover our industry, as experience shows they inevitably will.
Indeed, over the last 20 years, biotechnology has expanded through every downturn, with consistently rising employment, revenues and sales. And we have a long way to grow. From regional economic development agencies to global analysts such as those at McKinsey & Co., the consensus is that biotechnology will be a major economic force in the coming decades.
But realizing that potential depends ultimately on the health of the hundreds of individual companies that comprise our industry. And hence BIO's mission with this year's CEO & Investor Conference is the same as it was with our first: providing an enriched forum at which CEOs can tell their individual stories against the backdrop of broader historical, scientific and financial themes.
| 
Printer Friendly
