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I received a call today from GDS International, a UK-based b2b publishing company, alerting me to its annual, event called the Next Generation Pharmaceutical Summit (NGP) currently taking place at the Ritz Carlton on Amelia Island in FL. This invitation only event is supposed to bring pharmaceutical and life sciences executives to discuss problems facing the industry and what thing ought to be implemented to insure continued progress and growth.   This is the news coming out of the conference attended by over 50 pharmaceutical and biotechnology executives

Big Pharma concludes that M&A is not the New R&D

With large firms seeking synergies to drive down R&D costs, M&A deals can aid in the transfer of technical knowledge, scalability and reduce time to market. However, previous M&A periods have not alleviated the productivity crisis. “While short term gains emerge from these deals, in the mid to long term, R&D innovation, organic growth, and internal drivers are still key facet’s behind creating a successful company and providing an organization with sustainability.” So says, an executive committee composed of  50 pharmaceutical executives including Jeffery Nye, Chief Medical Officer at Johnson & Johnson, Reinilde Heyrman—VP of Clinical  Development at Daiichi Sankyo, Oscar Laskin—VP of Early Development at Celgene are leading the debate, joined by Ann Wang—VP of Clinical Operations at Human Genome Sciences. These sentiments confirm the notion that the pharmaceutical and biotechnology industries are in transition and suggest that life sciences companies still face many serious challenges in the not too distant future.

While increasing mergers and acquisitions isn’t likely to reinvigorate R&D, newly emerging economic pressures have recently triggered another wave of M&A activity in both sectors. But is this the solution for long-term sustainable growth?  “The willingness for the industry to unite in such a way clearly demonstrates long-term strategies for improved business processes so long-term investment in R&D can be secured” said Drew Contessa the NPG director.

The NPG will reconvene in April 2010 to review recommendations and actionable items.

The realization that M&A is not a solution to correct waning productivity in R&D was a long time coming. It cost about 150,000 pharmaceutical employees their jobs over the past three years. The idea that companies are beginning to recognize that buying or merging with another company is not a panacea or long term fix is a good thing. 

Hopefully, the life sciences industry can learn from its past mistakes.

Until next time....

Good Luck and Good Job Hunting!!!!!! 

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In the February issue of Genetic Engineering and Biotechnology News, J. Leslie Glick a former CEO of Genex and veteran of the biotechnology industry put forward a novel solution to financial crisis that is currently gripping the life sciences industry and the rest of the US economy. Dr. Glick proposed that the US government ought to consider injecting taxpayer monies into venture capital firms (VC) which, he believes, would foster creation of new companies, create more jobs, stimulate the ailing economy and also provide the government with an outstanding return on its investment.

According to Dr. Glick, “historical results reported by the National Venture Capital Association for the 20 year period ending December 31, 2007, show an annualized return of 16.7% to investors in some 1,860 U.S. venture capital and private equity partnerships. If the U.S. government had made annual investments of $10 billion in VC firms throughout the U.S. during that 20year period, the $200 billion total investment would have yielded a total return of almost $1.5 trillion.” Further, he asserts that according to the  International Trade Administration of the Department of Commerce, from 1970 to 2000, U.S. VC firms invested over $270 billion in more than 16,000 companies. In 2000, the surviving VC-backed companies employed 7.6 million people, representing 5.9% of all U.S. jobs, and generated sales of $1.3 trillion, accounting for 13.1% of the U.S. GDP.

This financial upside sound enticing but who is going to keep track of the money and keep an eye on how and what the VCs are investing in? Dr. Glick proposes creation of a non-partisan funding mechanism, possibly overseen by an independent panel of business people that would disburse $10 to $25 billion annually of taxpayer’s dollars to vetted and certified VC firms. Because of its investment, the US government would become a limited partner in these firms and could direct them to invest in technologies that would help to reduce health care costs, develop energy alternatives or improve food production capacity. While this proposal is unprecedented and controversial, we are living in extremely uncertain financial times that may necessitate innovative and out-of-the-box solutions to restore normalcy to the US economy. That said, all proposals—no mater how unconventional or outrageous—ought to be carefully evaluated and vetted to determine whether or not they have merit to help overcome our deepening recession.

Kudos to Dr. Glick!

Until next time,

Good Luck and Good Investing!!!!!!

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