A popular feature of “BioPartnering Europe” (BPE), which took place in London late last year, is the Bioforecaster review, which looks at the life and health sciences sector across Europe and tries to predict what will happen over the next six months. This year in particular, everyone was keen to hear what the experts had to say about the impact of the global financial crisis on biotech and pharma companies.
Stuart Henderson, European head of life sciences and healthcare at Deloitte, had an optimistic outlook. “This industry is not debt dependent. The lack of availability of credit is not a constraint upon its growth,” he reported.
Others had more concerns, specifically about drug availability, an issue the Obama Administration is expected to address later this year. Unfortunately, approval of a new drug is not the final hurdle in the battle to get drugs to the people who need them. Currently there are over 50 million uninsured Americans who do not have access to such drugs.
Patent expiry is another anticipated woe. From 2011–2013, patent expirations will likely cost the industry $113 billion. In addition, there has been a significant increase in the regulatory burden that companies face. But again, Henderson was positive. “The oil tankers are finally turning,” he said, by which he meant that big pharma is finally changing its ways, with a new emphasis on restructuring, speed, and flexibility, which is a good thing for those in the biotech industry. He also pointed out that there is more innovation in partnering, although early-stage inventors still lack confidence. Overall, however, he concluded that the future was bright, despite the current global gloom.
VC Funding on the Wane
John Hodgson, director of Critical I, a business development and intelligence consultancy specializing in the life sciences, reported on his analysis of VC activity in Europe. He found a decrease in early- round finance, but an increase in later- round finance. Looking down the road, however, Antoine Papiernik, managing partner of Sofinnova Partners, said that he believed VCs would make more early-stage investments.
Hodgson also predicted a slight decrease in the size of deals occurring everywhere in Europe except in Switzerland. “In 2007, there was a move away from high-risk investment, and in 2008 that trend continued. Large pharma seems to be picking off the best among the larger biotech,” he said, adding that, strangely, the current global crisis could have the effect of making biotech actually look less risky.
Private investor Andy Richards, Ph.D., shared his belief that there is actually enough cash in the European public biotech system for it to do whatever it wants. However, there is an issue with poor management in biotech, especially in the U.K., although he is not convinced that management in the financial sector is necessarily any better. He also believes there are real signs that pharma is beginning to diversify its business model, and he predicts more pharma spinouts, with R&D-experienced people being recycled. In addition, he feels there could also be a resurgence in companies, without a big cash burn, who provide services, licensing, and deals.
Finally, Sam Fazeli, Ph.D., head of European research at Piper Jaffray, thinks that the bottom of the market is close and that there will be more mergers and acquisitions activity in the future.