J.P. Morgan Healthcare Conference—Thursday, January 15 Update
Attended the Wilson Sonsini board of directors dinner last night. During dinner there was a panel discussion moderated by Morgan Stanley biotech analyst Stephen Harr and a panel conisting of a representatives Gino Santini from Eli Lilly, Bob Conway of Array, and Alan Frazier from Frazier Health Ventures.
The panelists reiterated that the most biotech is entering a nuclear winter in which cash is king and they're in survival mode. Money is tight, and the prevailing prediction is that during there will be major contraction within the biotech sector 2009 in which the 300 to 400 companies with only six months of operating capital can go belly up. Frazier noted that VCs are having difficulty making follow-on investments as well as investing in new companies, as their limited partners are telling them to stay put due to a highly volatile stock market.
From Santini’s perspective, big pharma is still looking to do deals as a result of their small product pipelines. Santini further noted that the old paradigm for biotech companies may not be feasible in the current economic environment; i.e., a business model where biotech companies are formed based upon new drug targets and innovative technologies and then raise money through private investors and VCs and eventually access the capital market to develop their products to a preclinical phase before searching out a partner.
Santini suggested that new drugs and products may have to incubate longer within academic institutions and then get licensed to either cash-rich pharma or top-tier biotech companies.
All the panel members said that we are embarking upon some real interesting times with respect to the biotech and healthcare industries due to the current financial crisis and a crumbling economy.