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PharmaDeals Business Commentary

June Gloom? (2008-06-23)

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At BIO 2008 in San Diego, California, the weather was typical for the time of year – foggy, misty, dark low cloud in the mornings; the locals call this ‘June Gloom’. By the afternoon, most of this mist is burnt off to reveal brilliant sunshine. In fact, as the week passed, the daily ‘gloom’ got shorter as the mist burned off sooner, and by the end of the week there was no gloom at all. This weather pattern appeared to be a metaphor for the feeling of attendees at BIO this year.   There is no doubt that there is an air of uncertainty, and the biotech sector is not sure whether it should feel gloomy or ecstatic! The extensive underlying scientific research activity in the industry brings hope to many in combating disease. However, this science needs money from both the public and private sectors, and neither are exactly booming at the moment. The current economic forecasts continue to point to tough times ahead, and this will mean that both sectors will probably rein in their funds even further. So our week started with a note of pessimism.

However, the presence of many US State Governors at BIO – including Arnold Schwarzenegger – shows the political importance of biotech. What is more, two states, Massachusetts and Maryland, announced public funds exceeding $1 billion to support biotech.  This has to be good news for the sector.

As I have commented before, and as most of you have observed, biotechnology companies remain targets for acquisitions, and this is beneficial to the industry as it provides exits for investors. But does this mean that the good and strong will disappear and the weak will be left?

I mentioned above the underlying scientific research in the biotech industry: to me, this is the powerhouse that brings hope to the sector. In past years we have had tough times, but the fundamental science continued, and the emergence of new and exciting approaches to therapy means that new winners will emerge.

Many of the larger pharmaceutical companies are trying to mimic the entrepreneurial biotechnology company by creating new areas of research and development, either within newly acquired biotechs, like AstraZeneca with MedImmune, or completely from within their own organisations, like GlaxoSmithKline with its CEDDs. Whether these units can be described as ‘biotech’ is debatable, but, nevertheless, these developments back the biotech concept.

In the end, as the delegates from BIO all left to go home, the mood was, in my view, optimistic: biotech has a long way to go but it seems that we are better at harnessing its huge potential. By the end of the week, June Gloom was just a memory.