This morning I attended Ernst & Young's Global Biotechnology Report session, which examined what led the industry to the state it's in now and how to survive these tough times. Panelists, of course, discussed topics we're all familiar with at this point: the biotech industry is at an inflection point, undergoing changes that will have a long-term impact on what this business looks like in the future. A combination of healthcare reform, increased generic drug use, personalized medicine and globalization will transform biotech in the comning years. Right now, however, lack of funding and exit strategies have forced many biotechs to cut costs. At least a few times a week, FierceBiotech reports on companies that are cutting staff, restructuring and refocusing their business in order to survive the financial crisis.
The speakers--which included Peter Wirth of Genzyme, Adelene Parkins of Infinity Pharmaceuticals, Colin Goddard of OSI Pharmaceuticals and Samantha DU of Hutchinson MediPharma--seemed particularly concerned about the lean, mean approach some biotechs have adopted over the last year. To preserve their business, many biotechs have focused on a single program, shelving earlier-stage research for more lucrative times. E&Y calls this the "rifle-shot" approach to drug development: the company gets one chance to succeed, and all its eggs are in one basket. If successful, the company may get a lucrative M&A deal, but if it fails, the company and its investors are out of luck.
"It's not smart to count on only one product asset," observed Infinity's Parkins. "If your livelihood depends on it, you're going to be forced to continue to invest in the drug, even if you shouldn't. Companies may end up throwing good money after bad." Biotechs can become so focused on one product opportunity that the company fails to create an organization that fosters innovation. "This industry has a full graveyard of single-roduct companies, and this approach does not build sustainable enterprises that can attract and develop talented employees," Perkins wrote in the E&Y report. Shelving an early-stage pipeline means attempting to predict a single drug candidate's approval--and the odds on doing so successfuly are long, to say the least.