Read
On – Powerful Reasons for Optimism
From
the desk of Paul Pescatello, President and CEO of CURE
 At the last
CURE/Yale BioHaven event of 2008 – Unexpected Outcomes: Navigating Scientific and Management Land Mines
– the focus was less on weaving a narrative of unfettered success than on deconstructing the nuts-and-bolts of succeeding when the best laid plans of management and chief scientific officers unravel. The backdrop for this discussion was, appropriately, the financial panic of 2008 – the last closing before
Unexpected Outcomes had the Dow Jones Industrial Average
down 411 points.
CURE’s holiday party was similarly colored by the Big Picture. Attendance was high because people seemed to need to come together to asses the industry and their careers as the markets roiled around us.
Will the next round be in place to get us into the clinic? When our party commenced, the NASDAQ was down 45% for the year.
It would have been nice if the panic of 2008 was just that, an artifact of a year gone by, but alas it has segued into 2009. At the just concluded, biotech/pharma conference of conferences –
the 27th J.P. Morgan Healthcare Conference – company presentations were similarly contextual.
Good science, good management, but what about the economy?
Tsunami metaphors were heavily employed. Has the wave hit, the damage done, and now we “just” need to rebuild? Or, is an outsized wave only now approaching? Is the damage thus far only from the tide being pulled uncommonly far out, allowing us, in Warren Buffet’s words, “to see who’s been swimming naked” but not yet enabling us to gauge what the deluge –
the crash – will be like? Will the seeming treasures uncovered at the low, low tide, together with the treasure seekers, be unceremoniously washed away when the Big One ushers in a new high tide?
Fear not, though. Out of all the macroeconomic upheaval and upended business models there are some powerful reasons for optimism. First, a more prosperous era may be on hold, but only for awhile. Even the brave new world in which we find ourselves needs biopharma products. As economics like to say, demand for biopharma products is pretty “inelastic.” Our medicines and therapies get reimbursed because, as expensive as they may seem, they save the healthcare system a lot of
money,
or provide life-changing benefits to patients that other
therapies cannot deliver.
For example, the many Alzheimer’s treatments in the works
are eagerly anticipated by economists and patients alike.
Without them, without innovation, the only way to treat the
tidal wave of baby boomers who will otherwise succumb to
Alzheimer’s is a huge expenditure for nursing care
facility construction and skilled nursing care training. As
one biotech CEO put it at the JP Morgan conference, not
everything wrong with our healthcare system “can be fixed
with preventative care and selling generics at WalMart.”
As another example, Alexion’s Soliris® is the
only safe and effective drug therapy specifically for
patients with paroxysmal nocturnal hemoglobinuria (PNH), a
rare blood disorder which, on average, is fatal to one-third
of patients within 5 years of diagnosis, and has left others
so disabled that, prior to Soliris®, they were unable to
function normally in their families or the workforce. Before
Soliris®, patients were treated, with very mixed results,
with blood transfusions and other conventional therapies,
and often endured multiple hospitalizations for blood clots,
strokes and other morbidities. The worst cases sometimes had bone marrow transplants, which
are not only costly but also carry a high risk of death.
It is heartening that the architects of the economic stimulus package see merit in an industry proposal to allow biotech companies to “monetize” their accumulated net operating losses (NOLs). Companies would be allowed to receive a percentage of their accumulated NOLS now (in 2009), in cash, in lieu of waiting to use them against income in the future. For some companies this could amount to their next round of financing and allow them to work through this rough economy. In the parlance of our times, CURE has stressed to our Congressional delegation that Connecticut biotech R&D is “shovel ready.”
(See CURE's letter to
Senator Dodd.)
There is of course valid concern that deficits at both the federal and state levels could undo tax incentives for life sciences R&D and that certain proposals for healthcare reform could undermine the biopharma business model. But the degree to which state and federal officials understand the importance of our industry is impressive. Governor Rell, for example, has specifically reiterated her support for Connecticut’s $100 million stem cell research initiatives, despite looming state budget deficits.
The debris from the burst debt bubble has taught us an important lesson: the notion that we could add value to the world, create good jobs and cause our living standards to rise mainly by taking commissions, servicing, facilitating packaging, etc., etc., was a conceit. The de-leveraged world we find ourselves inhabiting will put a much greater premium on the tangible, on real innovation, on actually accomplishing stuff. Biopharma companies are about and do all that.
Paul R. Pescatello is President and CEO of CURE.
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