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Biopharmas Need Investment and Investors Need Clarity
From the desk of Paul
Pescatello, President and CEO of CURE
 If there is an equivalent of the Detroit automobile show for the biopharma industry it is the just completed JP Morgan Healthcare conference.
Biotechs tout their wares and their prospects for the future — some products, but mostly interesting research and development that may lead someday to products. The mood was notably more upbeat than a year ago, but still muted compared to the not-so-distant past.
In the years surrounding the turn of the century, for example, the mood was exuberant. Hugely profitable medicines fueled an unprecedented investment in research and development. But patents have expired and pipelines full of complex research projects have shown how risky, costly, and time consuming it is to harness the wealth of new genomic and biochemical knowledge into new medicines.
Uncertainty confronts the industry on at least three fronts. First is the utility and efficiency of the biopharma business model. If one were to judge by the well-equipped labs or the confidence of the super-credentialed scientists, creating new medicines was formulistic —
a function of inputting the requisite amount of time and resources, and out would come the next generation of medicines. Alas, we’re not as smart or as right as we came to believe we were. Awareness of this is a good thing —
compared to even just a few years ago, biopharmas are much better businesses —
but it can also overshadow the many aspects of the biopharma business model that work well.
Overlaying a reassessment of the biopharma business model is, of course, an uncommonly deep and coordinated recession (i.e., occurring simultaneously to each of the world’s great economies). How and when a recovery, weaned of government stimulus, will take hold is another layer of uncertainty.
As if apprehension over the state of the world economy and biopharma business weren’t enough, the president and the Congress have added another thick stratum of uncertainty: healthcare reform. As 2009 came to a close it looked like a bill would be fashioned by a Congressional conference committee and signed by the president. Most analyses were that the bill to be put before the president would be highly problematic in many ways, most notably in its failure to accomplish one of two central goals: to “bend the cost-curve” so as to reduce overall healthcare spending. But the thinking was that the other main goal, to insure most of the uninsured, would be accomplished and the rest of the ungainly legislative mess could be fixed ex post facto.
But with the election of Massachusetts Republican Scott Brown in early 2010, whatever consensus certainty existed
[consensus certainty existed ??-bk] in the nearly hammered out conference bill, evaporated. And so the boundaries of biopharma intellectual property protection, the formula for prescription medicine reimbursement, especially for “expensive” biologics and the very size of the 21st century U.S. healthcare market, suddenly became uncertain . . . again.
Investors loath uncertainty. When the “rules of the game” are unclear or uncertain, they retreat. And so, this is how we begin the year —
well-run biopharma companies with promising research starved for cash, waiting for regulatory clarity and, with it, the economy to right itself.
Paul R. Pescatello is President and CEO of CURE.
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