As a whole host of analyses ponder the effects of the credit crunch on the biotechnology sector, a number of leading lights in the industry are predicting a surge in partnering with big pharma or acquisitions by the latter.
Speaking ahead of the BIO-Europe meeting to be held in Mannheim, Germany, in a fortnight, Bill Ringo, senior vice president of strategy and business development at Pfizer, said the economic crisis “doesn’t change the need for increasing new product flow and access to new technologies. Therefore, partnering continues to be an extremely important component of our strategy”.
His view was backed by Ted Torphy, head of external research and early development at Johnson & Johnson Pharmaceuticals. He noted “the inexorable move toward partnering is being driven by economic forces within big pharma, the growing strength of innovation from external sources, and the worldwide commoditisation of R&D expertise”. These will fuel a surge in partnerships between the pharmaceutical industry, biotech and academia “that will fundamentally and irreversibly change the model by which new drugs are discovered and developed”, he added.
While many worry that a weakened economy will slow innovation, Simon Moroney, chief executive of MorphoSys, sees things differently. He argues that “the fundamental situation in the pharmaceutical industry has not changed”. Big pharma needs innovative treatments to revive its pipelines, “biotech is increasingly the source of these products [and]a challenging financial environment will only increase the need for mutually rewarding partnerships”, he said.
Nevertheless the credit crunch is clearly hurting. A report from Mitra Thompson at Global Insights notes that “with the exception of the very largest players, biotech drug makers find themselves considerably more at risk from the credit crunch than their counterparts in the small-molecule pharma industry”.
The sector is much more dependent on private equity cash and “with access to this funding now virtually wiped out as financial institutions tighten their belts, biotech drug companies’ mid-to-long-term financial prospects will become increasingly shaky if the credit crunch persists”, Ms Thompson notes.
Not partnerships but buy-outs
Big pharma companies will be more ready than private equity funds to make major investments in biotechs over the next few years, so the latter will become increasingly reliant on the pharmaceutical industry for back-up, particularly for funding late-stage clinical trials, claims the analyst. The knock-on effect will be to place big pharma “in a position of power to push for direct takeovers of biotech firms instead of negotiating complex R&D alliances” so “the stage is set for a ramping-up of acquisition activity in this area.
