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Biotech companies need to diversify use new apporaches to survive today

on October 26, 2011 Source:

Kevin Buchi, the head of global branded products for Teva Pharmaceutical Industries (NASDAQ: TEVA), and Dr. Michael Rosenblatt, chief medical officer for Merck (NYSE: MRK), shared their views of the biotechnology and pharmaceutical industries and ways to improve innovation at Biotech 2011 this week.

There were similar themes running through each man’s speech: Despite extending and improving people’s quality of life, the industry’s work is taken for granted and the regulatory and economic environment has slowed innovation in the industry or, at the very least, challenged it quite a bit, but there are ways to move forward.

Buchi, who was the CEO of Cephalon prior to its acquisition by Teva in a deal that closed last week, said: “Small incremental improvements have been the mainstay of our industry for the last 20 years. You can go through category after category of product where companies made incremental improvements and made a lot of money off of those products; that’s very difficult to do these days.”

He called for companies to diversify, through research and, to some extent, by acquiring or partnering with smaller businesses.

“I like to think that business development product sourcing is looking for ways to do a deal and not looking for ways not to do a deal. … Every small company frankly is going to have warts on its product. They don’t have the resources of a large pharmaceutical company. You have got to be able to look through that and look for a product that you believe is likely to work. There is no slam dunk in this industry and with our regulator, there never has been. You have to be willing to take educated risks and look through the problem to the opportunity for a product.”

Buchi also encouraged companies in the audience to be unconventional in their approach, using his new company, Teva, as an example. Although it is known mostly as a generic drug producer, a significant portion of its business is from branded drugs. Referring to previously published stats, he said his company wants to have revenue of $30 billion by 2015, with 13 percent coming from branded drugs.

He advised companies to diversify beyond branded and generic-only products. “If you can participate in all of those areas, I think you diversify yourselves sufficiently and then you can still make money no matter how the world moves.”

Buchi added: “Don’t just be acquisition driven, have your own research at some level, but be aware that you need to supplement that with active product acquisition and a sourcing business development function and you need to be very opportunistic in those areas. You need to form partnerships with health authorities, with other countries. You need to commercialize compounds that offer unique patient benefit, but add value to the healthcare system.”

Rosenblatt, reflecting on a recent trip to Botswana and the work drug companies have done in increasing the lifespan and improving the lives of people with HIV, reflected on the positive work the biopharmaceutical industry has produced and said: “The biopharmaceutical industry stopped a killer epidemic in its tracks and unfortunately, I don’t think that’s widely recognized by the public -- I think it’s largely taken for granted.”

Innovation is at a crossroads, Rosenblatt said, and this may be particularly true of biotechnology because of the high stakes the industry’s members’ take. “This reflects not only current economic environment, but also the regulatory climate and the recent track record of our industry.”

He added: “The big question mark is will innovation be rewarded in today’s environment and will it be rewarded 10 years from now when many of the things you’re working on will finally make it to the FDA for approval? Will the value of what we create be recognized when we’re in an environment where frugality dominates? In short, are our business models dinosaurs and how can we make sure that they’re not?”

Rosenblatt called attention to the different ways companies within the industry can develop partnerships and collaborate, such as pre-competitive alliances like Genomics, venture funds and public-private partnerships, such as with the National Institutes of Health’s National Institute of Allergy and Infectious Diseases.

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