Mass. biotech firms urged to remain independent
By Robert Weisman, Globe Staff | October 7, 2009
It’s time for pulling up the bootstraps.
That was the message delivered to biotechnology start-ups at the 11th annual MassBio Investors Forum yesterday. At a time when major drug makers are consolidating and may be less willing to buy fledgling companies, biotechs have to make it on their own and bring drugs to market themselves.
Industry leaders warned that the old model of forming a biotech company, shepherding a drug through development and years of clinical trials, and then selling the company to a pharmaceutical buyer may be played out.
Success will now require a survival mentality and a focus on remaining independent, said Barry Greene, president of Cambridge biotech Alnylam Pharmaceuticals Inc.
“Cultures that depend on survival are absolutely critical for this industry to succeed,’’ Greene said. “If you don’t want to [stay independent], you’re not a company. You’re a project.’’
Biotech leaders said it could take seven to 10 years to bring new drugs into commercial use in the future, compared with the five- to six-year time horizon of the past, mostly because of scarcer financing and a longer government approval process.
James J. O’Mara, vice president of business development at another Cambridge biotech, Ironwood Pharmaceuticals Inc., said more start-ups are willing to invest in technology without the expectation they will be snapped up for a premium. If the technology doesn’t lead to a product, they must be ready to shut down and cut their losses, he said. “People are being much more explicit about the company they’re building, and I think that’s a good thing,’’ O’Mara said.
During a panel on building a sustainable biotech business model, moderator Ted Torphy, chief scientific officer and head of external research for Johnson & Johnson Pharmaceuticals, told the audience at the Sheraton Boston Hotel that drug companies continue to look to biotechs for research and development.
“As an industry, we’re spending more and more for less and less productivity,’’ Torphy conceded. “Unless this changes, large pharmaceutical companies may be doing better by their shareholders if they invest in oil rather than investing in drug discovery.’’
But that doesn’t mean they are as ea ger to make acquisitions as they’ve been in the past, Torphy said, noting that big pharmaceutical companies have been moving aggressively to pare costs by streamlining research and striking partnerships with biotechs. “We want products, we don’t want companies,’’ he said.
Not everyone agreed the old business model is broken.
Alan Crane, former chief executive of Momenta Pharmaceuticals in Cambridge who is now general partner at Polaris Venture Partners in Waltham, said biotechs that focus on developing “breakthrough technology’’ rather than finding new ways to use old technology will get funding despite the retrenchment at pharmaceutical companies.
“There’s a lot of reason for long-term optimism,’’ Crane said, citing the aging of the population and growth in global markets.
The most successful companies will be innovators, said Katrine Bosley, chief executive of Avila Therapeutics in Waltham.
“One way you know that you’re innovating is if everybody thinks you’re crazy,’’ Bosley said. “If you’re not getting that kind of reaction on a regular basis, then you’re not being innovative enough.’’
But in the near future, biotechs will operate in an environment of funding scarcity and will need to adjust their goals - and their “burn rates,’’ the speed at which they run through venture capital - said Noubar Afeyan, managing partner and chief executive of Flagship Ventures in Cambridge.
He defended venture capital firms’ practice of investing in more mature companies, which has come under criticism from cash-starved entrepreneurs. “If we pour a lot of money into the early stage, we’re going to have a lot of orphan companies.’’
Robert Weisman can be reached at weisman@globe.com. |
