As the Chinese calendar warned us, it did indeed turn out to be a year of the rat. If you‘re in any doubt about the economic crisis of 2008, here’s a single significant indicator: Pharmaceutical companies’ spending on advertising declined this year for the first time in history. Walgreen’s CEO Jeffrey Rein was quoted in FierceBiotech as calling 2008 “the tightest market for prescription drugs” in his 27-year career.

If big pharma and big retail were feeling the pain, of course the average citizen was too. According to a September Wall Street Journal article, consumers began cutting their health spending as the slowing economy took its toll. During the first quarter of 2008, the number of prescriptions filled in the United States fell by 0.5% — and by 1.97% during the second quarter compared with the same quarters of 2007. Those were the first negative quarters in more than a decade, according to IMS Health.

A Year of Less Health Care: In a survey by the National Association of Insurance Commissioners in August, 22% of 686 consumers reported that they were visiting the doctor less often than in the past because of the economy. About 11% also said they had cut back their prescription use to save money. Elective surgeries, diagnostics such as mammograms, and emergency room visits were all down. Although delaying medical care can lead to worse — and more expensive — medical problems later on, many people felt they had no choice. Rent and food have to come first.

These troubles affected both the insured and the uninsured. As copays and deductibles in employer-provided insurance plans increased over the past several years, patients were forced to pay increasing percentages of their own healthcare costs. And as unemployment increased (the pharmaceutical industry alone has cut thousands of jobs this year) fewer people had access to employer-provided insurance.

The second-largest clinical laboratory testing company in the United States, Laboratory Corp, has reported that the number of tests it performed for uninsured customers fell 8% in the second quarter of 2008 — and it usually sees about 1% quarterly growth. Obstetrician-gynecologist visits also dropped 6% during the first quarter compared with 2007. Some insurance companies are offering bonuses to doctors for prescribing generic drugs rather than the pricier brand-name drugs, and pharmacy chains offering discounts on generic drugs are thriving.

Seniors are particularly affected by economic troubles. Everyone is facing higher food, gasoline, and other costs of living, and those on fixed incomes feel the strain most acutely. All too often the cuts they must make come in health care. Medicare and Medicaid cover some but far from all of older Americans’ healthcare costs.

A Year of Layoffs: We might remember 2008 as the year of the layoff. Headlines have been full of “restructuring,” “reductions,” and just plain “cuts.” Like many others, biotech companies (from long-time stalwarts such as Amgen to small start-ups) are facing hard economic times. Big pharma is taking a real hit, with companies such as Merck and Wyeth laying off more than the population of some small towns. And the trouble is not regional, but global.

To recap just a few headlines: Avigen (Alameda, CA) reduces its staff by 70%; Amgen (Thousand Oaks, CA) plans to cut 2,200–2,600 staff; Cell Genesys (South San Francisco, CA) cuts “about 16” workers; Millennium Pharmaceuticals (Cambridge, MA) announces layoffs of 103 people, almost 5% of its workforce; Celera Genomics (Rockville, MD) cuts about 16% of its workforce; Elan Pharmaceutical (Dublin, Ireland) cuts more than 900 jobs in August; Xenova (Cambridge, UK) axes a third of its staff; Corvas International (San Diego, CA) will cut its work force 38.5%; Maxim Pharmaceuticals cuts its staff after a failed drug trial; at Santaris Pharma (Hørsholm, the Netherlands) 40% of staff leave their jobs; Genmab (Copenhagen, Denmark) will cut 20% of its staff; EPIX Pharmaceuticals (Lexington, MA) announces a 23% reduction of work force; IDM Pharma (Paris, France) will cut jobs; Pfizer cuts 275 jobs in Portage, MI; Abbott closes its manufacturing plant in Whippany, NJ, putting 134 people out of work; and on it goes. Pfizer started this trend with more than 9,000 layoffs worldwide during 2007, and Wyeth laid off more than 7,000 people during 2008. According to FiercePharma, big pharma has cut more than 100,000 jobs over the past four years.

The IPO window was essentially closed for the duration of 2008 as well, with just one biotech company going public this year: Bioheart priced 1.1 million-shares at $5.25 each, the midpoint of a revised range (after originally filing for 3.6 million shares at $14–$16 each). Cydex Pharmaceuticals (Lenexa, KS), Xanodyne Pharmaceuticals (Newport, KY), and Phenomix Corp (San Diego, CA), all dropped IPO plans during October.

A Year of Conflicting Forecasts: An October report by IMS Health predicted a 4.5–5.5% growth rate in the business for 2009, and Dublin-based Research and Markets predicts an 8% growth rate. Both expect that growth will continue to slow in the United States and that generics and emerging markets will be areas of greatest opportunity.

In the United Kingdom, a cash crunch is directly threatening the development of new medicines, according to TimesOnline. The Economic and Social Research Council reported that investment in drug research is seriously threatened as investors become more risk-averse. Additionally, TimesOnline said that recent staff cuts, such as GlaxoSmithKline’s October announcement that it will cut 850 jobs from R&D, are hitting beyond the sales force, which had taken the brunt of previous layoffs. Because increased R&D spending in recent years has not led to comparable new drug discoveries, R&D units are being cut.

In the United States, the global financial crisis combined with a “patent cliff” faced by big pharma (several blockbuster drugs will come off patent in the next four years) and the current regulatory environment may improve the picture a bit for biotech. Although venture capitalists are shying away from the large, long-term commitments required for biotech drugs, big pharma is eager to shore up its sagging pipelines, and it always looks to biotech for innovative drug candidates. A number of such deals are in the works, including the much-publicized sale of ImClone to Ely Lilly, Roche’s offer for Genentech, and GSK’s purchase of Genelabs Technologies. Analysts predict more of the same. However, according to an October article in USA Today, big pharma is interested only in those biotech companies with products to sell. It quotes Eric Schmidt (biotech analyst at Cowen and Company) as saying, “Pharma is not interesting in funding five years of research. No one is looking for another phase 1 or phase 2 stage company. And since no once is looking for those companies, there won’t be any IPOs either.”

Cash-strapped biotech companies are scaling down R&D too. The Biotechnology Industry Organization (BIO) reported recently that some 100 publicly traded companies in the US biotech sector are operating with just enough cash for under six months operations, and 38% of 370 small companies have under a year’s worth of cash. The Wall Street Journal predicted that “many small biotech firms are expected to file for bankruptcy, cancel drug trials, lay off workers, or sell out to large companies over the coming year.”

A Year of Dealmaking: Mergers and acquisitions (M&A), as well as licensing deals, are likely to continue. For example, Novo Nordisk has set aside as much as $2 billion to fund potential biotech purchases, according to CFO Jesper Brandgaard. In another kind of deal, the company recently entered into a collaborative research agreement with Cellartis AB (Göteborg, Sweden) and Lund University Stem Cell Center (Lund, Sweden) to develop insulin-producer cells from human stem cells. Bristol Meyers Squibb reportedly has “a long list” of biotech drugs and companies it would like to buy. According to Bloomberg, the company has $7.2 billion for acquisitions.

A Research and Markets study reports that M&A activity in the pharmaceutical industry has consisted largely of pharma buyouts of biotech companies, but M&As between biotech companies are also increasing. Echoing Eric Schmidt in USA Today, the report stated that marketed products and technology access continue to drive M&A activity. Of recent deals, 46% are based on a marketed product, and 34% harnessed technology platforms.

What Do You Think? We at BioProcess International discussed 2008’s top trends in the industry with a few of our advisors and friends. We asked them what issues are getting the most attention, and Christopher J. Dale (head of microbial technology in microbial biopharmaceuticals at Lonza Baltimore, Inc. in Maryland) was quick to echo some of the above: “Consolidation of mid- and large-scale players,” he listed. “And revaluation of the US dollar could affect operations.”

Nancy Chew (principal consultant for Regulatory Affairs North America LLC in Durham, NC) warned us to look out for a “loss of respect for the industry by the public due to corruption and fraud in some big pharma companies.” She expects a general “move away from small-molecule drugs and toward biopharmaceuticals” as well as continued “loss of jobs in big pharma.”

And Susan Dana Jones of BioProcess Technology Consultants (Acton, MA) pointed to an increased presence of Asian service providers — both contract manufacturing organizations (CMOs) and contract research organizations (CROs) — striving to meet the quality, regulatory, and service requirements of US and European companies. “I was just at BPI Asia,” she added, having recently returned from IBC’s mid-October BioProcess International Asia–Pacific conference and exhibition in Mumbai, India. “I met representatives from several organizations who were building or planning to build facilities in Asia, both product developers and CMOs.” In early November, for example, Novo Nordisk announced its investment of ∼US$ 400 million in a new insulin production plant creating 500 new jobs in Tianjin, China. The plant will be that company’s primary production base in the Asia–Pacific region, supplying both China and export markets.

Consultants Nadine Ritter and Scott Wheelwright both agree. He said, “The level of expansion in Asia will continue at a similar pace, with three to five new biopharmaceutical facilities coming on line in each of the next three years.” And she commented, “Biotech continues to move eastward. I see growing inquiries on CMC issues from eastern Europe, Israel, India, China, and Southeast Asia. It seems that groups in these regions are eager to incorporate ‘the best of the best’ from past successes and avoid common sources of failure from the history of US and EU biotech product CMC development projects.”

2008–2009 in Regulations

Passage of the US FDA’s Amendments Act in 2007 gave that agency a new tool — risk evaluation and mitigation strategies (REMS) — enabling it to put restrictions on patient populations that can access new products. The RPM Report (25 October 2008) claims, “The path to regulatory approval is easier the more willing a sponsor is to accept limits on how a medicine can actually be sold in the marketplace.” For smaller, less cash-burning biotechs, investment in niche or specialty drugs is far more attractive than it is for big pharma, which still clings to the blockbuster model.

We asked our friends and advisors about a few more detailed topics — beginning where all in the biopharmaceutical industry should begin, with the regulatory environment. So what have been the top regulatory changes/issues in 2008? And what regulatory changes may be pending that will have implications for those in the industry?

Nancy Chew pulled no punches. “Expect continued erosion of FDA effectiveness,” she told us, “due largely to inattention by Congress. We’ll see an increased focus on drug safety. There will be a chilling effect of postmarketing safety concerns on drug approvals and increased enforcement rigor for importation of drugs.

“Like the rest of the US federal government,” she went on, “the FDA has lost respect of the global community — and may well continue to do so — both from guilt by association and from chronic underfunding and political appointments over the past eight years. Assuming that federal support for the agency is increased, it could rebuild its authority both at home and abroad. The FDA will continue to develop drug safety initiatives and communicate them with industry. As newer FDA drug safety evaluation procedures are adopted, the approval pipeline will slowly open up.”

Another experienced consultant we know — who chose to remain anonymous so he could speak without reservation — put it this way: “The United States is embarrassingly behind the curve. Europe already has biosimilars legislation passed, which will go into effect in February, and many Asian countries do too. So the United States will have to play catch-up and ‘preharmonize’ itself with existing programs. Otherwise, the biosimilars market will just make its home elsewhere. This could be seen as the tail wagging the dog, but it’s just one more indicator of the accelerating erosion of US leadership in this industry.”

But Scott Wheelwright (president of strategic manufacturing worldwide for SMW Biotech in Saratoga, CA) said he believes the United States will develop a pathway for marketing biosimilars “probably in 2010.”

Alex Kanarek of BioProcess Technology Consultants (Acton, MA) told us the FDA is still tinkering with GMPs. “They say the new 21CFR211 is finally on its way, and let’s hope they do a better job than they did with the rule for phase 1 products. On, off, and on again — virtually unchanged — but no real effect on the industry because the sting is in the tail. You must still comply with the CGMP requirements of section 501(a)(2)(B) of the FD&C Act.”

The 2008 phase 1 guidance states that adherence to CGMP during manufacture of phase 1 investigational drugs “occurs mostly through well-defined, written procedures; adequately controlled equipment and manufacturing environment; and accurately and consistently recorded data from manufacturing (including testing).” Quoting that, Kanarek asks, “So, what’s new?”

He told us Canada has rewritten its own GMP guidelines and that the resulting document is something “all should read, even though it’s still in draft form. It gives the rule, the rationale for the rule, and clear advice on compliance. If only all guidelines/guidances were written like that!”

Kanarek’s colleague at BioProcess Technology Consultants, Susan Dana Jones, also commented on the phase 1 document. She says the FDA guidance issued in July of this year seems to be a major shift in the written policy of the agency — apparently stating that phase 1 materials need not comply with CGMP requirements. But, she added, “We do not think it is actually a major change in how they treat early and late-stage production; there has always been an acceptance that the processes for early stage material are less well defined and possibly less robust than later stages. The focus has always been on product safety.

“In the European Union,” she went on, “there have been additional guidances issued on biosimilars. This continues to be a hot regulatory issue. No regulations on biosimilars have yet been issued in the United States, but,” she agrees with Wheelwright, “this is something that will happen in the next year or two.”

Another guidance was issued in Europe in July 2008 regarding viral safety for investigational medicinal products. “This defines the minimal viral clearance testing that must be performed prior to initiating phase 1 trials,” Jones explained. She quoted consultant Hannelore Willkommen, who has explained that viral reduction studies must be performed no matter what the results are of cell line and bulk product testing. “In-house data can be used for the virus safety evaluation,” Willkommen said in a recent presentation, “but if that’s not available, then studies should be performed with two viruses (one enveloped, one nonenveloped, preferably including parvovirus), two orthogonal steps should be tested, and two runs of each step should be performed to show reproducibility.”

2008–2009 in Technology

We asked our editorial advisor Nadine Ritter (senior consultant at Biologics Consulting Group in Alexandria, VA) to tell us what she’s seeing in the analytical arena.

“Worldwide regulatory bodies are increasingly interested in having sponsors analytically define the pattern of heterogeneity in their biotech products,” she first explained, “and demonstrating consistency of manufacturing at different scales and in different production locations.” As an example, she cited frequent specification requests for quantitative analytical methods to measure and monitor product isoforms at time of release and stability over time.

And she added, “There is heightened emphasis on analytical method history reports — typically for noncompendial product-specific methods — that tell the ‘story’ of methods used for release and stability testing during product development.” Ritter says it is generally recognized that method-based events such as optimization, qualification, transfer between laboratories, and bridging to new technologies can substantially affect the nature of data generated over time with each test method. When looking back to assess trends in product quality, she explained, the analytical methods themselves (and changes made over time) are inherent parts of the resulting trend data.

One note of caution: “There is a continued gap in the correct validation of commercial ELISA methods used for host cell proteins, although they can be highly valuable if used appropriately.” Unfortunately, Ritter elaborated, “many sponsors fail to confirm the adequate immunospecificity of commercially supplied anti–host-cell antibodies for the specific host cell protein ‘mixture’ produced by their product manufacturing process.” Without sufficient host cell protein (HCP) immunorecognition by a commercial enzyme-linked immunosorbent assay (ELISA) kit, she warns, test results could indicate fewer residual HCPs than are actually present.

Ritter also told us that sponsors are showing more concern over the potential safety impacts (e.g., immunogenicity) on biotech products from container–closure interactions. Companies are being asked to better define their product stability protocols to include elements that carefully assess extractables and leachables. In early development, she explained, simple inverted (or horizontal) vial orientation could be suitable; as development proceeds, however, additional analytical testing for the presence of specific leachates (e.g., silicon) may become necessary.

Manufacturing Technology: The biggest buzz-word in bioprocessing over the past few years has continued to be so in 2008: “Disposables continue to increase their market penetration,” as Chris Dale put it. Kanarek commented, “I saw any number of large, disposable, stirred-vessel bioreactors at the BPI conference.” IBC’s BioProcess International Conference and Exhibition was in Anaheim, CA, this past October. “If these can be validated,” he told us, “then stainless-steel stirred tanks may be made obsolete for development and clinical-scale materials.” Besides, he added, as yields increase, “the demand for the largest bioreactors may be reduced.” Indeed, Scott Wheelwright believes that smaller bioreactors and fermentation scales will come from increased expression levels, allowing for increased reliance on disposables.

But another downstream expert we know offered words of caution: “Increasing cell culture titer is a bomb that will transform the industry. The capacity stress that high titers places on downstream processing will continue to make headlines, but the more serious issues have yet to surface. Increasing titer is accompanied by increasing aggregation and fragmentation, which cannot be adequately accommodated by the purification platforms that most companies presently rely on.

“Specifically,” he continued, “cation exchange will cease to be the default intermediate step. Platforms will be forced to migrate to methods with much higher aggregate removal capability. The movement toward two-step purification processes will probably come to a screeching halt. Chromatography vendors will scramble to come up with products and applications that can consistently manage double-digit aggregates.

“Elevated aggregate/fragment content can slow down process development as well, which will drive people more strongly to high-throughput robotic screening systems, at least in the companies that can afford them. Another likely reaction to higher (lower-quality) titers will be the ascendance of perfusion cell culture systems, which continually remove a lot of what piles up and favors aggregation and fragmentation. But perfusion has its limits too: Glycosylation patterns can change as a cell-line ‘matures.’ This is tantamount to a product becoming a different composition of matter, which as you can imagine is frowned upon by regulators.”

Continuous processing may be possible, our anonymous consultant said. “Now that the higher-titer genie is out of the bottle, it will probably never go back, so people will need to find ways to deal with it. In cell culture, expect to see a resurgence of perfusion cell culture. In downstream processing, expect to see the ascendance of simulated–moving-bed chromatography systems. In quality control, expect to see increasing headcounts, which will drive a trend toward increasing automation.”

He believes the trend toward single-use technology will start to level off. “It is in fundamental conflict with the green movement,” he pointed out, despite arguments based on utilities and chemicals used for cleaning reusable systems. “And it is limited to early phase operation in any case by the 500-L bag limit. To the extent that it continues to grow, that growth will be through technical innovations that support entry of disposables into new areas.”

Susan Dana Jones does expect to see continued increasing use of disposables in manufacturing campaigns as well as platform processes, “especially for monoclonal antibody products.:” She believes production cell lines with >5 g/L expression levels will be common, again “particularly for MAb expression. Many technologies are available that enable routine achievement of these previously unthinkable levels in the bioreactor and put significant pressure on the downstream operations.”

2008–2009 in Products

Monoclonal antibodies are becoming a platform technology in and of themselves. Although they vary widely in their specificities, they all conform to certain basic structural and behavioral parameters. This makes them more “small-molecule–like” (they’re now the purvue of CDER rather than CBER, for one thing) than other biomolecular drugs when it comes to manufacturing, making such work more easily outsourced for MAbs than it is for other proteins. Comparability protocols support flexible scale-up, and the number of people in the industry with MAb experience is ever growing. For those reasons and more, Scott Wheelwright told us antibodies will continue to dominate biopharmaceutical development programs.

Looking ahead, Chris Dale pointed to renewed interest in vaccines (more investment and outsourcing) and plasmid DNA products (preclinical development and GMP maufacturing for early clinical trials). “Vaccines appear in the public domain for many companies following years of exclusion,” he said. Whereas a few large companies once dominated this field in a closed world, the future seems more open.

Nancy Chew suggested that Democratic leadership in the US government (see “The Year in Politics” below) would lead to increased interest in cell therapies, including personalized medicine and embryonic stem cells. So she said, “Watch cell and tissue therapy companies.” Generic drug pricing, she added, will also come under pressure.

Alex Kanarek agreed. “Biosimilar products will play a larger role — there will have to be legislation made in the USA soon.” Looking back at 2008, he pointed out one significant development in expression technology, too: A new influenza virus vaccine using hemagglutinins expressed in a baculovirus system (from Protein Sciences Corporation) was given fast-track status by the FDA. “It has always surprised me,” he said, “that the BV expression systems were not more popular because they are very high yielding. At present, only the HPV vaccine from Glaxo is approved.”

2008–2009 in Business

Yali Friedman is founder of thinkBiotech and a well-known author/editor of books such as Building Biotechnology, Best Practices in Biotechnology Business Development, and Best Practices in Biotechnology Education, as well as online projects such as DrugPatentWatch.com, and Biotech-U.com. He guest-lectures for the Johns Hopkins biotech MS/MBA program and serves on the science advisory board of the Singapore-based Chakra Biotech. Here’s what he had to say when we asked where the biopharmaceutical business is at the end of 2008 and where it may be going in the near future.

”As a long-time industry observer,” Friedman said, “I’ve been particularly interested lately in the confluence of a number of factors driving a significant maturation of the industry. These are driving changes in the financing models, business models, and implementation plans of biotechnology companies. The effect of this maturation is that those operating within or serving the industry will also require new skills and mindsets.”

From Technology Push to Integrated Marketing: Friedman told us that early biotechnology business models were largely based on what he called “technology push.” In this model, products are developed based on finding market opportunities for a company’s technological abilities rather than seeking solutions to meet specific market needs (a “market pull” model). “This was appropriate at the time,” Friedman said, “and it enabled several great successes. Early applications for gene splicing, for example, were synthesis of human insulin and human growth hormone.”

KNOWLEDGE GAP OR EMPLOYMENT OPPORTUNITY?

“Why are universities not teaching any of their students that plan to enter our industry about the rudiments of the regulations and the means of compliance? There are a few instances that I know of, but I still see companies with brilliant scientists but absolutely nobody on staff who can help with their GLP/GMP problems. I guess that just means more revenue for expensive consultants!” —Alex D. Kanarek, BioProcess Technology Consultants



On 7 November, Pharmalot blogger Ed Silverman suggested that small drugmakers could benefit from job cuts at larger companies. Citing an article from NJBiz, Silverman says smaller companies are seeing a wide range of good talent coming from newly laid off employees. And they’re less likely to negotiate for top money as they might have in a better job market. He also said there should be more opportunities for contractors that provide support services and thus help pharmaceutical companies outsource their manufacturing and/or R&D.

But as the industry and markets have matured, he told us, so too have the challenges. “In past decades, it was relatively common for scientists to inadvertently disclose key information through publications or presentations, limiting their ability to secure intellectual property protection for their inventions and often precluding commercial development. As the industry has matured, the need to be wary of public disclosures is now common. Contemporary challenges include the need to develop a compelling value-proposition and ensure a path to market.”

Think About Reimbursement: Friedman provided an example of the need to understand the path to market. The BiDil vasodilator medicine received substantial attention in 2005 when its developer (NitroMed) gained approval for the drug as a treatment of heart disease in African Americans. “Although the prospect of a drug targeted specifically at treating a deadly condition in a racial group with a high prevalence of that condition may appear lucrative on first blush,” Friedman explained, “it is necessary to examine the business opportunity. BiDil is a patented, fixed-dose combination preparation of two existing generically available drugs, so patients have the option of taking those two individually at a fraction of its cost.” A key challenge in marketing the new brand name was convincing health-care payers (e.g., insurance companies) to pay a premium over generics for what might be regarded as no more than a reduction of patients’ “pill burden.” Low sales and difficulties in securing reimbursement led NitroMed to sell essentially its entire BiDil enterprise to JHP Pharmaceuticals in October of this year for $26 million.

Think About Long-Term Safety, Business Models: Recent multibillion-dollar liability suits associated with the Fen-Phen and Vioxx brand names serve as reminders that longterm safety issues must be considered when marketing drugs. Friedman says that failure to do so can potentially bankrupt even the largest companies.

“Exubera provides an example of how safety concerns and business model considerations can derail business models,” he said. Genentech and its partner Eli Lilly had reaped great returns from developing Humilin genetically engineered insulin as the first biotechnology drug. “The insulin market has since become crowded, and new entrants must demonstrate significant benefits over existing options to secure a share of the market.” The Exubera brand is an inhalable insulin product developed by Nektar Therapeutics’ using proprietary technologies with support from Pfizer. The drug was approved in 2006 following a lengthy development period, but then withdrawn from the market in 2007 (with Pfizer writing off $2.8 billion in related losses).

“The stated and implied motivations for that withdrawal were manifold,” Friedman told us, but the significant financial penalty willingly suffered by Pfizer suggests that at least one strong motivation was the potential for even greater financial penalty: tort. “The long-term effects of using lungs to transfer therapeutic proteins to the bloodstream are not known,” Friedman pointed out, “and liability lawsuits stemming from side-effects elucidated at later dates could potentially bankrupt Pfizer. Had Exubera involved a more conventional delivery method with a strong safety record, the liability risk would have been much lower, and the drug might not have been withdrawn.”

The market withdrawal of Exubera had strong implications for companies that choose a drug-delivery business model, Friedman said. “Whereas early industry pioneers such as Alza were able to build their enterprises on improving drug delivery, an underlying challenge for drug delivery companies is that they rely on partnerships to obtain drugs to deliver.” Recovering from the loss of its Pfizer partnership (and in recognition of that innate challenge), Nektar has repositioned itself as a drug development company instead.

A Global Financial Crisis: Yali Friedman calls the global financial crisis that exploded in the fall of 2008, with its associated liquidity issues, a “potent catalyst for industry maturation.” In bull markets, he said, undeserving companies could obtain financing and distract investors from those with stronger fundamentals and future prospects. “A dearth of investment capital does not mean that the biotechnology industry will cease to grow,” he cautioned. “Instead, it likely means that financiers will be more careful with their investments, and deserving companies should still be able to grow.” Those with good fundamentals — a strong management team, a sound marketing plan, good science, and so on — are generally able to obtain financing even in poor economic climates.

“It is also worth noting,” Friedman reminded us, “that many successful companies were developed in difficult economic climates. Financiers tend to have lower expectations, and skilled managers and staff tend to be easier to recruit. The cycles between bull and bear markets serve to alternatively support bold ambitions and cleanse poorly positioned companies.” Many companies will struggle and possibly liquidate in our poor financial climate, he affirmed. But it should serve as a catalyst for the biopharmaceutical industry to mature and for entrepreneurs to ensure that their projects have strong value propositions and implementation plans.

Perhaps because we happened to be working on this report in the middle of the financial melt-down and election season, we asked everyone about how these things would affect the industry. Chris Dale and Nancy Chew both anticipate constaints in the availablity of venture capital for start-ups and even second-stage funding for drug development. Chew said this should further shrink the already diminished pipeline of new products, “as well as make less funding available for academic research.” She added that fewer jobs will be available to older (more experienced but more expensive) workers in the industry. And Dale suggested that price competition for CMO services will form the basis of survival strategies for small players. “Outsourcing of services may become much more competitive.”

Our anonymous consultant warned, : “Little fish will be eaten by bigger fish. Most small companies have fairly limited cash reserves, typically a year or less, and many won’t survive on their own. The possible exception could be a surge of business for CMOs, unless the recession is really deep and prolonged, in which case they’ll suffer too. Other than that, companies will defer major capital outlays, which will make them less able to respond to any issues that arise. Expect staffing to take a hit too.”

Scott Wheelwright agreed that “small firms will be bought by larger ones, some small firms will close, and the industry overall will see unemployment rise.” And Alex Kanarek said, “If the developing biotech companies are going to need venture capital to continue operations, then they’re going to be in trouble. Nor will there be much cash around for big pharma to buy up all those promising new biotech discoveries. It is notable, however, that some cashrich companies are still out there bidding, but I think those started down the acquisition road before the present crunch. So Glaxo is still hoovering up vaccine leads, Roche may still acquire Genentech, and so on. However, if the other bigger companies are slashing R&D staff, they will have to rely on smaller companies for new discoveries and/or development. Maybe there’s hope for us yet.”

His colleague Susan Dana Jones said, “It has been my experience that when money gets tight, the first activities to get cut are drug discovery. Companies still try to develop the drugs in their pipeline because this is where the nearer-term value will come from. That said, this economy is obviously very likely to reduce the overall level of financing available to our industry and is therefore likely to reduce the number of new companies that will be able to obtain seed financing. Angel investors who have lost significantly in the stock market will not be able to finance the earliest companies.”

2008–2009 in Politics

No discussion of the year 2008 would be complete without examining political developments. Not 24 hours had passed after the US presidential election was over, and already people were making guesses about the effects a new administration would have on the pharmaceutical and biotech industries. FiercePharma predicts that, for one thing, direct-to-consumer advertising will come under increased scrutiny and control. Other new priorities could include controlling prices on expensive biotech drugs and a push toward greater generics use.

BIOTECH HIRING: MORE OF THE SAME FOR 2009



I feel like the TV weatherman who announces a ‘partly cloudy day’ today, the same thing for tomorrow, the day after, into next week, and so on. In the world of biotechnology hiring, it’s always a partly cloudy day. Sure, there are clouds and some very big disruptions caused by economic storms that affect the global industry, but there are also bright spots.



The sun still shines in certain career niches and specialty areas, and that’s where we recruiters concentrate our efforts to keep our own practices healthy. My company had a great year in 2008, and each of the two other recruiters I contacted for this bit of forecasting did as well. But we all work in different fields. Don’t ask a headhunter how the job market is unless you know what very specific piece of turf that person has staked out.



We see that companies are acting very cautiously now, and it has slowed down the time from first interview to offer by a factor of 2×. Everyone is very picky, both hiring managers and prospective employees. On the candidate side, great care is now necessary when considering cross-country moves that involve difficult real-estate decisions. And there isn’t a recruiter in the business without a halfdozen good client companies in a hiring freeze. The times are tough indeed, but we are all learning to work around these changes.



Even though the overall trend is up, and lots of growth is still in the cards, I believe that 2009 will — like the last quarter of 2008 — take a bit of patience for employment contractors like my own firm. More change is ahead: more of those partly cloudy days.



—David G. Jensen, CareerTrax Inc.

Many scientists are welcoming Barack Obama’s election. Among his campaign promises are plans to double the budgets of agencies including the National Institutes of Health (NIH), the National Science Foundation (NSF), and the Department of Energy’s Office of Science over the course of a decade. In addition, Obama’s attitudes toward global warming, environmental issues, and stem cell research are more science-friendly and less ideologically framed than those of the previous administration.

He will also have the opportunity to appoint a commissioner for the beleaguered FDA, which lacked a permanent leader for more than four years under George W. Bush. Current commissioner Andrew von Eschenbach is not expected to remain in office for long.

BIO issued a statement congratulating Obama and all others (many of them his fellow Democrats) who were elected: “To continue our nation’s global leadership in innovation and continue to fulfill the promise of biotechnology, we will work with President-Elect Obama and the new Congress to ensure that we have the proper public policies that promote and facilitate continued innovation.”

CNN Money warned on 5 November that “the nation’s healthcare companies face the biggest threat to their profits in over a decade,” citing not only the election of a Democratic president, but also a Democrat-controlled US Congress. Bloomberg pointed out that Obama’s promise to revamp the nation’s $2.2 trillion healthcare system will be challenging amid the current financial crisis. The plan to provide coverage for people who can’t afford it is projected to cost $65 billion/year. Obama’s proposal also includes $50 billion/year for five years to computerize health records, which he says will save money over time. He also supports additional spending for Medicare and Medicaid, reduced payments to insurers by those agencies, and allowing Americans to buy drugs from Canada — all ideas opposed by the drug industry.

However, the Wall Street Journal reported that increasing the number of people insured in the country could be a boon for the pharmaceutical industry by enabling more people to purchase prescription medicines. And Bloomberg quoted Oppenheimer analyst Carl McDonald as saying, “The continued financial market trouble has made it even less likely that we will see any major changes to the employer group health insurance market since there just isn’t the funding to pay for any kind of major reform.” However, a commentator for the online newsletter TalkingPointsMemo, Dean Baker, suggested that Obama could “take advantage of the current economic crisis to announce plans to jump-start national healthcare insurance. Extending healthcare insurance can be an effective stimulus that will provide an immediate boost to the community.” Reuters predicted stable stock prices for the pharmaceutical industry and suggested that Obama would have to concentrate on the economy first, which should delay serious action on health care. Citing the same reasons, a British e-zine called PharmaTimes said that “Barack Obama’s victory is unlikely to cause much concern” among pharmaceutical companies.

But biotech industry analyst G. Steven Burrill begs to differ. Quoted in FierceBiotech on 5 November, he said, “The implosion of financial institutions has served to sever the [umbilical] cord [between biotech and the financial sector] and now the biotech ‘infant’ is left to fend for itself.” Burrill’s prognosis for publicly traded biotech companies “challenging” and suggests they will need to “find ways to extend their runways.” Almost a third of those tracked by the Burrill Biotechnology Report have fallen below NASDAQ delisting levels, but the exchange suspended its minimum bid price for three months due to the current financial crisis. Burrill further predicts that the financial markets will begin to recover “in late 2009/early 2010” and that “we are likely to see a very different industry than exists today.”

So What’s Coming? We end by going full circle. The IMS Health report cited near the beginning of this examination of 2008–2009 anticipates drug revenue growth of about 5% in 2009 (to $820 billion), with slowed revenue growth in Europe, the United States, and Japan. Sales in emerging markets (e.g., China, India, and Brazil) may grow 14–15% to more than $105 billion. Murray Aitken (IMS senior vice president of healthcare insights) explained that the combined impact of “the shift in growth from developed countries to emerging ones, specialist-driven products playing a larger role, blockbuster drugs losing patent protection, and the rising influence of regulators and payers” will dominate the market.

So our final forecast is, as Dave Jensen puts it in the “Biotech Hiring” box, partly cloudy skies continuing into the foreseeable future. We’d like to know what our readers have to say. Send your thoughts to us by email to .