Posted by: Audrey Erbes | August 5, 2012

Are Underlying Values of Life Science Industry Changing? Plus Events and Jobs

Are the life science industry stakeholders potentially going to destroy the industry as result of personal and corporate greed? Big drugmakers are losing their revenues in big chunks as their blockbuster drugs go off patent. (See list of drugs going generic in 2012 and 2013.) But large companies also have lots of cash with easy access to debt, which has allowed them to make aggressive bids for promising biotech companies and other targets.  “They have driven the volume of biotech M&A to more than $25 billion so far this year, compared with nearly $10 billion during the same period last year”, according to Thomson Reuters data. This is the highest volume since 2008, when deal volumes surged to $54 billion largely due to Roche’s $46.7 billion takeover of Genentech as noted in Reuters article August 2.

Big Pharma is now behaving more like medical device companies is taking out entire companies rather than just licensing in a drug. Now they are buying out the academic discoveries of the future at the source as well, potentially destroying the path that produced biotech companies historically. This reflects a change in R&D at Big Pharma companies which are slashing departments to pursue new approaches. There are articles galore now discussing various strategies at Pfizer, BMS, Sanofi, SKF and Merck. In listening to many company heads discuss their new strategies, I fear a recklessness in trying to buy their way out of a dilemna.

There are only so many successful biotech companies to purchase so what happens after Big Pharma absorbs them and destroys them as they take the parts they want. Will Big Pharma learn from their past—that destroying the Golden Goose that lays the golden egg is not a very good idea for R&D productivity in the long run. Heads of R&D have acknowledged for years that they can’t duplicate the cultures that produced the therapeutic breakthroughs of biotech so why do they expect they will accomplish this by absorbing formerly successful cultures into their own. Roche R&D hasn’t produced a new drug of high value since the 1960s with Valium. Why would their unsuccessful leadership be expected to do a better job running R&D  than the extremely successful drugmakers formerly running the show at Genentech? Their answer to this question is that they can just buy another company to replace the Goose. They show total ignorance of the difficulty in producing a productive organization such as Genentech was.

The biotech industry is not like high tech so we shouldn’t be surprised that entrepreneurs aren’t driven by desire to become billionaires. Outsiders in banking and investment don’t seem to understand this difference in the motivation of scientists and engineers vs. many who run high tech industries infected by sole pursuit of more wealth than the other guy. What distinguished innovation in the life sciences is the desire to do something positive for humanity, finding cures and developing improvements in the health of their country’s citizenry. Yes, their individual career ambitions of personal achievement and a good living for their families played a role in their objectives but were in synch with the team’s desire to succeed. Seeing our American teams as well as those of some other countries at the current Olympics—putting team’s goals ahead of their own on part of American men’s swimming team going all for one vs. individual achievement and women’s gymnastics reminded me of this difference that led me and many others into the industry. I had choice of selling computer games or important new medicines and chose the latter. I wanted my family to be proud of my being involved in a career associated with producing life saving products.

The values of those in the investment community and banks with an obsession for quarterly stock performance and jackpot bonuses every year as most important outcome run counter to personal and team satisfaction in building an engine of productivity that provides livelihoods for themselves and their employees alongside achieving new inventions and quality products. I’m old enough to remember when banks could be trusted with your money and worked with you to buy a home and a business. They were a service organization that really had your interest in mind as they wanted you and the entire community to thrive. This shift from companies wanting to enrich their societies as well as make a decent earnings record for their stockholders to that of making a killing and guaranteeing a fortune for oneself at the cost of the society is a new way of thinking and cause for worry if this is the future of the life science industry. My horror is that the typical life science company could become another Enron—giving up real business with concrete assets to shuffling around paper and making up “stuff” with total disregard for the impact on people’s lives. We saw this big time with Power industry in California. It’s easy to lose track of individual citizen’s lives when you just focus on numbers on a computer without connection to its impact.

Is greed and cold calculated manipulation of markets in the short term our future? Am I a just an aging Pollyanna in expecting businesspeople to recognize total disregard for citizen’s lives as we see in China won’t make them successful in the long run. Returning to the age of Robber Barons who only found success in life by amassing more wealth, building larger houses and buying bigger toys shouldn’t be the outcome of the story for our formerly highly respected and successful industry and workforce. Is this nightmarish “industrialization” of our industry to be our destiny? I keep looking for a positive ending to the story.

I find hope when I look at the enthusiasm for finding solutions to the potential demise of our industry among our professional colleagues. I encourage you to get out and attend programs to keep abreast of industry developments as well as continue to build a vibrant professional network for yourself. I see success in life and career in the relationships we forge.

Upcoming Meetings of Interest and Jobs that Crossed My Desk

I’ve listed highlights of this coming week’s meetings below. Download complete list of Audrey’s Picks which includes details for these events as well as those through December by clicking on highlighted title. You can also access list of positions that have crossed my desk by right clicking on Jobs That Crossed My Desk. Latter includes the past three weeks of jobs.

  • BioCentury TV Today, See new program Webcast Starting Sunday, August 5, 2012 http://www.biocenturytv.com, Available anytime starting at 9:00 a.m. EDT; Topic: “Making Data Work: Ideas from Google and GE;” Speakers: BioCentury Publisher Eric Pierce and his guests: Dr. Krishna Yeshwant, Partner, Google Ventures and Dr. Ger Brophy, Vice President, New Product Development at Medical Diagnostics, GE Healthcare
  • Bio2Device Group, Tuesday Morning, Aug. 7, 2012; Topic: “Butterfly effect in the pharmaceutical development;” Speaker: Dr. Jayakumar Rajadas, Founding Director of Biomaterials and Advanced Drug Delivery Laboratory, Stanford University
  • Corning Life and NCC – AWIS, Monday Evening, Aug. 8, 2012; Event: Tour of Corning Life Sciences’ Axygen Manufacturing Site
  • CACO Minisymposium, Friday Afternoon, August 10, 2012; Topic: Mini symposium: Bioanalytical and analytical applications & problem investigation case studies; Speakers: Selected presenters
  • Deloitte Recap Webinar, Tuesday Morning, Aug. 14, 2012; Topic: “2012 Year-to-Date Biopharma Deal Trends and Highlights”

Audrey

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Responses

  1. Audrey: I think you are brave to write what many of us are thinking.

    • Hi, Doug,
      I appreciate your comment. I speak with many people from our industry regularly and know that most didn’t commit to life science careers to become billionaires. Yes, we wanted fair compensation. It is frightening to see values of doing good in biomedical field potentially being sold out for only financial return. Some say it’s the international corporations that lack loyalty to any community that are the cause. Some would blame the lose of earlier values on the loss of “moral fiber” or underpinning of our society.

      Trained originally as political sociologist, I see the problems we face as more complex than any one factor explanation. I believe that the overwhelming majority of people want the same things. I think it’s the proper role of government to curb the appetites of the excessive power seekers and limit the excesses of corporate greed run amok. Although the eradication of racism or male chauvinism isn’t total in the US, the environment is far better than it was prior to the civil rights laws being enacted. As I noted in earlier reply, I don’t have the solution but I think there is enough disgust with lack of gun control, downright dishonesty in the banking sector and loss of control of our community values, for example, that solutions will be found.
      Audrey

  2. Another bold, well-written post on a critical topic – thanks Audrey.

    However, I’m not as sure as you that anything has changed. While there are legions of people working in life sciences who are truly motivated to make a positive difference to people’s health, the industry is just that, an industry. And, as all industry, bio is motivated solely by financial gain.

    The biggest issue of our times, IMO, is that short term financial gain dominates and is increasingly supported by policy& system to the detriment of society and our future. With bio R&D, the relatively long time frames shine a stronger light on this issue than with much other R&D. Capitalism driven by long term gain is still capitalism and its society’s decision whether and how to favor short term vs. long term. Until we confront this fundemental underlying issue, there is nothing really surprising about the disturbing and accelerating trend that you document so clearly.

    • Ron,
      I know that when company founders and staff share same values as well as talent a company can be profitable without losing sight of its mission and ethics. The life science industry used to be this way. Syntex was such an example. And there were other companies in the U.S. achieving financial goals without destroying the company’s initial mission. When some new MBAs who lacked commitment to company mission joined Syntex in the early 1970s, they challenged management that a financial return of 15% a year could be make more easily with investments of company capital in financial vehicles rather than drug research and development, the management team supported by the Board of Directors rejected the recommendation. They reminded those focused only on numbers that the company was established with goal of bringing important new drug therapies to the market–not becoming a bank.

      But I recognize that was in the days when CEOs didn’t feel entitled to being billionaires and receive salaries totally out of range with the average salary of their employees. I agree that the financial environment has changed with greed seemingly in control at this time. I don’t have a quick solution. But I believe that there can be a form of capitalism where the citizenry can achieve fairness and financial equity and community objectives. I suspect appropriate regulations of the investment community to curb the dangers of greed controlling the “barn door” can be one step. I’m looking for answers, Ron. I refuse to give up on possibility to have a just society once again.
      Audrey


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