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  • Writer's pictureJohn Q Leonard

A Climate for Disruption


The biotech and pharmaceutical industries are currently in the midst of consolidation, and new opportunities for disruption are arising in spaces where executives at pharmaceutical companies either fail to see or choose to ignore in a veracious pursuit of growth. Larger firms focused on moving quarterly stock prices have long been compelled towards M&A, which has happened at such a rate that big Pharma is now experiencing a biotech glut. This phenomenon is not one unique to the pharmaceutical industry - it haunts all consumer markets like a specter that executives fail to acknowledge in the room. The large pharmaceutical firms appear to be in a particularly vulnerable position due to questions about their ability to manage risk in late-stage drug development. New technology has made drug generation possible for a whole assortment of new entrants, and drug companies' pipelines are now bursting at the seams with assets that will never see the clinic in the current business models and capital structures.

The act of consolidation itself distracts most companies from what is happening as they frantically try to reorganize; but consolidation is not the primary force driving disruption. As increasingly rich molecular biology capabilities afford scientists the ability to generate and engineer new molecules cheaply and with striking precision, many have already begun to over deliver. Discovery scientists specializing in biologics have provided decision makers at pharmaceutical companies with incredible new therapies that will never see the clinic due to capital restraints. The cost of capital would be lower if there was less risk associated with the projects, but three decades of experience in biotherapeutics has shown that decision makers are lousy at placing bets on clinical molecules. It seems that sustaining innovation in drug discovery within bigPharma has been written off as a game of diminishing returns.

A growing number of progressive entrepreneurs are running labs at home and in incubators within many of the biotechnology hubs in developed nations everywhere, and especially in the US near academic and industrial centers of excellence. (San Diego, Boston, San Francisco) The fact is that it no longer makes good economic sense to perform discovery research within the walls of a fully integrated pharmaceutical company.

JqL

Distant Rainstorm


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