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Thursday, May 13, 2010

Challenges facing biotechnology won't stop long-term growth


By Tom Still
Has the much-anticipated "BioCentury" ended after only a decade?

That unspoken question rippled through this month's BIO International Convention in Chicago, where the shock waves caused by the collapse of the financial markets, regulatory pressures and even health-care reform left some observers nervous about what will come next for an industry that has grown accustomed to double-digit growth.

The annual BIO convention is traditionally a time when scientists, business leaders, major pharmaceutical companies and investors come together to examine the latest research, forge partnerships and, typically, celebrate another banner year. For many of the 15,000-plus BIO participants on hand in Chicago, that was as true in 2010 as in past years.

But some surveys, reports and regulatory updates at the convention sounded alarms about specific threats to the biotech industry – in particular those segments that are more dependent on venture capital or captive to long regulatory delays.

A paper released by Deloitte Touche Tohmatsu went so far as to declare biotech's future "grim" if a convergence of threats continue, not the least of which is a shortage of early stage companies in the pipeline in some sectors. Deloitte also surveyed 281 biotech executives in late 2009, and 70 percent said they feared 20 percent to 40 percent of all biotech companies existing at the time would be gone within five years.

Throughout the week, speakers recited a litany of challenges: less venture capital due largely to the collapse of the financial markets, continued patent backlogs, more regulatory delays at the U.S. Food and Drug Administration, the delay in reauthorizing the federal Small Business Innovation Research grant program, attacks on the Bayh-Dole bill that accelerated transfer of university research, and even some provisions of the health-care reform bill.

The health-care bill contains $1 billion in tax credits for "therapeutic discovery projects," aimed at biotech companies with 250 employees or less, but it also reduces federal reimbursement payments over time to physicians and health-care centers that use newer drugs, medical devices and other products to treat patients. As the government increasingly looks over the shoulders of prescribing physicians, some speakers warned, they will be less willing to adopt innovation.

The new director of the U.S. Patent and Trademark Office was remarkably frank about the backlogs in his own agency, even acknowledging that delays are stifling innovation and costing the nation millions of jobs.

"Hundreds of thousands of groundbreaking innovations that are sitting on the shelf literally waiting to be examined – jobs not being created, lifesaving drugs not going to the marketplace, companies not being funded, businesses not being formed – there's really not any good news in any of this," said David Kappos, director of the patent office.

Others think the future remains bright for biotech, especially over the long term. Biotechnology has only begun the search for diagnostics and cures for most major diseases, especially in the developing world. Other frontiers of discovery include opportunities to create more and better foods, fuels and environmental solutions.

One relative optimist is Wisconsin native G. Steven Burrill, who spoke to a crowd that included many Wisconsin and Minnesota participants, and who also unveiled his 24th annual report on the state of the industry.

"It's a fabulous time to be alive in the industry," said Burrill, founder of Burrill & Co., a merchant bank that has invested heavily in the sector. He said biotechnology is poised to solve some of the world's most pressing problems and its companies are, by and large, adapting to change.

"Many were writing our obits last year and we simply proved them wrong," Burrill said.

Biotechnology was an infant industry 25 years ago and it has a market cap of $400 billion today. The "BioCentury" will march on, even if some of the problems facing biotechnology continue to challenge the industry as the decade rolls ahead. Fortunately, Wisconsin's biotech industry remains well-positioned to meet those challenges.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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