I was fortunate to attend “Winning Strategies in Life Sciences: Pursuing Success in Today’s Changing Environment,” an all-day conference held October 5 at the University of California, San Francisco’s beautiful new Mission Bay campus. It was sponsored by Foley & Lardner LLP, Silicon Valley Bank, BayBio, QB3 and RoseRyan. The focus areas covered maximizing growth potential, designing models for the wireless health care industry, ensuring global intellectual property and big-pharma mergers and acquisitions. Part of my quest was to answer a burning question: why isn’t biotech doing better, since the baby boomers’ demographic trends indicate that people are living longer, with a higher quality of life?
The sessions were a little more upbeat than the biotech news has been over the past two years—the industry has taken a beating as venture capitalists have focused on hot new social media and technology start-ups at the expense of the sometimes-capital-intensive biotech industry. One area of intense pride is the new QB3 incubator on UCSF’s Mission Bay campus. It is now full of start-ups (more than 40) that are given access to tools, money and networking opportunities, and find it easier to get from start-up mode to their first and second round of funding. Housed on the Mission Bay campus with other aspiring entrepreneurs, they can share ideas and contacts that can help accelerate their progress. Also, the QB3 center provides a concentrated area of experts that venture capitalists and other companies find attractive. QB3 has partnerships with outside venture partners (as well as service providers) that have poured more than $10M into the start-ups and is in the middle of raising an additional $10M to put into new companies. This is a little known success story outside of the biotech industry!
Some insights from the sessions included:
- The FDA has gotten better with providing clearer direction, but still has a ways to go.
- Angel investors like health care IT, because there are fewer regulatory hurdles to jump over.
- The health care IT sector has had rapid growth due to ARRA’s funding for electronic health records, which provides $45,000 for providers who are “meaningful users” of the technology. This is a clear edict that should provide rapid automation (and hoped-for cost savings) over the next five to 10 years.
- Investors are frightened by the large numbers of patents that are expiring over the next three to five years, because generics radically drive down the cost of pharmaceuticals.
- Capital efficiency is key for companies that must deal with a difficult regulatory environment.
- Many companies continue to go outside of the U.S. to accelerate their testing requirements.
- The JOBS Act will not have a great influence on whether companies file to go public or not.
- Wireless is a booming area of biotech growth, as companies are rushing to build applications that focus on personalized medicine and the improving relationships between doctors and health care providers. One wireless private network provider has analyzed more than 25,000 applications.
- Mergers and acquisitions continue to far outweigh IPO exits. It is imperative for companies to plan for potential exits one to two years in advance.
- More M&A events are focused on changing the landscape of drug/device combinations, building infrastructure in noncore areas and growing holistic end-to-end solutions.
Although the economy is still muddling along, biotech is holding its own in the Bay Area. I didn’t get my answer to why biotech isn’t booming now, but with the baby boomers aging, Obamacare coming and the pace of innovation increasing, the future looks pretty bright.