Maybe it’s just that executives feeling misery love to have company, but the mood this week at the JP Morgan Healthcare Conference in San Francisco didn’t strike me as quite as apocalyptic as advertised. I’ve been doing some unscientific polling of Boston’s biotech leaders this week at the industry’s biggest investor event, asking a series of five standard questions to get a feel for their thinking on how their companies will persevere.
Today, I’ve edited down recorded conversations with Alnylam Pharmaceuticals CEO John Maraganore and Vertex Pharmaceuticals CEO Josh Boger. Tomorrow, I’ll have another installment with comments from Alkermes Chairman Richard Pops and CFO Jim Frates and Sirtris CEO Christoph Westphal. Here are the highlights:
John Maraganore, CEO of Cambridge, MA-based Alnylam Pharmaceuticals
Xconomy: What was the single most valuable lesson you learned from the last big biotech bust (the genomics-driven crash of 2001 and 2002), and how will having those battle wounds help you carry on today?
John Maraganore: There are two key messages I take home. One is you need to focus on innovation as the foundation of what you do. You probably recall that many companies said, ‘Innovation is dead, let’s repurpose failed molecules in biotech,’ and ‘let’s see if the pig we just bought can fly.’ That became the venture investing model in that period. Frankly, that was a disaster. Most of those companies have failed, because they had binary events. Some have succeeded and are doing well, but not doing great. If they did well, they became takeover targets and that’s how they created value.
Out of the 2001-2002 bust, I think the lesson is to focus on innovation and do it in a more capital-efficient way than what was heralded in the bubble as the “New Economy.” People lost all sense of business judgment, and focused on huge infrastructure builds, and ping-pong tables, and people running around with Nerf guns in the office.
X: Every year, bankers like to say acquisitions and partnerships between biotech and pharma companies are going to pick up because pharma needs innovative new drugs, and biotechs need cash to develop them. Do you see this trend truly accelerating this year, and if so, why?
JM: I see the hunger for innovation from pharma being a lasting hunger. It’s driven by lasting macroeconomic elements that relate to what patients demand in terms of breakthroughs , what payers insist on in terms of reimbursement, and what the FDA is insistent on with therapeutic impact. The foundation of the industry, as it relates to pharma’s need for innovation and biotech’s ability to deliver innovation, is a lasting dynamic. So as a result, there will be significant partnering between pharma and biotech and also significant consolidation.
But I don’t think pharma will look at biotech and say ‘let’s find the cheap stuff and roll it up.’ You’ll see that from mid-size biotechs who see it as a way to build up their business differently by accumulating assets. There was a Medicines Company acquisition of Targanta just yesterday that was interesting. But I don’t think we’ll see pharma grab cheap distressed assets just because they are cheap. Pharma will look for innovation from biotech, and be willing to pay the premium.
X: What kind of companies, technologies, and people will be resilient enough to survive this downturn?
JM: RNAi [RNA interference] is one. I mean that in a broader sense. There really is a revolution around the roles of RNA in modern biology that will continue to be a foundation for new drug discovery. Clearly, the work going on with developing and delivering RNAi therapeutics, work on microRNAs, work on RNA activation technology. Even the work in epigenetics, and novel understandings of what a gene is. It’s just shocking. These basic understandings of biology that are so fundamentally new, will continue to be a foundation for new drug discovery.
There are also novel advances coming in human genetic research. When I as at Millennium in 1997, we were struggling with the slow pace of genetics and the slow pace at which genetics could offer you drug targets. It’s fundamentally changed. The pace of human genetics based on the speed of sequencing, and the completion of the human genome, have been completely rewritten. Our understanding of human disease will continue to accelerate at a remarkable pace. It will generate new drug targets for small molecules, or antibodies, or RNA-based approaches.
X: Who would make a good FDA commissioner and why?
JM: We need an FDA commissioner who is going to focus on creating trust back in the agency, re-instilling public confidence in the role of the agency. We need an FDA commissioner
