Biotech watchers were in a grim mood last week at the JP Morgan Healthcare Conference in San Francisco, but it didn’t strike me as quite as apocalyptic as advertised. I’ve come to that conclusion after doing some unscientific polling of San Diego biotech leaders (and a few in Boston) last week at the industry’s biggest investor event. I asked 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 Optimer Pharmaceuticals CEO Michael Chang, and Phenomix CEO Laura Shawver. Tomorrow, I’ll have another installment with comments from Life Technologies’ president Mark Stevenson, and from Bryan Roberts of Venrock Associates, an investor in San Diego-based Fate Therapeutics and Apoptos. Here are the highlights:
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?
Michael Chang: We raised our main VC fund at the tail end of that. We could have raised a lot more at that time, and we elected to raise just enough. So in that round, we raised about $33 million, instead of taking about $48 million. If I could go back and do that again, I would. I didn’t realize the bust would last so long. It makes a subsequent financing event more difficult. So looking back, I’d say, if you can take the cash, do it. Even if it means more dilution. The second part is on our decision to focus on products, which was a stroke of luck. We could have done parallel development tracks of multiple compounds. We decided instead to focus on OPT-80, and it turned out to be a good strategy, because we have something to show for it in the late stage.
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 really see this trend truly accelerating this year, and if so, why?
MC: It will increase because of pharma’s willingness to do deals, but more out of desperation. A lot of companies will end up just being sold. Pharma will be much more selective. They’ll be more demanding. You’ll have to demonstrate market potential at a later stage, and show that risk has been mitigated.
X: What kind of companies, technologies, and people will be resilient enough to survive this downturn?
MC: It’s a combination of factors. Companies with really solid technology platforms, like RNAi. Areas where people are still willing to take risks, that’s one. Then, companies that are run by a team with a good track record, and have credibility. Companies that have a pipeline or product that has demonstrated the risk is small or the profit potential is high, they’ll make it.
X: Who would make a good FDA commissioner, and why?
MC: That’s a question I should probably steer clear of (laughs). FDA is traditionally always very political. It’s very difficult for anyone to come in and really please everyone. There’s no ideal candidate. FDA is under tremendous pressure these days to demonstrate they look out for safety and consumers’ welfare. It’s a difficult job.
X: What’s the most surprising impact of the past year’s economic turmoil on your plans for this year?
MC: You’ve got to be more conservative, No. 1, in terms of spending. You need to be more focused. And you need to look at all options. For a lot of companies, including us, even though we have a good situation, it’s about survival. It’s about unknowns. You just don’t know, it could be more difficult than last year.
Laura Shawver, CEO of San Diego-based Phenomix
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?
Laura Shawver: The biggest thing I learned about is the importance of being flexible and adaptable as early on as one can. You have to recognize that changes have taken place and adapt to a new environment, and don’t try to hold on to what is in the past. I’ll just add that it doesn’t stay like this forever. It gets better. Attitude, keeping positive, and trying to focus on building value
