Harvard Business School professor Gary Pisano is considered a leading scholar of biotech industry economics, and has developed a reputation for providing treatises on how biotech firms have been unable to generate profits throughout history. Steven Burrill gives his own critiques in his life sciences banking and investment firm Burrill & Company’s industry reports. These two top minds in biotech united—and at times clashed—during a segment of the MassBio Investors Forum in Boston this week.
Both Burrill and Pisano agreed that the biotech industry is in for some dramatic changes. Burrill, CEO of San Francisco-based investment firm Burrill & Company, forecasted that new diagnostics would outperform new drugs as moneymakers for life sciences firms as the U.S. healthcare system evolves from a system of reactive care to preventive care over the next decade or so. And sounding a familiar drumbeat from his deep analysis of biotech in his book “Science Business,” Pisano said the industry needs further integration to remove some of the inefficiencies that have made developing biotech drugs such a costly and risky business.
But the two collided over how biotech startups should think about building the value. People in the industry should ask themselves how they can create the greatest amount of perceived value of biotech inventions in the shortest amount of time, and then cash in on that value, Burrill said. “It’s never going to be as good as we hope it will be,” he said. This sparked a brief debate between Burrill and Pisano about the merits of perceived versus actual value in the biotech industry. Pisano took the stance that focusing on perceived value could cost the biotech business loss of confidence among investors if they lose money because the promise of a life sciences invention fails to deliver.
“I think over time perceived value and real value have to match up or investors will get wise and stop buying,” Pisano said.
This debate is timely because many biotech companies are desperate for more dollars to continue operations. But the sinking value of companies and other market forces has made fundraising particularly difficult for life sciences firms over the past year. The big elephant in the room for the industry is that there are some 135 public biotech companies with less than a year’s worth of cash in their coffers and 70-odd firms valued at less than the amount of cash they have in the bank, Burrill said. It’s tough to argue with that point. For private venture-backed biotechs, the strained values of their public counterparts are contributing to the poor evaluations for their own fledgling operations.
The good news for biotech entrepreneurs, Burrill said, is that the life sciences industry is
