Monday Afternoon Plenary Session

Overview of the Industry: Past, Present & Future

Keith Brownlie, Partner, Ernst & Young, opened the discussion.

In 2007, the bio industry had record deals, booming financing, and improved profitability. In 2007, public company net loss of .5% of revenues - the lowest ever. However, the year was not without challenges, including: safety concerns (several black box warnings,) emerging regulatory challenges, and the cooling of public equity markets.

The acquisitions and black box warnings dented revenue growth in 2007. It was a year for record-breaking mergers & acquisitions. US financing reached the second-highest total on record (2000.) The uncertainty of the financial markets makes predicting the 2008 numbers difficult; they will certainly be lower. Most companies are planning on M&As or dual tracking for exits. Many are operating with less than 1 year's cash on hand and more than 100 have less than 6 months' cash on hand.

Rules of the road going forward: the deal space will still be very active, but bargaining power is critical. Raising capital in public markets in the year ahead will be very difficult. Companies will have to reduce the burn rate and spend capital more effectively.

A pattern is growing: the drug industry is being reinvented by three sweeping trends:
-increasing r&d productivity
-personalized medicine
-globalization

Doug Long, Vice President of Industry Relations, IMS Health, provided 2009 market estimates. Global pharma market will grow to over $820m in 2009 - the US market growing at about 1-2%. The strongest markets are the emerging markets - they'll grow from 14-15%. The oncology market will grow, too, at 15-16%, and biotech as a whole will grow 11-12%.

The generic market will mature with another $24bn in products due to expire, creating what Long calls "The Golden Age of Generics." At the same time, NCE's launch performance in the first half of 20008 is the weakest of the past 10 years.

Safety issues are increasing and having a real impact on the total market. Products that would have been approved 5 years ago aren't getting approved today. The FDA has more power than ever, and black box warnings are going up.


Mike Erickson, Ph.D., Associate Partner, McKinsey & Company

opened with a shot of "The Scream" to describe the current state of mind of a biopharma executive. He said Pharma has a broken innovation model - developing costs are increasing while productivity is shrinking.

Competition is getting tougher and stakeholder influence is shifting. New influencers come from a new array of outlets, including social media, reshaping the stereotype of what opinion leaders should be.

However, not all is bleak; some opportunities are coming. Specialty care biopharmaceuticals represent a place of hope and growth. Specialty care represents an increasing share of value from launched products. Demographics are also encouraging - the aging population will increase demand for pharmaceuticals. In the US today, there are over 50m folks over 50 - in 2025, there will be 75m over 50. This group accounts for 75% of prescriptions.

By Danielle Kozich on behalf of Pennsylvania Bio

I apologize if there are any errors in this post; I am a layperson and many of these terms are out of my field of expertise.