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Bio Technology : October 2009
12 Australasian BioTechnology Volume 19 • Number 3 • October 2009 The life sciences biotechnology industry: Creativity in a crisis The equivalent of a giant meteorite crashed into global short-term credit markets on 9 August 2007. The meteorite took the form of an announcement that the French bank, BNP Paribas, had halted trade in three of its mutual funds. These funds had bought US, securitised subprime mortgages, which had sustained large losses and become impossible to value. As noted by Alan Greenspan in his autobiography “The Age of Turbulence” (2008), “the outsized yields on securitized subprimes made them look like a steal. Hedge funds, pension funds, and banks around the globe clamoured for these products.” He also noted, “The fundamental problem had been the underpricing of risk worldwide” during the preceding few years. The failure of Lehman Bros in September 2008 symbolised the events of the next 12 months. After yet another 12 months, the continued rumblings of the economic equivalent of a meteorite-induced mass extinction are now denoted by the three letter acronym -- the GFC. Even though the bubble that burst was not in iotechnology but in real estate, financial instruments and the world of easy credit, the life sciences biotechnology industry (to which I will confine my remarks) finds itself significantly affected, in many cases as collateral damage (E&Y Beyond Borders, Global Biotechnology Report 2009 [E&Y Report]). The major damage has been to the "hundreds of emerging, privately held or small-cap biotechs" (E&Y Report) whose number, valuations, capital, share price, head count and R&D funding have fallen precipitously. Biotechnology has been thrown into a period of destruction. Although the destruction has not been triggered by the entry of disruptive innovation, it has precipitated the pattern of obsolescence and subsequent progress that is seen in all industries from time to time, the process of "creative destruction" (Joseph Schumpeter, The Process of Creative Destruction, 1942). Was a form of creative destruction inevitable for the biotech industry, regardless of the GFC? Yes. "At a time when many firms are struggling to remain in business, the real question is not whether individual companies will survive (many won't) but whether biotech's basic business model is itself sustainable" (E&Y Report). Does the GFC provide an opportunity for the biotech industry to advance? Can the biotech industry emerge stronger? Can we be optimistic about biotech's long-term potential? In my opinion, the answer to each of these questions is yes. The biotechnology industry is well positioned to avail itself of the opportunity and time presented by the GFC for thoughtful analysis of the market forces and political realities that will shape its future. There is no shortage of road maps of the future of healthcare and, therefore, the interconnected life sciences biotechnology industry. The 'Obama Care' debate has started the US down the difficult path of health-care reform in that country. The Final Report of the Australian National Health and Hospitals Reform Commission proposes "a practical national plan for health reform that will benefit Australians, not just now but well into the future" (http://www.yourhealth.gov.au). One of the biggest opportunities for the biotech industry is the exploitation of the growing interdependence and integration between the digital age and healthcare. Biotechnology is well position to take a leading role in the push towards personalised prevention, prediction, early detection and treatment of disease because it is comfortable at the nexus between digital and genetic technologies. Again, road maps from biotech's 'customers' such as the Australian Government are already available (see Australia's Digital Economy; Future Directions (http://www.dbcde.gov.au). The GFC has not destroyed the fundamental elements of the people and companies that have driven the success of the biotechnology industry thus far. These elements include: outstanding science, leadership and entrepreneurship; agility and flexibility; appropriate risk-taking; a singular focus on meaningful solutions; and capital-spare operations. The pace of scientific and technological advance has not abated. Therefore, as has been the case for other industries after other downturns, great, profitable biotech companies will be born as a result of this crisis. By Susan M Pond AM Presenter at AusBiotech 2009 11.30am – 1.00pm, Wednesday 28 October Biopharmaceuticals in a post GFC world AusBioFEATURE --- AusBiotech 2009