Though an extended bear market has made them more cautious in selecting biotechnology investments, investors will continue to be drawn to the biotechnology sector as long as the promise of a big payout exists, predicted one of the keynote speakers at the Kellogg School of Management's April biotechnology conference.
"It's laughable when I hear someone say that there's not enough money out there to fund all of the biotechnology companies that exist," said Stelios Papadopoulos, vice chairman of the investment banking firm SG Cowen Securities Corp. "Money gets reshuffled continuously based on expected returns."
Papadopoulos' address, "Consolidation in Biotech and Pharma," opened the two-day conference, held April 4 and 5 at the Donald P. Jacobs Center in Evanston, and organized by the student-run Kellogg Health Care and Biotechnology Club, in conjunction with the Kellogg Center for Biotechnology. The third annual event, titled "The Evolution of Biotechnology," attracted about 750 students, faculty, alumni and leaders from the biotechnology community.
Other keynote speakers included Dr. Murray M. Lumpkin, principal associate commissioner for the Food and Drug Administration, Joshua Boger, chairman and CEO of Vertex Pharmaceuticals Inc., and Brad Sheares, president of Merck's U.S Human Health Division.
Achieving success in an industry where failure is the norm takes vision and optimism - along with a bit of recklessness, Papadopoulos said. The majority of products in biotechnology's research and development pipeline never make it to market, and many companies end up folding before they ever turn a profit
"The biotech industry is inefficient," he said. "But every once in a while, they hit a big one."
Papadopoulos, who has spent nearly two decades on Wall Street, said that also explains why small start-up firms willing to take risks tend to discover the "winners," and why executives of those companies often resist merger plans.
Said Papadopoulous: "You don't trade your dreams for someone else's dreams. You live and die by your dreams."
But financial incentives built into the process also mean some worthwhile products never make it to market, said Dr. Lumpkin.
For instance, Lumpkin noted that many of the counter-terrorism products available today rely on outdated technology because the chances these products will ever be needed on a large scale are actually small. Company executives are therefore reluctant to spend money on research and development, fearing their firms will never recover the cost of these investments, much less turn a profit.
As one specific example, Lumpkin cited the antibody currently available to treat the spore-forming bacterium botulinum, which causes the illness botulism. The antibody used today draws on early 20th-century technology.
"There are cases where the full potential of new technology is not realized," Lumpkin said.
In addition to the conference's four keynote speakers, a variety of biotechnology experts added their insights to panel discussions. Topics included winning strategies for life sciences investing in a down market, building global biobrands and defining the boundaries of biotechnology.