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21st Annual
JPMorgan Healthcare Conference

On the road for Info.Resource, publisher of

A Concept: through good old fashioned American audacity, let the malaise be over

By Lorraine Ruff and David Gabrilska, Partners
Milestones, the critical thinking company
Seattle, WA

Friday, January 3, 2003. Seattle, WA. We’ve talked to a lot of biotechnology CEOs and senior consultants during the past few weeks preparing for the 21st annual JPMorgan Healthcare Conference, which opens Monday in San Francisco at the Westin St. Francis.

The fundamentals are intact. The industry’s collective mission to apply considerable intellect to knock down and perhaps even eliminate serious disease for patients, young and old. Drug development is not a pursuit for the feint of heart. It requires guts, vision and innovation, creativity and pragmatic focus. It demands unrelenting teamwork and symbiosis among scientists, business executives, investors, and regulators - often for long periods of time irrespective of economic cycles and industry slumps.

But equally compelling are the financial realities that could result in perhaps as many as 30 percent of small cap companies closing by this time next year. 2002 has also been a year of predictable but nevertheless adverse events.

Between January and October of 2002, 30 biotech drugs missed primary endpoints in Phase II or Phase III clinical trials that investors – licking their wounds from the dotbust of 2000 – misinterpreted as pattern recognition for the crash of still another technology sector.

In 2002 we’ve allowed ourselves to become distracted. Not just in our day jobs, but in the conduct of our personal and spiritual lives as well. The pervasive and soul-wrenching malfeasance by global companies and the Catholic Church, the clash of religious absolutes that brought down the symbol of America’s financial prowess, more than 15 months living with the spectre of war, and nagging doubts about our personal and cultural safety – these body blows during the course of 2002 have resulted in an uncharacteristic aversion to risk. It has also created a climate in which the opportunists, i.e., hedge fund managers, quick to subscribe to “alternative” financing instruments make money buying low and selling short. We observe that the camel’s nose is not only in the tent; he’s taken up residence.

But when you sweep it all away, the truth remains: aversion to risk is simply antithetical to our pursuits. Risk aversion bleeds energy from the life sciences press of sail: genius, vision and derring do.

We may elect to take this malaise with us into 2003. “Malaise, hell!” you might exclaim. “Most of us have, if we’re lucky, 12 months of cash, and if the window doesn’t open soon, we’ll close our doors like many others before us. And even if the window opens, it could still be too late.” True. But we also need to factor into our thinking and especially our partnering activities:

  • Biotechnology is an established business sector and represents approximately 1.5 percent of the S&P.; It has become and remains a bona fide driver for drug discovery.
  • The biotechnology industry is measured by estimated annual drug revenues of $28.5 billion and more than 371-late stage drug candidates.
  • It has already begun to feed the large-cap pharmaceutical and biotech appetite for revenue and eps growth. (For industry statistics going back to 1994, please visit
  • Biotech companies have the opportunity to significantly reduce costs associated with the discovery and development of new molecular entities by harnessing technology to address the bottlenecks that historically have resulted in stunning failure at the finish line.

The fly in the ointment throughout 2002 is that the biotech sector’s volatility and decreasing valuations are giving these companies fewer negotiation options in partnering and M&A; transactions, heretofore safe haven in times of tight money.

If what we are experiencing is truly a crisis of confidence - and we believe it is – we conclude that who among us are better candidates for showing us the way beyond the malaise and what’s underlying it than the people with the vision of cures for five-year-old kids with cancer, young adults with cystic fibrosis, or seniors with neuropathy?

Americans have distinguished themselves for their entire history as being innovative and resourceful. We haven’t lost those attributes that societies the world over revere and prize so highly that they send their children to America to learn and bask in our audacity.

The biotechnology industry’s leadership has demonstrated for more than 25 years perseverance to finish. So, let’s refocus like a laser beam on the real enemy and send it packing home. And, oh yeah, don’t blink.


1. Biotechnology Industry Organization, October 2002.
2. Biotechnology Industry Organization, October 2002.

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