Will Biotech Ever Again Captivate the Public Imagination, Like Facebook or LinkedIn?

5/16/11Follow @xconomy

Everywhere you look this spring, there are signs of bubbly enthusiasm for technology. Microsoft just paid $8.5 billion for a company that isn’t profitable. Facebook has racked up more than 600 million members around the world. LinkedIn is teed up to go public this week at a valuation of more than $3 billion.

It may be hard to remember, but the history books say there was once a time when broad swaths of the American public got that fired up about biotechnology. I’ve now been writing about the industry for 10 years, and have never encountered that feeling myself. The only biotech industry I’ve ever known is populated by a small group of hard-core specialists. When I venture outside biotech circles and tell people I write about new biotech drugs, devices, and diagnostics, I usually get greeted with a blank look. I’ve learned the best option is either to pass the celery sticks, or change the subject to something popular, like Facebook, or something else I may have in common with the other person, like being a fan of the Green Bay Packers.

There are good reasons biotech lives in such a zone of public indifference. The industry has overpromised and underdelivered since its beginnings in the late ’70s. The investing public has learned, appropriately, to be skeptical of claims about revolutionizing medicine. Drug development is way more risky, requires more money, and takes a lot longer than anybody realized back in the early days. Even when a new biotech drug does make a big difference, it only really affects people with a certain disease, and maybe their family members, so it never enters the vast sea of pop culture awareness (except, perhaps, for Viagra).

All of this collective indifference has consequences for the industry. When an industry shrinks down to a small core of specialists, you naturally see little appetite for new IPOs among generalist investors who control most of the capital on Wall Street. And the lack of an IPO market makes it difficult for biotech companies to gain negotiating leverage they need to sell their companies for a mint to Big Pharma. When biotech fails to captivate the public imagination, it can’t get good returns for venture backers, and companies have to slash their payrolls, and, often, their ambitions.

The return of investor enthusiasm for tech has made me wonder whether there are any signs that biotech might, just might, ride the tech industry’s coattails. The verdict isn’t in yet on that question, but there are some signs of a modest (let me repeat, modest) renewal of interest in biotech.

This year, biotech/healthcare specific mutual funds have seen more capital flowing into them, rather than out, for 16 of the first 19 weeks of 2011, according to a report last week by Chris Raymond, an analyst with Robert W. Baird in Chicago. More than $2 billion of new investment capital has flowed into biotech/healthcare specific mutual funds this year, with more than half of that coming in the past two weeks, Raymond said. Investors apparently have noticed that biotech stocks are doing … Next Page »

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  • http://na John

    Luke,

    I know you struggled terribly in writing this gr8 piece w/o mentioning DNDN and their future potential (over next 5-7 years):
    1. U.S. Provenge market potential & growth.
    2. ROW Provenge market potential & growth.
    3. Potential of Provenge in earlier pc disease (enormous!).
    4. Upcoming new trials for other cancers (ie: Bladder, Breast). Potential newly approved ACI therapeutic cancer immunotherapy vaccines.
    5. Etc…

    “I don’t see anything today that could be so huge” as the genetic engineering was in the early days of biotech, Papadopoulos says.

    Respectfully, Mr. Pap needs to research DNDN. DNDN’s immunotherapy platform technology is the next novel, innovative personalized medicine (given that poisonous killer chemo’s have dominated the landscape for the last several decades).
    John

  • Anonymous

    Aside from John’s personal promotion of his personal investments in an underwhelming biotech firm, you hit the nail on the head when you said:

    “There are good reasons biotech lives in such a zone of public indifference. The industry has overpromised and underdelivered since its beginnings in the late ’70s. The investing public has learned, appropriately, to be skeptical of claims about revolutionizing medicine. Drug development is way more risky, requires more money, and takes a lot longer than anybody realized back in the early days. Even when a new biotech drug does make a big difference, it only really affects people with a certain disease, and maybe their family members, so it never enters the vast sea of pop culture awareness (except, perhaps, for Viagra).”

    Viagara, incidentally, is not a biotech drug, but a small molecule, chemical drug! Let me add that the industry has misrepresented itself from the beginning, and is not afraid to screw others in it’s pursuit of money. With so many morally bankrupt people running the industry (Henry I. Miller comes to mind), how can anyone expect anything from them when history has consistently proven them to be more about making themselves rich than bettering the lives of people with real illnesses.

  • http://www.xconomy.com/author/ltimmerman/ Luke Timmerman

    John–there are certainly biotech companies that have performed well. Dendreon, for one, has made some big strides by hitting its Phase III survival endpoint, winning FDA approval, and starting to sell its immune-booster for prostate cancer. It has earned a lot of attention on Wall Street. But I’d hazard a guess that even in Dendreon’s hometown of Seattle, fewer than 10 percent of residents have heard of the company or cancer immunotherapy. That’s what I’m talking about, in terms of how biotech has no hold on the public imagination anymore.

  • http://www.palatuccisearch.com Chris Palatucci

    Luke-
    Thanks for another great article. Where I see hope is in the cross fertilization of clean tech and biotech. Those of us with some gray hair remember when BIO was the IBA (Industrial Biotechnology Association). Those technologies, which were not providing the glitz and glamor of the therapeutic side of the industry, are suddenly having their day in biofuels – ethanol, algae, water technologies, etc. Unfortunately, investment in that sector has cooled as well, but my hope is that the overlap in these industries will result in some very exciting new commercialization opportunities.

  • http://www.linkedin.com/in/laurakwhite Laura White

    Perhaps it’s a generational thing, but I’m a little confused at the comparison to web 2.0 companies. Like Luke, Genentech’s exponential growth phase was before my time professionally, but I have a hard time believing that any biotech has or can captivate the same level of public imagination as a company whose product is marketed to virtually all consumers with an internet connection. A Phase III trial will never be a beta launch of a web service; there’s nothing tangible for Joe Public to sign up for and get excited about. The possible exception to the rule is direct to consumer genomic testing, but with FDA pushing in the opposite direction on that front (channeling tests through doctors vs. true DTC), my magic 8 ball still says outlook hazy.

  • http://na John

    Agreed Luke!

    Yes, Dendreon’s (DNDN) 1st ever FDA approved immunotherapy vaccine won’t have the glamorous impact of say a biotech drug like Viagra… or have the social impact of tech giants like a Facebook.
    And yet the limitless potential of this biotech is ever-present and could succeed like a Celgene or an Immunex.

    1-2 million Americans have prostate cancer in the U.S. alone. Of that statistic, 70K-100K men fall in the on label category for Provenge. DNDN can only treat at max 4,301 men this year ($400M).
    Next year they may treat 10K men ($930M).

    You can see, unfortunately, there are lots of men leftover who are dying from prostate cancer and need Provenge TODAY
    (70K – 15K = 55K men).

    With the impact of the incoming baby-boomer generation (increasing prostate cancer incidence) and the unfortunate continual flow of a certain % of men who’s prostate cancer progresses and metastasizes, Seattle should be excited that they have a biotech that is trying to extend dying cancer patient lives w/ a paradigm shifting, immunotherapy agent.

    I guess we’ll have to wait for our first tv commercial on Provenge b4 those sleepless in Seattle wake up!
    ;o)
    Thanx!
    John

  • jason

    Not gonna happen- biotech can’t mint BBillionaires

  • Saumitra

    Hey Luke – Funny and hard hitting at the same time ! Need to glamorize Biotech ! have 20s year olds working with scientists for cracking genomic code – sounds familiar?

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