The Quest For Biotech Independence: Maybe It Isn’t So Quixotic After All
Conventional wisdom a couple years ago said that the era of the independent biotech giant was over.
Nobody would ever again build a multi-billion dollar, fully integrated independent biopharma company on the scale of an Amgen (NASDAQ: AMGN), or even a Gilead Sciences (NASDAQ: GILD). Drug development is too risky, time-consuming, and expensive. Investors, tired of execs who overpromise and underdeliver, were thought to no longer have the patience or the stomach for the whole messy ordeal.
Sure, the occasional feisty little biotech could raise money for a promising R&D project, and every once in a while, they might succeed in getting an FDA approved product. But it was only a matter of time before the little biotech would see an opportunity to cash out, and get acquired by a Big Pharma company that needed to feed its beastly appetite for new surefire moneymakers. Jobs would be lost, a company culture would die, and often, a region’s economy would be wounded.
This still occurs, but I’ve started to doubt that this is the grim destiny of all biotechs. There’s no question most biotech startups today have slim hope of ever going public at a decent valuation, and they are being built with an eye toward getting bought by a Big Pharma. But there are also signs that biotech drug developers in 2011 can stand on their own two feet as long as they want, maintain control over their company culture, and continue to grow while discovering, developing, and marketing their own products.
There are a few companies of the past couple years that are in position to blaze this trail once again. Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX), Seattle-based Dendreon (NASDAQ: DNDN), Cheshire, CT-based Alexion Pharmaceuticals (NASDAQ: ALXN), South San Francisco-based Onyx Pharmaceuticals (NASDAQ: ONXX), and Rockville, MD-based Human Genome Sciences (NASDAQ: HGSI) could all be placed in this next category. They all have potential to stay independent, and profitable, for the long haul.
Taken together, these companies are still not quite in the same “Big Biotech” class that is dominated by Amgen, Gilead Sciences, Biogen Idec, and Celgene. Those big four have multiple products on the market, thousands of employees around the world, and a track record of consistently generating big profits.
The next tier of companies down still has a ways to go before they reach that status. If you add up the market capitalization and employee headcounts of all five companies—Vertex, Dendreon, Alexion, Onyx, HGSI—you get $34 billion of market value, and about 5,530 employees. Taken together, those companies add up to about one Gilead—and they aren’t even close to Amgen.
Still, the next group of companies have room to grow. Vertex just won FDA approval of its first homegrown drug last month, and has another one on deck. Dendreon is just now moving into position to start manufacturing enough of its drug to … Next Page »