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In good times, don’t assume any of the underlying fundamentals have changed. This is a hard business, creating new innovative health care companies and making money investing in them. It’s hard. So you need to relentlessly focus in how you innovate in science and business in order to be successful at it. Don’t get lulled into thinking it’s easy because for some time period the cycle works in your favor. Because then you’re unprepared when the cycle works against you.
I think a variety of our companies are quite well prepared. In this time period, the good companies will continue to do well and be successful. When you look at how many companies ever get to have a real product, it’s a small number. This is an industry where you pick company winners, you’re not betting on a basket of an industry sector. The good companies will continue to do well. There will be a substantively harsher winnowing of the mediocre middle class of companies. There are a ton of them. They have historically remained around, raising more money, in-licensing more things. I think you’re going to see more of those going away.
You see it on the broken public company side. You used to be able to do a reverse merger into a public shell for the cash and public trading currency. Now you’ve got shareholders saying “No, no, no, I don’t want that. Give me my money back please.” I think you’ll see more of that.
X: Every year, bankers like to say acquisitions and partnerships between biotech and pharma companies are going to pick up because pharma needs innovative new drugs, and biotechs need cash to develop them. Do you really see this trend truly accelerating this year, and if so, why?
BR: I think that was the never-fulfilled promise until about two years ago. In the last several years, there has been a substantive uptick in M&A. It’s a couple things. One, it became en vogue for pharma to look for things outside their own walls. Two, as management teams at pharma have turned over, new guys have come in and said “We gotta go buy some stuff.” They don’t have legacy issues to deal with. So I think it will be a steady pace this year from last. Yes, it will continue.
Everything is for sale now. We live in a capital-intensive industry, and when capital starts to go away, people start trying to figure out how can I retain, create, or salvage value. So I think it will be steady.
X: What kind of companies, technologies, and people will be resilient enough to survive this downturn?
BR: For already existing companies, those management teams that have all the requisite characteristics you look for—they’re smart, have high integrity and all that stuff—but those who take the long view, put the company first, and are really seeking to improve patient care and outcomes, and have a product candidate that really does materially improve the standard of care. That doesn’t happen all that often. The seventh drug in a class, the fourth knock-off of twice-daily dosing, those will be much more difficult. A lot of this is being driven by the FDA and reimbursement. But I think real innovation and proof of differentiation from current therapy will be crucial.
For people who are starting companies, you don’t have part-time entrepreneurs who are trying to start companies today. What you have are the die-hard people who are really in it for the long haul. They really want to start something and change the world. There will be some great companies started now.
X: Who would make a good FDA commissioner, and why?
BR: Someone who’s in the job more than nine months. (Pause). One of the more interesting ones I’ve heard is (Jane) Henney. Someone who’s experienced, but not compromised by their history. And who’s not seen either as a friend or a foe of industry. It’s all fine to say we should hire Nader’s guy for health policy, or (Steve) Nissen, take your pick. You want someone who’s intellectually rigorous about the job, but not who has an agenda one way or another. Someone who can command respect from the Congress and the public. The FDA has really had a tough run. Let’s be clear, every side of the equation has an incentive to have a well-functioning FDA.
X: What’s the most surprising impact of the past year’s economic turmoil on your plans for this year?
BR: I have been pleasantly surprised with how positively proactive people have been about the changing environment, doing more with less, prioritizing what they’re doing. It’s been really heartening for me. That’s been a surprise.