ATLANTA - Addressing an audience that numbered more than 600 at the Georgia Life Sciences Summit, Steven Burrill offered a bit of behind-the-scenes boardroom knowledge, as well as various other industry insights.
Organized by the Georgia Biomedical Partnership, the third-year regional gathering was held at the Georgia World Congress Center and included a midday speech by the state's governor, Sonny Perdue, followed by sessions devoted to technology, funding, and research and development, among other topics. But financing and capital market opportunities were the focus of the daylong event's morning sessions.
Burrill, CEO of the San Francisco-based life sciences merchant bank Burrill & Co., kicked things off with his perspective on the state of the industry. Discussing the past, present and future direction of biotechnology, he recalled a recent meeting with Novartis AG in which he learned that the pharmaceutical giant currently is contemplating 600 collaborative deals.
"And these aren't just big pharma ripping off late-stage products," he said. "They are digging deeper and deeper into the development pipeline to try to get deals done as they become more desperate for innovation."
Pharmaceutical firms tapping biotechnology companies to fill a need for pipeline products is nothing new. But smaller biotech companies are beginning to find themselves in a better negotiating position relative to the structure of deals, which Burrill said often take 15 months to 17 months to complete. Potential partners such as Basel, Switzerland-based Novartis, which he said saw 4,600 proposals last year, are hardly shying away from the process, leading Burrill to believe that the biotech industry will absorb less consolidation than some have predicted.
"We're actually moving back to where we, as an industry, see deals less driven by a need for capital because the capital markets are improving," Burrill said. "The deals once again are becoming much more strategic."
With about $9 billion pumped into biotechnology to date this year, funds are flowing into private and public companies, and an opportunity has arisen for those looking to transition from the former to the latter. Thirteen firms have filed for initial public offerings since midsummer. While none have priced, Burrill predicted the queue would grow by as much as another 20 filings over the remainder of this year and into the first quarter of next. But he remained cautious regarding longer-term IPO prospects.
"The expectation right now, at least on the part of the bankers and companies, is that we will grow through a period of relatively robust financings," Burrill said. "But I'm a little bit leery about that. You don't necessarily have the A team in front of the B team - many of these offerings that are on file are from companies that have been trying to get out for several years . . . I think the market is going to be far more tentative than many people think."
Calling the market shallow, he said the financing environment would tighten after the first half of next year, supporting 20 to 30 deals before then. Nevertheless, Burrill pointed out that over the course of this year the biotech market has increased 50 percent. A bull market has contributed, as have investment buyers who have just begun to sink capital back into the sector in the wake of such near-term revenue drivers as recent product approvals.
He also spoke about longer-term value drivers in the business, suggesting that drugs would decrease in profile relative to diagnostics, which he said have gained in importance as the industry has increased "sensitivity, specificity and compliance." Eventually, patients and providers could look to products that bundle drugs and diagnostics into single theranostic packages such as Gleevec (imatinib mesylate, Novartis) and Herceptin (trastuzumab, Genentech Inc.).
Other areas of current interest include RNA interference, whole-genome scanning, stem cell technologies and drug delivery. Burrill also expects life sciences companies to target the wellness market, a growing niche that includes products such as dietary supplements and nutraceuticals.
"The set of sciences that have enabled us to begin to understand disease and how the body works are the same set of sciences that will enable us to begin to understand how those [products] work," he said, adding that sales grow when a particular product is associated with improved health. Such correlations could lead to an increased biotech presence in the food industry.
Burrill called government-backed bioterrorism initiatives a potential earnings driver for biotech businesses as well, though such development is not entirely clear cut, as a would-be customer base is not absolutely defined.
He also noted that reimbursement issues loom large in the drug development paradigm and said the FDA, under Mark McClellan, would look toward drugs that improve economic efficiency in addition to the agency's standard pillars of safety and efficacy.
In sum, Burrill said he expects the market to continue its positive trends.
"Partnering will continue much more dramatically than it has - I don't think we're done with big pharma consolidation, and I don't think we're going to see a lot of big biotech mergers, although we're likely to probably see another one," he said. "Products, by and large, will make their way to the market and we'll actually be headed to a much better time for biotech."