By Matthew Willett

SAN DIEGO ¿ Growing up is hard to do, especially in the volatile capital markets and risky regulatory landscape occupied by biotechnology companies.

A panel of experts told conventioners at BIO 2001 on Wednesday that to make the move to big pharma status, companies need to have a plan, a ¿story,¿ to tell Wall Street, and grow through technology and investment.

David MacCallum, global head managing director of Solomon Smith Barney¿s health care group, said a mere five companies have made that jump since biotech¿s inception.

¿It¿s really about growing up, and growing up is, in fact, hard to do,¿ MacCallum said. ¿The record over the course of the last 50 years has been terrifying.¿

To make that move, he said, companies must be global in their reach, have vast clinical capabilities, a broad pipeline, be independent of the capital market and have a free and copious cash flow.

That flow of cash is illustrative of the disparity between pharma and biotech. If the top 30 biotechnology companies in the world were to merge into a single entity, he said, their cash position would still only approximate the No. 10 pharmaceutical company.

MacCallum¿s five ¿ Syntex Inc., now a part of F. Hoffmann-La Roche, of Basel, Switzerland; Marion Labs Inc., now part of Aventis Pharma AG, of Frankfurt, Germany; Mountain View, Calif.-based ALZA, soon to be a part of Johnson & Johnson; Elan Corp. plc, of Dublin, Ireland; and Thousand Oaks, Calif.-based Amgen Inc. ¿ are among, he said, about 3,000 biotechs that were started with the dream of making the jump to big pharma status.

¿These are terrible odds, but here we are, thousands of us still committed to the dream,¿ he said.

And to make that dream a reality, he said, companies need to continually enhance their valuations, pursue investments to fund that enhancement and use their technology to support their movement upward.

David Holveck, Centocor Inc.¿s company group chairman, was CEO of Malvern, Penn.-based Centocor before the company was acquired by J&J in 1999. He piloted the company through the merger and integration into the big pharma realm, and he said the road to pharma status is risky.

¿Science doesn¿t do it all,¿ he said. ¿Cash is an essential ingredient when risk is high.¿

Holveck also emphasized the need for a focus on a technology platform, multiple products and ownership of manufacturing capacity.

MacCallum¿s conclusion stressed the need for ¿huge, free cash flows¿ to make it to the upper tier of drug companies. ¿More than any other measure, that will tell you this industry¿s growing up,¿ he said.

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