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Bioscience Companies Showing Signs of Strength and Making New Investments

Although the financial crisis has battered many bio firms, there are still signs of strength and new investments on the horizon to sustain this sector's vitality.

Apr/May 09
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Pharma Shuffles the Deck and Plays Consolidation Hand
Over in pharma land, jobs have been evaporating for a few years, most notably in the marketing area. In 2007 there were about 102,000 sales reps, says Reid Paul, editor of Pharmaceutical Representative magazine. Although "it's difficult to know the exact number," he believes that since then "a good 25 percent" have been laid off, and the sales rep work force could be as low as 70,000.
Regarding trends, layoffs will continue. Contributing factors vary - from the unpredictable recession and healthcare reforms, to the new mega-merger trend embraced by companies seeking to survive, even thrive, in this shifting-sand environment. Firms of all sizes are rocked by escalating drug developments costs, their patented drugs going generic, stingy credit markets, and/or government mandates seen as too intrusive.

Consider this year's merger trifecta: In January, industry king Pfizer said it would pay $68 billion to buy Wyeth, marketer of two of blockbuster drugs: Enbrel (treats arthritis) and Prevnar (a vaccine). The move gives Pfizer a large stake in vaccine and biologics technologies and allows it to maintain its top spot. In early March, Merck announced it would purchase Schering-Plough for $41.1 billion; their combined sales last year totaled $46.9 billion. Then on March 26, Swiss-based Roche completed its $46.8 billion acquisition of San Franciso's biotech giant, Genentech. The deal provides Roche with formidable cancer drugs Herceptin and Avastin, among other exciting drugs, and world-renowned research scientists.  
Paul says the consolidations will create fewer and bigger companies that will "increasingly focus on more targeted drugs that are less `blockbuster,' and instead focus on very narrow subsets of people." The trend of buying up smaller biotechs with innovative research to revitalize their drug pipelines should also continue.

In the past few years, pharma got slapped by overly worried legislators in about a dozen states (more states are considering the same). They imposed rules on how companies report and/or conduct their marketing activities in an attempt to lower healthcare costs and/or curb perceived influence peddling by sales reps. Such bans or laws will make it much harder for companies to get in front of physicians and educate them about important drug information they need to know to help them provide the best possible patient care. Nevertheless, in response, the industry voluntarily curtailed some of its sales activity to mitigate further regulatory activity.

U.S. Medical Device Forecast
An insightful market trend article - "A Look Into the Future of the U.S. Medical Device Market" - provides a comprehensive overview at an industry estimated to be worth more than $100 billion. Published January 2009 by Medical Device & Diagnostic Industry magazine, the article reveals the industry has consistently grown "at mid-to-high single-digit rates" for companies selling equipment (55 percent) and supplies.

The report also analyzes "forces currently at play that will continue in the same direction through 2015," and gives several scenarios on how they may affect cardiovascular, orthopedics, and neurological device segments, in particular. One conclusion, say the authors: "Cardiovascular and orthopedics are likely to continue to be the largest, most vibrant segments of this market, although both confront immediate challenges."

Promising Bioscience Areas to Watch
There are a multitude of exciting (and a few contentious) biosciences trends and activities under way destined to impact society in the not-too-distant future.

First, the push is on to intensify efforts to replace fossil fuels with combustible advanced biofuels made of renewable plant biomass or municipal wastes. A February 2009 study released by Bio Economic Research Associates states that a solid increase in biofuels production could create thousands of new jobs, stimulate the American economy, improve energy security, and create new investment opportunities. U.S. Economic Impact of Advanced Biofuels Production: Perspectives to 2030 states this green industry can create 190,000 direct jobs and 807,000 jobs overall (considering a multiplier effect) by 2022 and contribute $148.7 billion all told to American economic growth.

Additionally, according to BIO, over 30 existing and planned cellulosic biorefineries (see are ready to start advanced biofuels production within the next few years. However, biofuels are raising many legitimate social/environmental questions. Concerns abound about the impact of using land to grow "fuel," not food crops; the quantity (and type) of land cleared for cultivation; increased fertilizer usage (increases nitrous oxide, a heat-trapping gas); and water scarcity issues. The ideal is to find responsible methods of creating fossil fuel alternatives that yield significant amounts of increased energy, i.e., more than the energy used to produce them.

Then, on March 9, 2009, thunderbolts zapped on both sides of the "lightning rod" stem cell research issue. That's when President Obama signed an order that allows federal funding of embryonic stem cell research. (Under former President Bush, government funds could only be spent on researching 36 existing embryonic stem cells lines. The private sector continues to remain free to do embryonic research with its own monies.) Obama said this order rejects the "false choice" between science and morality. Two days later, however, he signed the Omnibus Bill, which includes the Dickey-Wicker amendment. It forbids the federal government from funding this research.

Although adult stem cell research already has already treated scores of medical conditions and diseases - e.g., spinal cord injury, heart tissue regeneration, corneal reconstruction, autoimmune disorders, Parkinson's disease, and some cancers - millions of Americans believe it's reprehensible to ask taxpayers to destroy human life, no matter how small or young (days old), to acquire the cells needed for futher research. This controversy will continue to play out.

Thus, despite the fact that some doom-and-gloom news for biosciences and related industries is a bit frightening - and more surprises could be in store - there are strong signs of hope, health, and vitality for this sector. Big plans, significant research, and major investments by governments/private funders are still going on and will continue to improve our quality of life.

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