With many of us gathering on the fourth of this month tocelebrate the birth of our country, it's a good time to assess the state ofU.S. pharma and biotech markets.
As you will read in this issue's GovernmentWatch section, federal and state officials are taking a keen interest inAmerican pharma activities, from safe laboratory practices to industry-academicrelationships to funding for start-up companies. Some of this scrutiny willbring about welcome change and give the industry the resources it needs to staycompetitive; however, American pharmas are currently challenged on many otherfronts.
Patent expiration, sluggish pipelines and mounting joblosses have for some time been a concern, but other forces are threatening BigPharma's bottom line. One major criticism is that innovation in the industryhas become idle—and some of that criticism is coming from the industry itself.
Last month, Dr. John C. Lechleiter, president and CEO of EliLilly & Co., addressed the Detroit Economic Club and warned that America'sgreatest competitive advantage—its "genius for innovation"—is in jeopardy.Lechleiter cited a 2009 study by the Information Technology and InnovationFoundation which ranked the United States sixth among the top 40 industrializednations in innovative competitiveness, but 40th of 40 in measures of whatindustrialized countries are doing to become more innovative in the future. ButLechleiter also suggested that with the right choices—such as improving mathand science education, changing to immigration laws to allow top scientistsabroad to bring their talents here and funding and tax breaks for researchinstitutions—"what might seem unimaginable today will be commonplace tomorrow."
The rapid growth of the CRO market also has some worriedthat Big Pharma will outsource much-needed jobs and services to firms inforeign countries. Dr. Mark Fishman, president of Cambridge, Mass.-basedNovartis Institutes for Biomedical Research (NIBR), the global pharmaceuticalresearch organization of Novartis, recently told the Life Science Leader that "there is no question that the economicdownturn has affected the scientific enterprise in the United States, and Iworry that this may be a problem for future generations of Americanscientists." However, Fishman added that he still believes the United Stateshas "the strongest system of government support for scientific and biomedicalresearch as compared with any other country in the world."
"I am not sure I agree that there is less scientific talentin the United States than there has been in the past," Fishman told themagazine. "While job opportunities for American scientists may be fewer than inthe past, I believe that these trajectories are self-correcting, and thesituation will likely be different in the not-too-distant future."
Due to these various challenges, analysts have noted thatpharma has fallen out of favor with Wall Street and now has one of the lowestprice/earnings ratios of any major sector of the stock market. But Barron's Andrew Bary remains optimistic, writing that whenWall Street writes off one of the world's most important industries, and withvaluations at all-time lows, investors ought to take notice. According to Bary,investors should consider that the top companies are cutting costs, merging,entering into partnerships and expanding into the OTC and developing worldmarkets. They're also spending billions on research and development, whichcould pay off handsomely, Bary adds.
So with every criticism come suggestions for how to overcomethese challenges and hope for pharma's future. Big Pharma, like any otherAmerican industry, has its ups and downs, but is marked by the ability torebound from any adversity. Simply put, it's the American way.