Tuesday, September 3, 1996
A few years ago, the biotechnology sector consisted of a handful of well-endowed biopharmaceutical corporations and a lower tier of companies - hundreds of them - united primarily by their need for cash. But no longer. In late 1996, the biotechnology industry has become a rich tapestry of companies, spanning the entire spectrum of maturities and geography, and facing an equally rich tableau of issues beyond the simple hierarchy of the "haves" and the "have nots."
For everyone in the industry, from companies to investors to analysts to BioCentury, this growing complexity has necessitated gaining at least a passing familiarity with an ever-widening array of information: in every disease area imaginable; for a multitude of enabling technologies (screening, combinatorial chemistry, genomics); clinical trial design; manufacturing; marketing; partnering; regulations; health care reform; patent law; stock market behavior; and a variety of business models. It simply isn't possible to be good at them all.
For investors, the choices have multiplied, while the information and analysis required to make good picks have increased exponentially.
For starters, the number of companies has proliferated. When BioCentury started publishing in January 1993, we tracked 177 public companies. We now track 313. There were 42 cancer companies in the first quarter of 1993, 29 companies in the infectious disease arena, and too few gene therapy companies to form a category. We now track 74 cancer companies, 62 infectious disease companies and 13 gene/cell therapy companies. That doesn't count the companies in the 20 other subgroups. And it doesn't count the growing legions of private companies, most of which probably are aiming, eventually, for the public markets.
It would be hard enough if all these companies competed with similar products. But the technology choices themselves once were simpler, too. For example, hormone replacement built on existing therapies had a logic that was easy to grasp. But for each disease area, there now is a multitude of technology approaches, of more or less complexity and more or less plausibility. Many of the mechanisms of action of these approaches have never been tested. Even deciding what's sufficiently plausible to deserve a second look is a daunting task.
With the group in better financial shape than it has been in for some time, the complexity of the business environment becomes the new compelling story. The growing complexity of the biotech sector is thus the subject of this year's Back to School issue.
While every issue can't possibly be addressed in this limited space, a short list can illustrate the wide variety of concepts that companies and investors must understand and address. This week we will discuss four broad areas where complexity is a dominant force: competition, disease targets, commercialization and business models. Among these, first and foremost is competition.