The following blog post from PharmaTech talk wonders aloud if biotech is going down the same path as Big Pharma when it comes to reductions in R&D expense (down 1% in 2010) in response to dwindling funding sources (rather than dwindling revenues due to patent cliffs with Big Pharma).
In Biotech's case, only 40 of the more than 270 publicly traded large-molecule companies are profitable, and the rest must rely on venture capital. Companies without products on the market are having a tougher time attracting funding these days. Up-front payments have decreased about 55% in the past five years, according to Ernst & Young. Money is increasingly contingent on achieving drug-development goals
The writer wonders aloud if this continuing trend could become a vicious cycle in which small biologics companies keep spending less on research, which in turn prevents them from discovering potentially marketable products that could keep them afloat.
I think not. I don't know that all 270 companies should survive. That would not be the case in most industry models. I think the stronger companies will rise to the surface and will be able to continue bringing innovative products forward - whereupon they will be compensated through licensing for their properties or will be acquired. Either way -- the value for the innovations will be recognized and the model will roll on albeit perhaps in a modified form.
By the way, some of the Big Pharma companies may not survive either. If you read this post from In the Pipeline last week analyzing Lilly and AZ's current situations, one might conclude that either or both are prime to be swallowed by a bigger player. Thus, Lechleiter may spurn "mega-mergers" but he may end up on the received rather than the giving end of one.