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Platform Companies Are Pharma s Prey

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According to folks in the GenomeWeb newsroom who escaped the New York City heatwave to spend a few days in Boston last month, M&A activity in the life sciences industry was the topic du jour at the Drug Discovery Technology conference there.

Jan Leschly, chairman and CEO of Care Capital and former CEO of SmithKline Beecham, prodded the conversation that pervaded the meeting with his keynote, “Global Success is No Accident — The Sources for Future Blockbusters.” Of M&A activity among big pharmas he told conference goers, “I do believe consolidation will continue,” but said that what is really needed is biotech consolidation. “Biotech is on a roll,” Leschly said.

Allen Roses, senior VP genetics research for GlaxoSmith- Kline commented on the union of the two mega companies that are now his employer. Contrary to the view that a merger turns two big pharmas into one lumbering dinosaur, one of the “catalyzing features is the size of the organization,” he said.

Meanwhile, at lunch tables and up and down exhibit hall rows, observers whispered that platform companies are a dying breed. “Rollups will have to take place because they can’t get any funding,” noted one analyst.

Contrary to the heady days when tools and technology providers were flush with funds, this year those companies occupied only the smaller booths, if any, at DDT. An investor remarked that scientists who want to start platform companies should compare what these companies look like now with three or four years ago.

Some believe that platform and technology providers that are worth anything will be absorbed into drug companies, the way Aurora was into Vertex, Rosetta was into Merck, or Visible Genetics is being into Bayer Diagnostics.

Terry Morris, a venture capitalist with BioScience Managers Limited, says the mood at DDT was extraordinarily somber. There seems to be the view in the US, he says, that “if a public company doesn’t have two years of cash it’s a short. The assumption is that there will be no cash for two years and if you can’t weather it, it will not be a happy ending.” Does Morris concur? “It could be a really hard climate for a couple of years. With all the accuracy of the crystal ball, I have the view that you need to be prepared to survive for a couple of years. If you need to raise money, go ahead, but if you can avoid going out there it’s in your best interest.”

Of course the mood could change as quickly as the weather, Morris notes. We’ll check it again next month at TIGR’s 14th Genome Sequencing and Analysis Conference. Meeting organizers tell Meredith Salisbury (p. 67) that commercialization is out, in favor of more hard science this year. (Of course that’s not to say there will be any shortage of promotional giveaways, as our annual Freeloader’s Guide to GSAC proves.)

Meanwhile, we’re not letting the general economic malaise keep us from celebrating a birthday: GT is two years old this month. And with that, we’ve finally started posting some of our content to the Web — an article from the current issue will appear each Thursday on GenomeWeb.com, and IT Guy Nat Goodman’s valuable lists of links are now accessible by clicking on Nat’s picture on the GenomeWeb home page.

Our goals for the coming year? Offer readers an online archive of our articles from our back issues, and put the new addition to our editorial team — John MacNeil, who will officially give up editorship of ProteoMonitor to join the GT team next month — to work helping us achieve our ambition to deliver more in-depth analysis of the industry.

Adrienne Burke, Editor in chief

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