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Our pharma, ‘tis of thee
With many of us gathering on the fourth of this month to celebrate the birth of our country, it's a good time to assess the state of U.S. pharma and biotech markets.
As you will read in this issue's Government Watch section, federal and state officials are taking a keen interest in American pharma activities, from safe laboratory practices to industry-academic relationships to funding for start-up companies. Some of this scrutiny will bring about welcome change and give the industry the resources it needs to stay competitive; however, American pharmas are currently challenged on many other fronts.
Patent expiration, sluggish pipelines and mounting job losses have for some time been a concern, but other forces are threatening Big Pharma's bottom line. One major criticism is that innovation in the industry has become idle—and some of that criticism is coming from the industry itself.
Last month, Dr. John C. Lechleiter, president and CEO of Eli Lilly & Co., addressed the Detroit Economic Club and warned that America's greatest competitive advantage—its "genius for innovation"—is in jeopardy. Lechleiter cited a 2009 study by the Information Technology and Innovation Foundation which ranked the United States sixth among the top 40 industrialized nations in innovative competitiveness, but 40th of 40 in measures of what industrialized countries are doing to become more innovative in the future. But Lechleiter also suggested that with the right choices—such as improving math and science education, changing to immigration laws to allow top scientists abroad to bring their talents here and funding and tax breaks for research institutions—"what might seem unimaginable today will be commonplace tomorrow."
The rapid growth of the CRO market also has some worried that Big Pharma will outsource much-needed jobs and services to firms in foreign countries. Dr. Mark Fishman, president of Cambridge, Mass.-based Novartis Institutes for Biomedical Research (NIBR), the global pharmaceutical research organization of Novartis, recently told the Life Science Leader that "there is no question that the economic downturn has affected the scientific enterprise in the United States, and I worry that this may be a problem for future generations of American scientists." However, Fishman added that he still believes the United States has "the strongest system of government support for scientific and biomedical research as compared with any other country in the world."
"I am not sure I agree that there is less scientific talent in the United States than there has been in the past," Fishman told the magazine. "While job opportunities for American scientists may be fewer than in the past, I believe that these trajectories are self-correcting, and the situation will likely be different in the not-too-distant future."
Due to these various challenges, analysts have noted that pharma has fallen out of favor with Wall Street and now has one of the lowest price/earnings ratios of any major sector of the stock market. But Barron's Andrew Bary remains optimistic, writing that when Wall Street writes off one of the world's most important industries, and with valuations 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 world markets. They're also spending billions on research and development, which could pay off handsomely, Bary adds.
So with every criticism come suggestions for how to overcome these challenges and hope for pharma's future. Big Pharma, like any other American industry, has its ups and downs, but is marked by the ability to rebound from any adversity. Simply put, it's the American way.