Thank you Dave. Dave Holveck is a good friend, and a forceful champion of our industry. I don't use the word "champion" lightly but few individuals in our industry - in any industry - have gotten back up off the mat after his company took a big punch just about a decade ago. Dave bounced back and guided Centocor to new heights, and in his deliberate style he's an inspiration to many of us.
Ladies and Gentlemen, I could not be more pleased to be back in Philadelphia where a few generations of Feldbaums have lived and where I was born and raised. Something that does not appear on my resume is that I graduated from Lower Merion High School and played on the varsity basketball team - just like Kobe Bryant. Thirty-one years later, when I still hadn't been drafted by the NBA I opted for BIO, and I have never looked back. If you're a little down and think times are tough now, talk to Dave.
One other Philadelphia thing: as BIO has grown nationally into all 50 states and now into 33 other nations, I travel a bit to show and plant the flag. Everywhere I've been recently - Seattle, Amsterdam, Singapore - there's a place that offers so-called "Philadelphia Cheese Steaks." I try to resist going in to each one and saying: No, no, the roll has got to be from Amoroso's bakery in Philadelphia, and the cheese cannot be provolone, cheddar, swiss, munster - it's got to be Cheese Whiz! Given the global addiction, there's a growing body of opinion that believes cheese steaks should be subject to approval by the Center for Biologics at the Food and Drug Administration. Ladies and gentlemen, it's good to be back home.
And here, back home, you've got a lot to be proud of. Just a glance at the membership of the Pennsylvania Biotechnology Association attests to the tensile strength of this region as a world-class biopharmaceutical center. You've got top-ten multinational pharmaceutical companies, you have venture-stage start-ups, you have organizations that are essential to the sustenance of any major biotech cluster, providing business, financial and legal expertise, plus a few of the greatest academic centers on the planet.
Plus now you've got Fritz Bittenbender. I'm pleased that Fritz has taken the reins as the new president of PBA. His experience in the Ridge and Schwieker administrations is perfectly suited to serve our industry in this commonwealth. As Governor Ridge assumes one of the soon-to-be-largest departments in the history of the federal government, Fritz, you and I will be working very closely together. Plus we share roots in Forty-Fort, just north of Wilkes-Barre.
Several of these factors, combined with the enthusiasm and commitment of city and state officials, led BIO to select Philadelphia for our BIO Venture Forum meeting this November and for BIO 2005.
But for this industry, 2005 is a long way off. What we all have to focus on right now are the economic and policy challenges of 2003.
Back in 2001, it looked like our industry was coming in for a soft landing after the euphoria of 2000, but in 2002, biopharmaceuticals hit tough times. Not the hardest of times, but surely very tough times. I don't intend to sugarcoat any of this.
In 2002, the stocks of large pharmaceutical companies plateaued or slid after years of steady gains.
For biotech companies, the news was worse:
- The Nasdaq Biotech Index fell 45 percent last year.
- 90 percent of biotech stocks were down for the year.
- Many stocks slipped to under $5 -- which makes financing very difficult to obtain.
- A number of excellent companies' stocks fell into the red zone of under $1, at which point Nasdaq threatens de-listing.
- Although aggregate investment remained high by historical standards - at $11.6 billion - a large percentage of that money went to a handful of top-tier companies and to venture-stage companies. Younger public biotech companies were pretty neglected, and we saw the effects in a wave of restructurings.
Was it ImClone or a string of product setbacks that sent the industry sort of tumbling in 2002? Or did biotech just get pulled into the undertow of a wobbling economy? These were all factors. The more important question is:
What do we, as leaders of the industry, do now?
First, we emphasize the strengths of the biotechnology industry to buy- and sell-side analysts, fund managers and the financial media. This has been one of BIO's major themes for months, and will be the central mission of our CEO and Investor Conference in New York next month, and a major motif at our BIO 2003 convention in Washington. The story of biotechnology is not the story of Raelians or ImClone and Martha Stewart, but of medicines and vaccines that to date have benefited more than 300 million people worldwide, and which will benefit billions more in the future.
The fundamentals of our industry remain remarkably strong:
- There were 35 approvals of new biotech and biotech-related drugs in 2002 alone.
- We have 371 products in late-stage clinical trials.
- We have vibrant, growing markets as the baby boomers age.
Despite the usual complaints, we have a significantly supportive legislative and regulatory environment, including new energy at the FDA with the appointment of Commissioner Mark McClellan, renewal of PDUFA, new resources, and significant restructuring aimed at creating new efficiencies in drug reviews.
Also on the Washington scene, I'm glad that Senator Bill Frist has taken over as Senate Majority Leader. A cardio-thoracic surgeon, he has worked closely with BIO in the past and, despite some differences over stem cells and cloning, I am confident that his scientific approach to many matters on our agenda will be extremely beneficial. As one of very few science-trained individuals in the U.S. Congress, he has been exceptionally influential among his colleagues on the issues that mean the most to us.
- We take this largely for granted, but the biotech industry also has mature management. The unprecedented infusion of capital into the industry from mid-1999 through 2001 wasn't squandered on Super Bowl ads and the like, but is still being invested in biomedical R&D. Many of the companies that benefited the most from the early 2000 bubble have shifted their strategies, pared programs, and are managing their cash very prudently.
And there are a number of technological factors that weigh heavily in our favor. Several computer and biotech industry gurus have observed that the convergence of bioscience and informatics is creating trends that will truly transform drug discovery and create generations of new products.
First you have Moore's Law - which states that the power of a computer chip roughly doubles every 18 to 24 months while the cost falls. This has already taken hold of our industry, allowing individual scientists to do experiments that would have required large, institutional commitments ten years ago.
Our industry is also benefiting from Metcalfe's Law, which states that the utility of a network grows with the square of the number of users. We've already seen the power of these networks with the Human Genome Project, which linked labs scattered around the world and posted data daily on the Internet.
The Law of Finite Biology promises that the solutions to biomolecular puzzles will eventually come much faster than they do even today, much as the pieces of one of those thousand piece puzzles we work on during rainy vacation days fall into place more and more quickly as one approaches the full picture.
And finally, I would be remiss in not mentioning Murphy's Law, which we all live and work with on a daily basis. Even given Murphy's Law, the vast array of products that could emerge from these efforts will find eager and growing markets as the baby boom generation marches toward retirement.
And yet . . . we must not play Candide about the state of the industry. First, we lose credibility by doing that, as this is clearly not the best of all possible worlds. Second, we lose opportunities to help revise or set policies to support our industry at both the state and federal level.
For example, BIO is pushing for a new type of tax credit to bring the benefits of the R&D credit to pre-profitable biotechnology companies. (How is that for a euphemism?) Seriously, while the existing R&D credit has been a great boon to technological development, it fails to help companies that need it the most because they have no profits yet and hence have no tax bill to offset with the credit.
Also, political momentum is building for a bipartisan consensus on a new Medicare drug benefit. This obviously is good news for both patients and for biotech companies, a majority of whose therapeutic products address diseases associated with aging. But if the coverage comes with draconian price controls or is government administered, it's got problems, because it will dampen incentives for innovative research and, in some cases, could actually reduce broad access to new therapies and cures.
These are not just hypothetical concerns.
Innovation requires investment, and investment capital will flee if returns are threatened. We saw this back in 1994, when the Clinton health plan drove away investors and slowed research by about a year.
These policy issues are not as sexy to talk about as genetic and stem cell research, or the Raelians' alleged "Baby Eve," but they are critical to the future of our industry, which in turn is critical to all of us here in this room. If you are a university representative, a healthy biotech industry provides a market for technology transfer, potential partners for research, and a source of jobs for your graduates. For those of you in the pharmaceutical business, ours is a critical segment of the pipeline that moves cutting-edge basic research into the clinic, generating new products to replenish your portfolios as patents expire. And even if you're a reporter, the biotechnology industry is important to you, beyond filing today's story, because it is the source of new medicines and vaccines for you too and your families.
Our business here is to help people, heal people, cure people. The rest is some carnival sideshow. We may need to react to the hoopla, but we know to keep our Eagle eye on the ball. Pun intended.
Thank you for inviting me back home.