The speaker was an economist working with Ernst and Young (a trading company I believe). He was involved with writing the Global Biotechnology Report, an annual report on the state of the Biotech Industry. The talk was supposed to be on how biotech was being/going to be affected by the current recession. The answer to this, however, was fairly simple: the average money available to biotech companies goes down, and companies cut operations to accommodate. What was a lot more interesting was his description of how these companies actually work.
Biotech companies may have some side operations, but the bulk of their work is in drug discovery. Discovery is applied broadly here, but in essence these companies are looking to put drugs into the market under their copyright. Biotech companies typically put out a whole lot of proposed new drug designs, but unfortunately, for every 5-10 thousand drugs proposed, only one actually makes it to the drug market. Of course, this means a lot of wasted money for these companies, but that's not in itself a big concern for anyone else. However, biotech companies do need to get this money from somewhere. They run as public companies, fueled by the investments of venture capitalists. I don't actually know econ, but my understanding is that the investors feed money to the companies, the companies get drugs onto the market, the current investors get really large dividends, the stock prices climb, and new investors get excited and invest, providing money for biotech companies to start the research cycle anew. The process for getting a drug from conception to market takes almost two decades, and so investors periodically withdraw and invest money depending on whether they get impatient or excited. Because of this, biotech companies usually know how to deal with cash problems, and so won't be too badly hit by the recession.
The interesting part of this talk came when they guy started talking about healthcare. It's worthwhile to note that in every country in the world except for the US, drug companies are required to sell drugs at very reasonable prices, and it is this that makes health care elsewhere so affordable in comparison. However, it would be really bad to enact the same policy in the US for this reason: biotech companies use those large profits to pay their stock holders' dividends, and so if these profits are cut, dividends are cut, excitement falls, and stock prices do not rise as quickly as needed, severely cutting off the investments that fuel R&D. If we were to force healthcare costs down in the US, we would be fine short term, but in a decade or so, production of new drugs would come to a grinding halt. Obviously this is a problem. As of now, the US is essentially footing the bill for healthcare around the world.
This is a pretty serious issue, seeing as we really do need affordable healthcare. I've been thinking about this a decent bit since the talk and I've talked to some of you about it, but I'm interested in what you all think (if you actually felt like reading a post about bio and business >_>). Is there a clean solution to the problem, and is it driven by government, business, or science?
Anyway, let me know what you think, and I promise that you'll be getting an actual post at least every other day from now on.
