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BIOTECH–Planning to Succeed in the Biotech Industry

The dynamics of the biotech industry have severely shifted from the late 1980s and early ’90s. No longer is biotech the darling of the investment community.

Instead, biotech companies have seen a serious shift of their investors toward the more lucrative, albeit highly volatile, Internet/high-tech industry. Yet, because of the allure of financing potential cures for cancer, there will always be money out there for the biotechs.

But, for every success story coming out of the labs at Cypress Bioscience and Ligand Pharmaceuticals, there is an Amylin laying off workers or Cytel shutting down completely, the San Diego Business Journal reported in 1999.

The biotech industry has had its woes, even during our “heightened” economy. In 1990, expectations for the future of biotechnology were high. In 1999, optimism has given way to the realities of unfulfilled discoveries, lagging performances and drained finances, according to the Business Journal.

Even more, the industry has seen a significant consolidation in the midst of the many other mergers and acquisitions of the 1990s , much of which was in the form of minority stake alliances and acquisitions.

Thus far, U.S. acquirers have been dominant in biotech mergers and acquisitions, yet the industry is still extremely fragmented with about 75 percent out of the 2,500 U.S.-based biotechs having 125 or fewer employees, according to the Business Journal.

– Strategies For

Biotech Success

The mergers and acquisitions are expected to continue in the future, although, at a slower pace. Given this and other strategic issues, how can the industry rethink itself to succeed in the future?

Once a biotech company has been “born” and moves away from the incubator phase, several issues immediately come to mind. The prominent issues are location, government regulation, and strategy for continued success.

Although each issue can be dealt with on a separate level, each one is intertwined with the next in some form or another. I will approach these issues separately and synthesis them in the end as a plausible framework.

o Location , The location for a biotech company is important for many reasons. Some of the physical attributes of a building itself are difficult. These attributes are related to the need for higher ground-to-floor clearance, higher volumes of water flow and the type of water available, greater circulation of air, and conformance to the various governmental entities that inspect the location and operations.

Beyond the physical location, other reasons include the ability to hire appropriate staff, availability of clean water sources, governmental assistance, cost of the facility, strategic collaboration, and assistance from local organizations, to name a few.

It used to be that biotechs were typically clustered around the universities and institutions where the scientists worked ten years earlier. Today, a biotech company looks for essential services as finance, legal support, recruitment houses, and science parks.

– Biotech Companies

Attracted Services

I would say that for areas like San Diego and San Francisco, these services sprouted after the biotech companies created a need. Other areas, such as Portland, Ore., which are just now beginning to develop the infrastructure for biotech, need to attract these services simultaneously in order to be successful.

Globally, the number one areas for attracting biotechnology are the southeast United Kingdom for Europe, although Germany is a close second; Japan for Asia; and the United States for North America.

Within the United States, California still remains tops for the field where $3.5 billion dollars was spent in R & D; opposed to the runner up, New England, which barely scraped together $1 billion.

o Government , Aside from pharmaceuticals, innovative biotechnology has slowly made its way off the drawing board and into the approval stream of the USDA, EPA, and FDA. The reason for the slow down has been whether to base regulation on risk-base or technique-base. Science prefers the risk-based approach while government has preferred the technique-based approach.

According to some experts, in order for improvement to continue, two things need to happen.

First, scientists, as individuals, must learn to discuss complex scientific and technological issues so clearly and logically that non-experts can understand the arguments an draw conclusions on their merits.

– Debates Elevate

Level Of Discourse

Second, professional scientific associations, journals, and faculties must also join the debate by exploring and elucidating the controversies over public policy and seek to elevate the level of discourse.

Lastly, those who are not directly involved in science but who have a stake in the ultimate applications of science and technology need to become conversant with the basic concepts that relate to biotechnology regulation.

o Strategies , Strategic alliances are the latest direction that biotech companies have taken to ensure their success.

Currently, there are about 1,200 alliances among the top 24 pharma companies and leading biotech firms.

Although, this structuring may seem a bit radical at this time, I believe we will continue to see companies gravitating towards one another that share similar core competencies. Alliances have become a way of life for the biotech industry.

– Mapping A Course

For Future Success

Beyond physical and social limitations, companies must continue to create strategies to succeed for the future.

Probably the least identified aspect is the core competency of a company. This is especially prevalent with biotech companies given the dynamics of the field.

The purpose once thought for a developed product is quickly becoming recognized for alternate uses. So the basic question executives face when charting the strategic direction of their companies is, “With whom and how does our company compete?”

Recognizing this enables companies to be aware of their surroundings, e.g., what other companies are doing and whether or not it threatens their existence.

Wise is the vice president for the real estate services group, Equis Corp. of San Diego.

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