Friday, June 20, 2008

Biotechnology's Unsettled Forecast

The global biotechnology industry came within a whisker of profitability in 2007. In the 35 years since Boyer and Cohen first produced recombinant DNA, the industry as a whole has suffered staggering losses. That may change in 2008, a cause for cheer among the more than 20 000 biotechnology aficionados attending this year's BIO International Conference. However, instead of celebration, and despite enthusiastic endorsements of biotechnology by conference keynote speakers, Craig Venter, Arnold Schwarzenegger, and Colin Powell, the overall mood at BIO 2008 appears to be one of growing fatalism, even gloom.

So, what is raining on biotechnology's parade? Three clouds have come up repeatedly in a variety of panels and plenaries: (1) risks of weakening patent protection, (2) a drastic deceleration in Food and Drug Administration ("FDA") drug approvals, and (3) the credit crisis.

Patent protection. After several years of aborted efforts, the House of Representatives finally managed to pass a significant patent reform bill, H.R. 1908. The Senate, by contrast, let its counterpart bill, S. 1145, die. Though aligned on many policy issues over the years, the high technology and biotechnology industries strongly disagree about Congress' patent reform bills. James Greenwood, President and CEO of BIO, defiantly told at a plenary lunchtime crowd that, although high technology has had the upper hand on promoting patent reform, the tide has now turned, and "We are going to win [the battle against weakening of patent protection]". Even so, the combined effects of KSR v. Teleflex (U.S. 2007), Congressional patent reform efforts, and proposed new rule changes at the United States Patent and Trademark Office ("USPTO") have sown uncertainty about what level of patent protection is, and will be, available for biotechnology inventions.

FDA regulation. With a modern record low of 24 approvals in 2007, the FDA has strongly signaled that the bar for drug and diagnostic approvals has now risen considerably. So, once they survive the USPTO frying pan, biotechnology companies developing drugs or diagnostics now face the prospect of the fire of the FDA approval process.

The credit crisis. Over the last decade, the funding required to sustain biotechnology companies through the billion dollar expense of drug development has become increasingly difficult to obtain. What began as a gradual decline became a precipitous fall last year, and has not improved much since then. With money for biotechnology companies so tight, failed ventures are accelerating.

Mixed with the gloom is a spirit of defiance. BIO is spearheading increasingly effective efforts to ensure that Congress does not weaken patent rights. USPTO efforts to limit continuation pratice have been permanently enjoined, providing a template for legal challenges to other proposed rule changes, such as heightened disclosure obligations and much more difficult procedures for appealing claim rejections to the Board of Patent Appeals and Interferences ("BPAI"). The biotechnology product pipeline appears to be healthy, with exciting progress in stem cells, gene therapy, genomics, proteomics, and synthetic biology. Biotechnology in Asia and Latin America is booming as never before. And, the biotechnology industry can, at least, enjoy Schadenfreude that the pharmaceutical industry is experiencing even harsher challenges, such as vigorous competition from generics companies and an approaching epidemic of patent expirations of blockbuster drugs.

Given the legal and financial challenges it faces, the biotechnology industry may be entering a new, less wildly optimistic, phase. The coming year may be one of tempered expectations. On the other hand, the biotechnology industry as a whole will almost certainly make a net profit in 2008, an unprecedented event that may allow at least some singing in the rain at BIO 2009.


Post a Comment

<< Home