In Vino Veritas: Truth from the Frazier Dinner at PSA

For the last several years of FDC/Windhover’s Pharmaceutical Strategic Alliances conference, Alan Frazier, the founding partner of the Frazier Healthcare Ventures group, has been hosting a first-night dinner for roughly 30 top business development executives, the majority from Big Pharma.

Given the dealmaking power in the room, it’s not a bad place to sample industry opinion. And so, before too much wine has been poured, the guests fill out a brief survey.

No surprise, perhaps, given the dinner guests, but this year’s crowd was uncharacteristically pessimistic about biotech. Sixty-nine percent felt that Big Pharma’s and Big Biotech’s acquisitions of smaller biotechs were overvalued; 82% felt that the recent decline in acquisition values of private biotechs (you can see a complete analysis of private-biotech acquisitions here) would only get worse; even bigger majorities felt that Big Pharma or Big Biotech would own rights to most of the industry’s late-stage assets (92% for small molecules; 84% for biologics).

The latter answer certainly makes sense given financing prospects for biotech: next to hedge funds, public biotechs without product-based cash flow are going to feel the most pain from the market meltdown, say the Frazier guests … and would thus be more willing to sell control of their key programs.

Not that any of this is particularly good news for pharma. Two-thirds of the dinner guests felt that pharma shouldn’t diversify into generics and OTCs, let alone devices or services – but should “focus on getting innovative drugs to market.” Problem is, nearly the same proportion—61%--felt that “the fundamental rate of innovation across the entire biotech/pharma ecosystem is incapable of sustaining the business at its current size.” [UPDATE: if you'd like to weigh in on the issue, see this post.]

See the issue? Pharmas should focus on innovation…but they don’t themselves have what they need – and what’s available from biotech ain’t worth the sticker price. And even if the economy forces biotechs into discount mode, there still isn’t enough to go around.

Lucky that Alan picked up the check.

Photo courtesy of Flickr user katiew through a creative commons license.