Waiting for an elevator at the Westin St. Francis, Celgene ($CELG) CEO Bob Hugin and I were chatting about the frenzied pace of deals that were announced in the lead-up to the annual JP Morgan confab. "The whole industry is on fire," he said with a happy smile.
Back just a few years ago, one of the big topics at JP Morgan centered on when the IPO window would finally open. Now one of the main lines of inquiry is when will it close. But for now, at least, the feast-or-famine world of biotech is laying out the smorgasbord.
"You're always in a bubble" in biotech, Abingworth's Kurt von Emster told several hundred execs at FierceBiotech's executive breakfast this week, which was moderated by Senior Editor Stacy Lawrence. And you're either up or down. "There's nothing in between.
Every year JP Morgan gives execs a stage to sound convincing about their confidence in the year ahead. So it's no surprise to hear an upbeat tone at the conference. Nevertheless, the mood of the industry this year was exceptional. Even some of the most grizzled veterans who have been making the annual trek to San Francisco for years noted they've never seen anything like this before.
Boiled down in the business development group, it amounted to this: Damn the valuations and full speed ahead. Those higher biotech numbers you've been hearing about are now an accepted part of the industry scene. And dealmakers this year were happy to discuss their appetite for blockbuster collaborations and acquisitions.
"We are not limited by capital," says James Sabry, a biotech vet who now orchestrates deals for Genentech. Last year he set up the $1.7 billion buyout for Seragon, and he said he'd be happy to do similar acquisitions reaching around the $1.5 billion to $3 billion mark this year as well—along with a string of much smaller pacts. (Move up into the stratosphere of $8 billion to $10 billion-plus, though, and you're talking about deals that will be executed in CEO Severin Schwan's office suite in Basel).
"The complexity of the industry has gone up in the past 5 years dramatically," says Sabry, making dealmaking for complementary technology an essential ingredient for any company along the lines of Genentech. And smaller players are following the same game plan.
"We focus on game-changing, cutting-edge science," said Ken Araki, the global BD chief for Takeda, which has been stepping up its deal game lately. Gilead's ($GILD) $11 billion Pharmasset deal helped demonstrate that some assets are simply worth more, he added. And he is ready to ink "multibillion-dollar" deals that fit into the company's focus on GI, oncology and emerging markets (China, Russia and Brazil), including buyouts.
No one believes that the law of market cycles has been repealed. What goes up inevitably comes down. But not all biotech waves are built the same way, and there are tidal differences about this surge that even a practiced cynic can't ignore.
One of the big differences this time is that the 30-year-old biotech industry has come of age. Experienced teams are coming together around new companies and some fascinating science, often shepherded by veteran investors and gaining instant credibility among pharma buyers for early-stage work. Development progams are being unrolled at often record pace, and there's plenty more money on the table to add in collaborations that wouldn't have been dreamed of before.
Lawrence's panel members, a group that included Aisling Capital founder Dennis Purcell, also highlighted some of the more unique traits of the current go-go round for biotech.
Purcell noted that this particular surge of growth isn't being financed just by the traditional venture players. Juno Therapeutics ($JUNO) helped illustrate that. "The industry has never been as well capitalized as it is today," he noted.
The stream of money coming into life sciences is also inspiring some fresh thinking about deal terms. Hugin's chief dealmaker, the omnipresent George Golumbeski, was cited by von Emster as a leader in innovative deal structures, where the companies coming to the table with cash are more interested in finding ways to work together to everyone's mutual advantage.
"It's much more collaborative; tell us what you want and we'll figure it out," said von Emster.
"The next five years could be the golden age of biotech," he added later.
Here's hoping we don't blow it.
John Carroll
FierceBiotech
