VC CEO Believes Biotech Is Entering Golden Era

    By Donald Zuhn --

In the August issue of Life Science Leader Magazine, Randal Kirk, Chairman and CEO of the venture capital firm Third Security, LLC, writes that while some 600 to 800 life science companies are expected to go out of business or be absorbed by other companies within the next two years, biotech is at the edge of "a golden era of valuable discoveries that forever will revolutionize its foundation" ("At the Outset of the Golden Era of Biotech").  According to Mr. Kirk, however, this golden era of biotechnology will be quite different from any previous stage of the industry's development.

Not surprisingly, one impetus of change in the biotech industry will be the economic recession.  Mr. Kirk (at left), however, argues against the "common misconception that the industry has suffered a setback similar to that of others -- largely due to the poor economy -- and that, with recovery in the general economy the industry eventually will return to normal."  He suggests that "the biotech industry will not return to a state that we recently knew as 'normal,'" and instead will "morph[] into a new state."  A "new state" of biotechnology is required, Mr. Kirk contends, because "much of the biotech industry is based on flawed logic and processes that in the cruel light of day reveal themselves to have been chasing specious objectives with an overabundance of poorly directed capital."  With the economic woes leading to a withdrawal of venture funding, and many in the industry pointing to inadequate funding as the problem, Mr. Kirk notes that "the more obvious lesson seems to have gone largely unlearned:  We have been creating too little value."

According to Mr. Kirk, the real problem with the biotech industry can be traced to its dependency on the healthcare industry, the latter of which "lacks critical feedback mechanisms that are normal to other consumer industries in a market-based economy."  Mr. Kirk notes that because the consumption decisions of healthcare consumers have been divorced from their payment obligations as a result of third-party payment systems, the healthcare industry lacks incentives to produce higher quality products (i.e., more effective treatments) at lower costs.  Mr. Kirk argues that "the healthcare industry has actually been selling a product that is quite different from what may reasonably be termed 'healthcare' and that product is called 'hope,'" adding that "[a]s a product, hope offers considerable profit opportunity."  As an example, Mr. Kirk points to "many of the cancer therapies that gross billions of dollars per year today [but] only manage to move overall survival rates by an average of a few weeks and are largely ineffective for the majority of patients who take them."

Mr. Kirk therefore suggests that the solution to the biotech industry's problems will be to rededicate itself to "providing constantly improved value to the consumer."  In other words, "[c]ompanies should be focusing on adding genuine value to the maturation process of the health care industry by developing technologies that produce a higher quality product at lower cost."  For example, Mr. Kirk argues that clinical trial expenses for ineffective therapeutic candidates could often be avoided by performing "a simple proof-of-concept study [to] determine if the underlying premise -- that the product candidate could achieve its therapeutic goal -- was valid or not."

Mr. Kirk concludes his article by suggesting that a handful of disciplines will lead the biotech industry into its new golden era:  "Within the life science fields, the most promising space includes molecular biology, cellular biology, and genetics, and the intersection of the three."  He notes that "[t]his space is accruing intellectual capital at such a fast rate that . . . the quantum of what is known is doubling every 2-3 years."  Drawing an analogy between where the biotech industry currently stands and the place where the semiconductor and software industries were in 1980, Mr. Kirk states that "[j]ust as GUI screens, object oriented code, data base software, optical fiber and many other science-based technologies became established as fairly fixed concepts in the development of a meteoric increase in productivity for those industries, biotech today is on the verge of identifying the technologies and motifs that will be the bases of its growth hereafter."  He also notes that the analogy is more than casual, stating that while the biotech industry spent its first 30 years focusing on genes, their modification, and the processing of their output, the industry is beginning to shift its focus to non-transcribed portions of the genome.  Mr. Kirk writes that "researchers now understand that the regulatory domains act as logical controllers, and, indeed, that DNA is nature's logic controller."

Mr. Kirk will be speaking at the 2009 Mid-Atlantic Bio Conference on November 4-6, 2009, where he plans to discuss the impact of the economy on the biotech industry, offer more thoughts on the next wave of advancements in the biotech industry, and provide predictions regarding the future direction of the industry.

Comments

[BCD]

There is a corollary to this line of reasoning directly relevant to IP. The heavy emphasis on coding regions and "genes" of somewhat known function presumes a conception of organisms as collections of cells and cells as bags of genes that make proteins that are also in the bag. The job of patents has been to specify which parts in that (generic) bag belong to whom. Several problems: 1. some DNA encodes multiple products; 2. some really interesting phenomena are about timing and control rather than DNA sequence specifying amino acid sequence.

[Kevin E. Noonan]

Dear BCD:

Not sure they are problems, in this respect. If you want to make sufficient quantities of a protein (whether it is a hormone, an enzyme, or an antibody), you can treat cells as little manufacturing plants for your protein, and the validity (or limitations) of the reductionist paradigm are not particularly relevant.

However, you are correct that biological organisms are more complex that that. This may be the reason that antisense technology and gene therapy have failed or taken longer to work than expected.

Thanks for the comment.

[Mr Todd J. Tocco]

Well sir, 09/12/09

My name is
Todd J.Tocco
2014 Fiero Avenue
Rotterdam, N.Y.

And I'm one of the top 100 inventors. I'm not a molecular biology, cellular biology, and genetics,or biotech industry.
I believe that G.H.I. Which is precent and lies dormant in everyones bodys. Is the reason people get alheizmers.
And should be ruled out first.

Thank you

[drishya pillai]

27/08/2010

my name is
drishya pillai
kcc nagar
jaipur(india)

sir,
i'm a student interested in biotechnology and related domains,though we have just been introduced to the topic.
i'm eagerly looking forward to prepare a project on the same(biotechnology-the green gold of the new era)and i would surely be obliged if i got your views and ideas on the topic as well.
thank you