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    NIH director to Cambridge biotechnology executives: Coming years won’t be easy

    CAMBRIDGE -- Despite strides in medical technology, the biotechnology industry faces mounting challenges ranging from reduced research funding to uncertainty over reimbursements to a shift in pharmaceutical companies’ focus from drug discovery to mergers and marketing.

    That was the unsettling prognosis delivered Monday at the annual meeting of the Massachusetts Biotechnology Council by Dr. Francis Collins, who heads the National Institutes of Health, and speakers on a panel taking the temperature of a business in transition.

    Estimating that 83 percent of the $30.9 billion NIH budget in fiscal 2012 will bankroll outside research at academic medical centers and elsewhere, Collins told about 500 state biotechnology executives that “a rather large chunk of that comes to Massachusetts.” When measured by per-capita spending, he said, Massachusetts “blows away California” and every other state that receives research money from the NIH.


    Collins said the NIH directly supports 432,000 medical research jobs across the country. But he warned that the inflation-adjusted purchasing power of that funding has fallen 20 percent since 2003 even as China, India, and Europe have boosted their research outlays.

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    “If America wants to see its economy continuing to grow, this is a very important area to be pushing forward,” Collins told the audience at the Royal Sonesta Hotel.

    Along with his warnings, Collins did offer some reasons to be optimistic about the biotechnology industry’s future. He cited the importance of groundbreaking new drugs such as Kalydeco, the recently approved cystic fibrosis treatment made by Vertex Pharmaceuticals Inc., based in Cambridge. He also noted that advances in technology have dropped the cost of sequencing a human genome from $100 million in 2001 to under $10,000 today. And he said the NIH is working with the Food and Drug Administration and the Pentagon’s research arm to load cell types on microchips to screen for safe and effective drugs.

    But other speakers cautioned that the biotechnology industry’s drive for innovation is being increasingly threatened by the shrinking federal budget, a growing reluctance of big drug companies and private investors to finance early-stage research, and the slow pace of US regulatory approvals as profitable blockbuster drugs lose patent protection.

    Juan Enriquez, managing director of Boston venture capital firm Excel Venture Management, said there’s a price to pay for regulators failing to act swiftly -- or at all -- on new drug applications. “The pipeline is eroding,” he said. “There are less biotechs able to get an initial public offering that is successful at the same time that the costs are going up and up.”


    Another problem for industry is that, with insurance payers reluctant to reimburse for new medicines, only about three in 10 approved drugs generate enough money to recoup the cost of their development, said Steven C. Gilman, chief scientific officer at Cubist Pharmaceuticals Inc. in Lexington. “Pricing reimbursements have become a relatively big deal that you can’t wait until after approval to start thinking about,” he said.

    Sridaran Natesan, scientific site head of research and development for drug maker Sanofi SA in Cambridge, said that given these trends, companies will have to boost the small percentage of drug candidates that are now being brought to market -- a formidable challenge, given the complications involved in running clinical trials.

    “We don’t have very reliable models for predicting whether a compound will fail in the clinic,” Natesan said.

    While companies are stepping up collaborations with one another and academic researchers, turnover at all of these organizations is slowing down joint research output, said Abbie Celniker, chief executive of Eleven Biotherapeutics in Cambridge. “This constant changing and moving around translates into a huge risk aversion,” she said.

    Other companies have merged or bought rivals, reducing the number of players engaged in drug development, but increasing their own odds of discovering new treatments.


    Companies can succeed by placing smarter bets and becoming more focused on fewer projects, suggested Manos Perros, who heads AstraZeneca PLC’s infection medicines group in Waltham. “If you work on a project and take it all the way, it’s affordable,” Perros said. “It’s not affordable if you work on 100 projects and take one all the way.”

    Robert Weisman can be reached at