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Budget, health fights worrying biotechs at BIO

Climate of uncertainty called a drag on industry

BILL GREENE/GLOBE STAFF

Joshua Boger (left), Brian Atwood, Rachel K. King, H. Thomas Watkins, and Christopher A. Viehbacher spoke at BIO.

The biotechnology industry, already grappling with funding, research, and reimbursement challenges, has some new worries: how federal budget cuts and the impending Supreme Court decision on President Obama’s health care law could scramble their business calculations.

Among concerns cited by executives Wednesday at the Biotechnology Industry Organization's annual convention in Boston were potential cuts in National Institutes of Health grants, which could dampen the basic research that is the lifeblood of medical innovation. Also, they said, a high court ruling invalidating the Affordable Care Act could strip away a protection that gives biotech companies a dozen years of exclusive rights to the data underpinning their drugs.

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“The biggest thing that could go wrong for us is if the whole thing gets overturned and we have to deal with the risk of uncertainty,” said Rachel K. King, chief executive of GlycoMimetics Inc., a Gaithersburg, Md., company that is developing a treatment for sickle cell disease.

“Uncertainty is the biggest enemy,” agreed H. Thomas Watkins, chief executive of Human Genome Sciences Inc., of Rockville, Md., which last year won Food and Drug Administration approval for a drug to treat lupus, an autoimmune disorder. “There’s a lot that goes on at the NIH that is pretty critical to what we do . . . and allows us to move the ball forward.”

Executives spoke during a lunch panel, moderated by Joshua Boger, founder of Cambridge-based Vertex Pharmaceuticals Inc., at the trade group convention, which drew more than 15,000 people to the Boston Convention & Exhibition Center. The panel examined industry changes at a time of financing constraints, increased regulatory scrutiny, and reluctant payers.

“The bar for innovations continues to go up,” said Christopher A. Viehbacher, chief executive of French drug maker Sanofi SA. “To gain reimbursement, your products have to be much better than what’s out there — not a little better. And there has to be unmet medical need.”

Earlier in the luncheon, BIO officials unveiled a Biomedical Innovative Initiative to support life sciences education and programs at the planned Edward M. Kennedy Institute for the United States Senate adjacent to the John F. Kennedy Presidential Library and Museum on the University of Massachusetts Boston campus. The initiative will honor the late Massachusetts senator for his decades of support for biomedical research.

That legacy, which included Kennedy's push to double the NIH budget in the 1990s, could be jeopardized by cuts proposed to address the nation's mounting debt, executives said.

But the industry also faces a “perfect storm” of other obstacles, including difficulty in taking companies public, more stringent oversight, and the inability of governments and private health insurers to pay for costly new therapies, warned Brian G. Atwood, managing director at Versant Ventures, a Menlo Park, Calif., risk capital firm.

“The biggest threat to the industry is governments all over the world saying we can’t afford your innovations,” Atwood said. One result of that scenario, he suggested, might be an increased industry focus on drugs that treat “diseases of the wealthy” in the world’s richest countries.

Companies have been responding to the new challenges by forging more research partnerships, stepping up collaborations with financiers and academic researchers, and forming consortiums to share the costs and risks of early-stage “pre-competitive” drug research, said Viehbacher, whose company last year paid $20.1 billion to buy Cambridge biotech Genzyme Corp.

Several examples of cooperative efforts were unveiled at the BIO convention Tuesday and Wednesday. One was a Sanofi collaboration with Joslin Diabetes Center in Boston to develop new medicines for diabetes and related disorders. Another was Boston Children’s Hospital joining with Life Technologies Corp., of Grand Island, N,Y., to develop a lab infrastructure for genetic sequencing.

And Governor Deval Patrick announced the formation of the Massachusetts Neuroscience Consortium, where seven global pharmaceutical companies will team up to fund basic neuroscience research at Massachusetts academic and research institutions.

“We are having to move outside our comfort zone,” Viebacher told several thousand industry executives at the BIO luncheon Wednesday. “We are all under funding issues. We are all under pressure to see new models in research and are being driven into each other’s arms.”

While drug companies once worked to build their own research, manufacturing, and sales capabilities, that model is becoming less viable, the speakers said, as financial backers push them to outsource tasks that can be done cheaper elsewhere.

“This notion that you have to control your asset base, capital providers aren’t going to let us do that anymore,” Watkins said. “We’re all going to look a lot more virtual 10 years from now than we do today.”

Robert Weisman can be reached at weisman@globe.com.
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