Print“Maybe we ought to reward our shareholders the way Sanofi is going to reward their shareholders with our profits.”
Matthew Perry came prepared. Perry, a portfolio manager for the Biotechnology Value Fund (not the Friends actor) was one of the panelists on the closing panel for the BIO Investor Forum, Forecasting 2011: Clear Skies, Darks Sikes, or Just Leave it to the Magic 8-Ball?”
The annual gathering at San Francisco Palace Hotel, hosted by the Biotechnology Industry Organization, brings together emerging life sciences companies with investors in the sector.
When moderator George Millstein, managing director of Wedbush PacGrow Life Sciences, asked the panelist about whether Sanofi buying Genzyme would be a good thing for biotech investors, Perry pulled out his Magic 8-Ball (not just an ordinary Magic 8-Ball, but a Berkshire Hathaway Warren and Charlie Magic 8-Ball), gave it a shake, and read the result. The inky oracle of Omaha declared, “Sweet deal.”
But once the laughter ended, Perry offered some less enthusiastic thoughts about the possible acquisition and a critique of biotech’s willingness to turn a successful product into fuel to grow infrastructure.
Perry, who said he’s not close to Genzyme, began speaking hypothetically in terms of a pharma-biotech acquisition. He asked if the reason Sanofi is buying Genzyme is because it wants to capture the revenue from the products and shut down the rest, why can’t biotechs learn to do this themselves?
He said when companies have one or two successful products, they use the revenue to fund massive infrastructure. “If the internal engine isn’t productive, maybe these companies themselves think, maybe we should pay a dividend. Maybe we ought to reward our shareholders the way Sanofi is going to reward their shareholders with our profits.”
While paying dividends may not be a very biotech-like approach, Perry suggested other lessons biotechs could learn from Big Pharma. He said just because a company had success in moving a product to market is no guarantee that it will be able to do that again.
His suggestion is companies should be more opportunistic and look outside themselves for new products.
No doubt drug development is slow, expensive, and frought with failure. The lesson may be that success is not easy to replicate, but just enough of it can make you vulnerable to an acquisition that plunders a company’s prized assets and gets rid of everything else.
October 08, 2010
http://www.burrillreport.com/article-behind_the_magic_8_ball.html
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