BioWest Day 2 offered two presentations and a job fair to round out an exciting two days. The day began with a panel discussion of what large pharma and medical device companies are looking for. Panelists Dick Brandl and David Snitman covered the topic from opposite ends of the spectrum. Brandl serves as the Director of Business Development for Medtronic Navigation in Louisville, giving him significant experience from the perspective of the acquirer in medical device deals. David Snitman, as COO of Array, has formed a number of partnerships with large pharma and biotech companies to support drug development and commercialization.
Both panelists noted that large companies – in the drug and device world – are generally more suited to “development and commercialization” as opposed to research which generates opportunities for small research driven companies. Neither panelist felt a small company needed to have a credible threat of going it alone (all the way through commercialization) in order to get favorable deal terms. As Snitman noted, especially in primary care indications the costs of getting to market are so high that even large, cash-rich pharma companies are partnering together to share risk.
Comments on several other topics are included below:
- Changes in deals – Brandl remarked on a somewhat more conservative approach taken by large firms in recent years, as Medtronic will often partner with companies for a year or two before seeking an acquisition in order to gain a deeper understanding of the product and risks.
- Important terms in deal aside from cash – Snitman cited the importance of the smaller partner retaining some control over continued development as ceding total control leaves open the possibility the large company may shelve the product if strategic priorities change.
- How type of product impacts deal timing – In Snitman’s view a first in class product is more likely to be acquired early (pre-clinical or phase 1), while a best in class molecule will likely need to wait until Phase 2 to see clinical data that supports claims of superiority.
- Valuing the deal – The panelists diverged pretty significantly on approaches to assessing value. While Brandl noted that for Medtronic “there is always a financial model” using risk adjusted cash flows (usually discounted in the 13-18% range), Snitman relied more on multiples and comparables, considering market analysis only as a guide to the order of magnitude.
- Most important product characteristics – To Brandl it came down to clinical proof and reimbursement. Reimbursement is important because “most clinicians and hospitals are business people” so the economics must be considered.
- Factors leading to a deal failure – 80% of the time, according to Brandl, deal failure results from not hitting top line sales projections while only 20% of time it is due to cost or synergy factors.
The conference closed its presentations with T.R. Reid, a veteran Washington Post Correspondent and author of nine books offering perspectives on healthcare systems outside the US. After some promotion of his new book Sick Around the World available next May, Reid did not shy away from presenting a controversial thesis stating that all comparable nations (which he defined as free market, advanced, industrialized and democratic) have better healthcare systems than the US. Specifically, these comparators “cover everyone with high quality care that costs less.” Reid cited the disparities of care offered in the US: Those with good insurance have access to “the best care in the best facilities,” yet each year 20,000 uninsured or underinsured die of treatable conditions because they can’t afford a doctor and up to 700,000 file for bankruptcy due to medical debt.
As research for his book and documentary, Reid visited many other countries and spoke with physicians as well as health official. Based on this research he tried to dispel some common myths about other healthcare systems:
- “It’s all socialized medicine” – Reid noted that the British system (NHS) is essentially socialist as the government both serves as the employer of physicians and the payer. In many other countries, doctors are private while the government serves as the payer. Still other nations, like Germany, have both private payers and physicians.
- “Government healthcare leads to a bloated beuracracy” – According to Reid, private insurers in the US spend between 15-25% on administrative costs, while in other countries the government administrative costs run closer to 5% (Canada-5.5%, Britain-6%, France-3%, Taiwan-<2%)
- “Other countries save money by rationing care” – All countries limit choices to some extent to save costs. In some countries, especially Canada and Britain, rationing is done through long waiting periods before having access to specialists.
Reid also noted the differing perspective that a government takes compared to a private insurer towards preventative care. As the British health minister noted, he must concern himself with prevention as all residents will be his patients for a lifetime making any cost future cost savings highly relevant. Compare this with the perspective of the Aetna CEO who only insures a person for an average of 4.8 years.
Reid then laid out four models for healthcare delivery (summarized in the table below) noting that all four models were actually employed in the US.
| Model | Explanation | Example Countries | US Use |
|---|---|---|---|
| Beverage | Socialized Medicine | UK,Spain,Italy | VA, Military |
| Bismarck | Employer coverage, government covers unemployed | Germany, France, Japan | Employer Insurance |
| National Health Insurance | Government pays, private MDs | Canada, Taiwan | Medicare |
| Out-of-pocket | Self-pay | Most developing countries | Uninsured |
Comparator countries all primarily employ a single model rather than the piecemeal approach of the US. Reid asked several high ranking health officials why their countries used a single model and got two consistent answers – cost (due to consistent rules) and fairness. To Reid, the fairness question is a conversation that to date the US has chosen not to consider. Reid firmly believes that the US has the assets – both human and physical – to offer the world’s best healthcare through any of a variety of methods, but first it must choose to address this question of universal access to healthcare.
The 2008 BioWest Conference closed with a job fair after a remarkable two days. The Colorado Bioscience Association can be commended for both administering a well managed conference and for its prescience in choosing an array of speakers who could address the political and economic volatility transpiring now.
