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March 29, 2004
Play It Again
I've had some e-mail from a colleague who says that GlaxoSmithKline is running an ad somewhat similar to the one that I sketched out last week. It ends, he tells me, with the phrase ""Who pays for medicinal research? Pharmaceutical companies do." Sounds like they've taken the results of that opinion survey to heart. Perhaps it'll help. I have to say that I haven't seen the spot (but I don't watch much television, so I might not be a good data point.)
Wonder where and when it's running? Any sightings out there? Perhaps we can assemble a reverse demographic. The ad buys might be rather revealing about where GSK thinks that they can do the most good. Do you target the people whose opinion might be most open to changing, or for those whose opinion would do you the most good if it changed? Generally speaking, those aren't the same groups.
And secondly, my mention of Jazz Pharmaceuticals' ferocious fund-raising round brought a response from someone who actually does venture capital work for a living. And if the whole thing seemed a bit odd to me, well, here's how it seemed to him:
It's ridiculous. The guys who funded that company are going to have their heads handed to them by their limited partners when that deal blows up.
Even IF they successfully in-licensed and developed a couple of drugs, how are they going to make back their money? The guys who bought in got LESS than half the company. You want to see at least 15-20% returns on VC money, or it's not worth the risk. It will have to go public at over $1 billion in the next 3 years to even come close to hitting a decent return for these guys. If they have to wait for 6-8 years (more typical), it'll have to go public over $2 billion. That's what they're betting on. I'd rather buy a lottery ticket.
While I'm on the subject of Jazz, another reader from Big Pharma sent this along:
I agree that it's going to be risky and expensive going this route as a start-up with CNS therapeutics. However, I think you could reasonably argue that this is now more or less the situation (and for all the therapeutic areas) at Bristol-Myers Squibb. All of their recent drugs have been in-licensed, I don't think their Lead Discovery has produced a drug for them in at least 10 years. . .
He's got a point, and BMS has company. There are other companies that have just one or two products of their own to show for that same stretch of time. I'll name Pfizer and Schering-Plough just for starters. The problem with running an inlicensing operation these days is that there are too many people trying to play the same game. Pipelines are so thin that any outfit with a real candidate can hold out for an insanely good offer (remember the crazy sums that BMS laid out for things like Erbitux?) So where is Jazz going to find these great drug candidates? And how much are they going to have to pay?
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