The bulk of biotech companies are firmly rooted towards the foot of the ladder of corporate evolution. Precious few can realistically claim to be at the top end of the evolutionary scale with full R&D capabilities, global reach and a strong presence in key disease classes. This is the view of John Morris, head of European Pharmaceuticals at business advisory firm KPMG, who believes that the biotech sector cannot escape from its dependence as a supplier to the pharma industry.
"After 20 years, only Amgen might claim to have made it into the ranks of the top global pharmaceutical companies - although even its turnover of $4 billion is dwarfed by that of Pfizer at $32 billion," notes Morris.
He is also less than convinced by current talk of mergers between biotech companies, as he believes gaining financial critical mass alone is an insufficient reward; the resulting companies still require new capabilities to be developed in sales force capabilities and global reach.
Morris believes that there are a number of potential future scenarios for the biotech sector. In one, relatively cheap, curative biotech products start to appear in high value pharma segments such as cancer. These products revolutionise therapy by moving from disease containment to genuine cures, wiping out the franchises of big pharma's life-extending treatments. The latter would seek mergers with biotech companies on terms favourable to the biotechs - trading market capabilities for access to new technologies - and the sector would revert to a strong technology-driven base. Profligate pharma marketing spends become a thing of the past.
However, Morris believes this is an unlikely scenario, for the simple reason that the technological and commercial leaps of faith appear too great for bio-aggregates to effectively displace big pharma.
In the second model, pharma companies fail to keep pace in innovation terms, and the consolidated 'super-bio' companies increasingly hold all the best patents and demand high fees for licenses. These super-bios would divide and conquer by selectively licensing only to the best pharmaceutical marketing companies in each key market, leading to a bipolar model with two types of company. On one side would be the consolidated biotech R&D companies, taking products through approval, aided by outsourcing. On the other side would be the pharmaceutical marketing companies, having slowly been driven out of R&D activities.
"I believe it is unrealistic to assume that big pharma could become so weak and small bio become so strong that the bipolar model could become the industry reality," said Morris. However, he feels a limited geographical version of the model is likely. "With the drift of the technology base to the US from Europe - in particular in terms of biotech strength - unfortunately for Europe there is a big risk that over time many European companies will become consolidated down to regional marketing companies."
In a third scenario, one could envision that the pool of major pharmaceutical companies concentrates down to 6-10 global players with revenue market shares of eight to 10 per cent each.
If the bio revolution continues only at its current slow pace, big pharmaceutical companies will have plenty of time - and the financial muscle - to absorb all the best biotech programmes, notes Morris. Even worse for some biotech companies is that, because the transition from basic bioscience invention to saleable products takes so long, a lot of early patent property will have expired before serious exploitation lifts off.
"The safe money goes on this super big pharmaceutical company scenario," in Morris' view. The best pharmaceutical company players will almost certainly continue to grow their market shares and global market power and this will give them tremendous leverage to acquire, rapidly develop and commercialise the best technology regardless of its origin. In the USA, there may be the possibility of a few more like Amgen, he believes, but even there, most will be swallowed up en route.