Biotech Merger Mania: Listen Up

Many analysts have predicted a wave of mergers in the biotechnology industry. Now, it's happening. After all, many companies with promising technology now have low stock prices and are running out of money, making them takeover candidates. Something new is reflected in this new wave of mergers--many of the companies being taken over recently are the opposite of what has been predicted. They have money and are being acquired for their cash rather than for their technology. Read the latest in the New York Times on the topic. Go here.

Biotech has an insatiable appetite for capital for research, new product development, and just plain old daily operating funds. I will go on record here. Beware economic development friends. We are headed down a very slippery slope, and the economic development community just might be creating its own ice.

The biosciences are of major importance to our future. There is no question about that. Yet, the global "biotech frenzy" concerns me deeply. It smells of a 90's Internet revolution, and it's not a pleasant aroma.

We may be running the risk of flooding the market with far more biotech companies than can possibly survive. While it is true that the market can and will take "corrective action" to handle over-capacity problems, my concern relates to the substantial public sector investment being made in biotech, biosciences, life sciences, genomics and other terms you want to use to describe this sector. When these companies go belly-up or are bought by another company, your public dollars are either lost or seriously at risk.

Nearly every state and metro area across America is a biotech wannabe. Governors, legislators, mayors, chamber presidents and university presidents seem almost embarrassed if they don't mention the words "biotech" or "life sciences" at least five times in their speeches.

I see huge expectations being created that bioscience will save us from all our economic misery, and guess what? It will not. Can it help? Of course. Prudence, my economic development friends. Weigh your bets carefully. Be careful who you give your scant dollars to. I say invest in people and infrastructure that will remain in your community long after your fleet-footed biotech startup dances to another city. Start lifting weights today. The arm-wrestling could get ugly. Better yet, learn a martial art. Go here for one recent example.

Don't get me wrong. I like many of the things that I see happening in the biosciences across the U.S. and other countries. I will say it again. This is a vitally important industry to all us. My concern is the "cowboy economics" strategy that I see being followed in many places. "Ride 'em, rope 'em and brand 'em" is not the best economic development strategy for bioscience development.

Get out your calculators and run the numbers again. For some good ideas on how to get smarter about biotech, go here.