Pharma and biotech: is there love?

    For biotech, this fresh ardor couldn't come any sooner. The industry has been battered by capital shortfalls in the current economy. While dozens of companies have failed, others have sold themselves for fire-sale prices. The big BIO bash itself has seen attendance fall from over 17,000 a few years back to about 15,000 this year.

    "Pharma is definitely doing more deals," says Mark Litton, chief business officer at Seattle-based Alder Biopharmaceuticals. His company recently completed a $1 billion milestone and licensing deal with Bristol-Myers Squibb (BMY, Fortune 500) -- including $85 million up front for an innovative rheumatoid arthritis drug that just finished phase-two human trials.

    "Given the public markets, it's hard to raise funds," says Litton. "This cash helps and we don't have to go back to venture capitalists and further dilute our shareholders."

    Pharma-biotech deals seem to be favoring partnerships at the moment in part because buying biotechs and absorbing them into the mothership has not always worked. Also, Pharma is mostly interested in late-stage drugs with the highest chance of success. But these deals are more expensive, pushing some pharma companies to embrace riskier early- stage projects as well.

    There is a danger in too much love, however. "I think there's too much hype about the biotech industry," says George Poste, former president of R&D for the old SmithKline Beecham and now a professor of health innovation at Arizona State University. "If Pharma trims too much, it might not solve the problem. Biotech has a great deal of innovation, but it's not a panacea."

    We won't know for years if this marriage will last, since it typically takes a dozen years to develop new drugs. I suspect, though, that this new relationship will increase the odds that more innovative drugs will emerge. Poste believes this might take 10 to 20 years. Let's hope the offspring of this new marriage will emerge sooner rather than later.