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Genzyme CEO predicts more jobs but fewer biotech companies

Henri Termeer transformed Genzyme Corp. from a modest venture in the early 1980s to one of the world's leading biotechnology companies. Yet even he is cautious about the future of his industry.

"After 20 years, the biotech industry is chronically unprofitable," Termeer told a Tang Center audience at the May 12 Industry Leaders in Technology and Management Lecture sponsored by the Center for Technology, Policy and Industrial Development (CTPID) and the Office of Corporate Relations.

A second major challenge faces the industry: "The health care delivery system is in no way geared to receive the innovations we are trying to create," he said. "It's a real bottleneck."

Nevertheless, Mr. Termeer, Genzyme's CEO, president and chairman, has led his company to profitability, one of only about 10 of the existing 1,300 biotechnology companies so distinguished. Collectively, the industry produced $18 billion in revenues last year but still lost $5.1 billion, he said. And this industry loses more money every year -- losses sustained by venture capitalists and stockholders.

Repeated losses have cut into investors' faith in the once red hot biotechnology field, Mr. Termeer said. He predicted that in the next 10 years, a dozen companies will thrive and the rest will simply disappear. Yet the strength of these companies, combined with increases in federal research spending and growth in research-based pharmaceutical companies, will account for overall job growth.

Increases in the National Institutes of Health budget, predicted to double in the next few years to $40 billion, will help the biotech industry by funding basic research at academic institutions, which will ultimately reduce development costs.

Biotech's other problem -- delivering innovations to patients -- is an outgrowth of efforts by health care providers and insurers in the mid-1990s to reduce costs. The Clinton administration's early focus on health care reform resulted in an array of reimbursement regulations and cost constraints, Mr. Termeer said. "Technology became a problem" rather than a solution to human suffering, he said.

Today, if new drugs or procedures cost more than existing therapies, they may be denied to patients even if they can reduce suffering and save money in the future. And new therapies are slow to markets -- despite the FDA's progress in shortening average approval time from three or four years to 12 months -- because insurers are asking for additional efficacy studies. "This slows down innovation," Mr. Termeer said.

Mr. Termeer, a board member on numerous biotechnology corporations, trade groups and business organizations, also has won awards for innovation as well as for human rights efforts. Ultimately, he sees the biotech field as very human and very rewarding. "In the biotech industry, we are trying to create more life during life," he said.

A version of this article appeared in the May 19, 1999 issue of MIT Tech Talk (Volume 43, Number 31).

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