Westphal on the Life Sciences Innovation Paradox

I had a chance to sit down for a few minutes with entrepreneur and ex-VC Christoph Westphal at the Biotech Business Development Conference he organized today at the Charles Hotel. Mostly, we spoke about Westphal's assessment of the current environment for life sciences in Boston.

We're in the midst, he said, of "an unusual and profound downturn" in which big companies will get smaller, and some small companies will disappear.

On the VC industry: "They haven't done a good job of returning capital over the last ten years." Why? Too much focus on what's perceived as safe: specialty pharma, "retreads," and in-licensing. When venture capitalists do well, he suggested, it's by investing in innovative stuff -- and here, as examples, he offered up three companies he has been involved in starting (Momenta, Alnylam, and Sirtris). "People do pay for disruptive technology," he said.

But the paradox of today's climate, Westphal suggests, is that while big pharma companies seem to be saying they're still willing to pay for innovation -- drugs that are truly differentiated -- there seems less willingness of the part of investors to take risks on "big vision" companies. "There's less money available, and more contingencies on taking that money," Westphal said. The hurdles to getting money are much higher today than any time in the past ten years, he believes.

But while the screen is incredibly fine right now, the few companies that can get funding will be able to attract great people, he said, encounter fewer competitors in the marketplace -- and presumably see a payday at some point down the road.