There’s been a flurry of mergers in the pharmaceutical and biotechnology industries lately. My Manhattan Institute colleague Paul Howard has some thoughts on one of the more interesting potential transactions: the hostile bid for Illumina, a genetic diagnostics company, by Swiss pharmaceutical giant Roche. Roche already has a diagnostics division, so they don’t need the acquisition to help drive any of their targeted medicines. After all, once you know the “target” for a personalized cancer drug (like Herceptin) and get it on the FDA-approved label you don’t need to know anything else about your patient’s genome.
So why the Illumina bid? (Besides the fact that the stock is way off its high.) This Bloomberg Businessweek article gives a lot of good background on the bid, and asks a lot of good questions.
Analysts also point out that the market for the expensive gene-sequencing machines – primarily academic scientists with government grants – is a shrinking market right now, so Roche’s bid has got to be about the future market for genomic technologies more than the present one.
What is the next market for super-fast, cheap gene sequencing? It’s hospitals, doctors offices – heck, maybe even the CVS drug store down the street. That’s the future of genome sequencing: fast enough and cheap enough to become a consumer commodity.
(I think that Roche is betting that if you’re willing to pay $500 or $600 today for a tablet to play Angry Birds, you’d pay the same – or more – out of pocket to know your or your children’s genetic future. For instance, what diseases to watch out for, what drugs or vitamins to take – or avoid – etc.)
The problem I see is that we don’t have a health care system, or a regulatory system, that is prepared to interpret the flood of genomic information from Illumina’s superfast machines and then turn it into actual clinical knowledge. The FDA has already signaled that it’s very leery about consumer genomic services, and without that approval the technology isn’t going anywhere. (And even then, it still has to be translated into plain English for physicians and patients.)
Roche, I think, has the complete play here. They’re intimately familiar with the regulatory hurdles at the FDA, and know how the agency thinks and what kind of data they will be looking for in terms of regulatory approval for genomic applications. They’ve got marketing channels into physician and hospital offices, and the science research base to help translate emerging genomic discoveries into clinical information and – better yet – personalized treatments coming out of Roche’s labs.
If personalized medicine is going to expand beyond specialized cancer treatments, companies like Roche will lead the way since they have all the tools to translate the genome into mainstream medicine.
The question is, how long will it take (5, 10, 15 years?) for the transformation to become complete, and how much (or how little) regulators will slow the revolution down – in the name of protecting consumers from themselves.
Hopefully, innovative companies will be allowed to lead the way, with the FDA just validating the underlying methodologies.