Global Financial Crisis-It’s effect on Life Science Industry

                 Global Financial Crisis-It’s effect on Life Science Industry
   
     India’s and almost all countries most innovative sectors is facing potential catastrophe in the current financial crisis, as many ‘Life Science’ companies face increasing difficulties to access the funding they need to keep afloat. As per NSE, BSE view on behalf of the Indian ‘Life Science’ Enterprises, paints a grim picture of the impact of the crisis on the sector.
    The problem is particularly more acute in healthcare life science/biotechnology because product development can take up to 12 years of research before companies have a viable, marketable product. This means many companies are dependent on external funding for liquidity – a resource that almost disappeared as the financial crisis continues to bite. In addition to the impact on the basic research performed at Life Science companies, development of medicines by pharmaceutical companies has also been hit by the credit crunch.
      The global financial crisis could seriously delay the discovery and production of many new life-saving medicines. Drug discovery depends on long-term finance with high risk of failure and lots of it investment into research for new drugs which globally runs into the billions is now seriously at threat as former investors in the drug companies shy away as a result of the economic meltdown
     Financing of biotechnology companies hit $50bn in 2007. And overall, this biotech’s only made profits for the very first time last year, amounting to $1bn on revenues of $59bn by a report across American, European and Asian countries. But the strategy before the sun shine in their success and further growth it has being into halt deprived in name of financial crisis. Whilst the immediate impact would be highly damaging, the long-term ramifications would be much greater. In the medium to long term, it could spell a major setback to “Life Science Companies” future competitiveness. Bankruptcies on any scale could mean that the benefits of health research already undertaken by the scientific enterprises may be lost. For medicinal products under development, which already have a limited patent life, this will further reduce their appeal to potential investors.
  The current financial crisis is first and foremost a crisis of confidence. The tip of the iceberg may be the subprime mortgage crisis and its immediate aftermath, but the roots of the crisis have to do with unsustainable dual deficits (fiscal and trade) that have resulted in gargantuan levels of Indian debt, both private and public.
  Ultimately, we have to recognize that a financial system built on credit cannot survive if the issuer of that credit continues to pile up debt. For years now, we in the India have been consuming beyond our means, relying on European/American and oil-exporting countries to finance our expenditures with their trade surpluses and other savings. A long-term solution to this problem can only come from careful rebalancing of global production and consumption patterns. We need to produce and save more; other countries need to consume more of our go….
   
  Credit is limited, but life science firms that hoard funds right now, instead of using them for investments and operations, are directly contributing to the downward cycle of the economy. Constrained life science firms plan cuts in operating costs this year that are roughly twice as deep as unconstrained firms. That includes approximately slashing employment by 35 percent, research and development by 50 percent, marketing by 35 percent and dividends by 10 percent. The forecasts are likely conservative.
  There is no avoiding the tough market conditions that companies are facing. All markets have slowed and some are in significant recession. The current crisis has removed any doubt as to how tangled risk is with performance. The volatility of the economic crisis has increased the pace at which life science industries need to revamp their organization and value chain. Every business trading today must anticipate that their performance is in constant jeopardy, so whatever their business or operating model, improving performance must be a key business objective, closely aligned with an immediate and long term focus on reducing costs. The crisis could deepen further in 2010 if the current situation persists. This unprecedented state of affairs means that over 50 % of small life science companies already feel under threat.
  Many industries face challenges in this climate; however the life/bio science market is unique. This is not just about saving jobs in the short term, it’s about protecting India’s capacity to drive medical innovation and health care. Small life/bio science companies represent a substantial part of the future of India’s health and competitiveness. If we do not support the sector, much of the innovation already created may be lost.
  One potential solution could be for urgent assistance from the Investment Banks. More over the government has to establish some credibility for the Banks (Indian Banks). The Bank’s credibility is in urgent need of repair following a catalogue of failures.
 failure to regulate banks;
 failure in good relationship with investors;
 failure to spot bad lending;
 failure to mitigate financial risks;
 failure to provider proper financial oversight;
 failure to rescue insolvent banks;
 failure of monetary policy;
 failure to maintain political independence and
 failure to keep inflation within target.
   
  Governments, companies and regulators must reduce the rewards for growth and profits to avoid a far worse crisis and the collapse of the life support systems. Industry need to secure their positions by identifying and resolving critical issues quickly to protect against value erosion, or to be well placed to take advantage of opportunities. A holistic review of a company’s ability to access liquidity, manage and release cash and control costs is essential to managing overall risk from changes in market forces. This review needs to extend beyond the business to include the health of both its supplier and customer base. By demonstrating faith in healthcare bio/life sciences, the institutions and companies can maintain confidence and attract potential investors to come forward.
    The current economic crisis is calling into question business model fundamentals and putting all companies in stress. Volatility and uncertainty are the foremost characteristics of the new world economy and may well be for quite a while to come. Yet experience of previous recession’s shows that there will be companies continue to prosper.
There is opportunity in the adversity of the worst of markets. Be encouraged to find that opportunity right now.