The era of personalized medicine promises to be the catalyst for a major transition in healthcare. Factor in a greater understanding of disease on a systems level, and the promise for the future of healthcare is compelling: earlier and more precise diagnoses, treatments tailored to the individual, reduction of side effects and adverse reactions to drugs, breakthroughs in treatment, and ultimately, the prevention of major diseases such as cancer, diabetes, and Alzheimer's.

The industry is moving toward more personalized, predictive, and preventive (the three Ps) medicine that will revolutionize the healthcare system as we know it today. This movement is challenging pharmaceutical and biotechnology companies to adapt. Until recently, their focus has been on the discovery of blockbuster drugs. Now, with the convergence of information technology and genomics, smarter drug delivery and "labs" on a chip are leading us down an inevitable path away from concentrating solely on " and toward targeted personalized medicines and the spotting of early warning signs of impending health problems. We are closer than ever to understanding the genetic and molecular mechanisms of various diseases, and new diagnostic and prognostic tools will make it easier for clinicians to predict the outcomes of drug therapy.

The more we uncover about the human system—from the "omics" of genomics, proteomics, metabolomics, toxicogenomics, etc.—the more we can integrate this knowledge and build, piece by piece, the "networkeome," or full working knowledge of the body as a biologic system. In the meantime, new technologies for finding new drugs and drug targets, drug development, and genetic data are being used fruitfully to understand and correlate diet, disease, and health. As we move into the future, our toolbox will continue to expand and improve. We'll progress from treating sickness to truly treating wellness—that is, to the holy grail of medicine: preventing the emergence of disease.

For 30 years in the biotech business it has seemed, at least to outsiders, that the industry would be consumed by a wave of consolidations and mergers. The specter that biotech will see extensive consolidation has been raised as cash-rich companies, from both pharmaceutical and biotech, seek opportunities to broaden pipelines with product candidates that fit in-house expertise.

This scenario is unlikely to occur for two main reasons. First, individual deals happen for specific reasons, unique to each, and one combination doesn't necessary lead to large-scale industry consolidation. The second key reason why the industry is unlikely to see massive consolidation is corporate partnering, an activity that continues to build value for both pharma and biotech participants. The massive and record-breaking $20 billion in partnering deals during 2006 is certainly a testimony to this. With the exception of one or two mega-deals of the order of the 2005 Amgen-Abgenix deal and the 2006 Gilead Sciences –Myogen deals, partnering predominates.

Meanwhile, companies developing and commercializing therapeutics face tough choices; they must choose well in how they access technologies, capabilities, and human and financial resources. As the biopharmaceutical industry matures, the number of available options for accessing these resources has increased significantly; thus, entering into partnerships becomes an attractive option to outright acquisition or internal growth.

WHAT DOES THE FUTURE HOLD?

• Capital markets in the US will be more robust than in 2006, and biotech's elite companies will outperform the Dow Jones Industrial Average and the NASDAQ.
• Biotech IPOs will pick up and improve on their lackluster numbers from the past two years, and more than 30 IPOs will be completed in the US in 2007.
• More than $40 billion will be raised by the US biotechs; and the industry's market cap will reach an all-time high of $575 billion.
• The M&A biotech trends that were hot in 2005 and 2006 will not slow down, as Big Pharma will remain eager to access pipelines and innovation. Both Big Pharma and big biotech will compete for companies with advanced product pipelines, and both will seek to acquire new technology (as, for example, the $1.1 billion acquisition of Sirna by Merck, announced in November 2006).
• There will be no slow down in partnering deals, and a significant portion of the $20 billion raised will be directed at gaining access to technology at an early stage in its development as pharmaceutical companies strengthen their product franchises.
• Drug safety will continue to be a major issue in the wake of the Institute of Medicine's report on this subject. Regulators will take a increasingly proactive stance that will raise the bar for innovation and drug approvals, and pharmacovigilance will increase.
• Heated debates will take place about healthcare during the campaign trail for the 2008 presidential election; this could have negative repercussions for the healthcare industry in general.
• Sales of products will continue to increase, and more biotech companies will become profitable for the first time. In addition, despite stricter regulatory oversight, more companies will bring products to the marketplace.
• Biotech will continue to become more global as companies, particularly in the US, look to India and China for their manufacturing needs and to conduct clinical trials.