Is the BMS industry safe in this current recession? The answer is both yes and no.

Many companies in the pharmaceutical and biotechnology sector have used external sources of financing to fund their research efforts. These days, under the impact of recessionary trends, funds are hard to come by. With banks and financial institutions collapsing and the increased need for liquidity to manage their own businesses, bank loans are tough to manage at much higher interests or may even come to a halt.

However, this is generally not a cause of worry for big pharmaceutical companies which have been traditionally cash-rich and relatively debt-free over the years. On an average, any of the top 20 pharmas have access to $7.5 billion in cash, equivalents and short-term investments and their average net debt, as percentage of capital employed is just 6%. But the scene is indeed a bit worrying for the smaller biotechnology companies who have relied much on external sources of financial assistance to support their research.

Experts say that we will be looking at acquisitions of smaller biotechnology firms by the Big pharma, in this current recessionary period.

Measures Taken to Reduce the Impact

Unfortunately, the measures adopted by most companies across the globe is to reduce head count or make salary cuts.

Lay-offs will be made mostly on the sales side of the business and the research side. There will also be a transition of R&D pipeline from the mass markets to the niche sector. For instance, companies like Pfizer, Bristol Meyers Squibb and Wyeth are now focusing on just two or three disease areas and are particularly enhancing their biotechnology-based research.

The Industry will Emerge Stronger

There is no doubt that the economic slowdown is bound to impact the ability of patients to pay for their health care. However, the need for emergency health care cannot be denied. There will also be patients who will be in need of drugs in any economic situation. Hence, companies dealing with life-saving drugs and other medical supplies are likely to remain afloat. For example Becton, Dickinson, which specializes in syringes and surgical tools and Baxter International, which specializes in drugs for treatment of blood and immune disorders have announced high profit gains for the last quarter and they even increased their full-year earnings estimates.

The area of “Preventive Medicine” is also likely to be another shining star in the midst of this economic darkness. When times are hard, people will be looking towards preventive medicine which will help to reduce the burden of health care costs.

In India and South-East Asian countries, experts say that medical tourism is another segment that might see continued growth despite the global economic downturn. This is due to the sheer advantage of low-cost health care and superior quality of health care professionals present in these areas. Since the economic downturn, many employers are encouraging their employees to seek medical care in the mentioned countries, even if they have to pay for the airfare. This is due to the lower expenditure of a surgery performed in India than in the United States or United Kingdom .

This article is written from a holistic viewpoint, in an attempt to address issues from a global stand. We can see that the Biomedical Sciences industry is relatively safe as long as the companies are able to catch the niche areas to focus their R&D pipeline on. Fortunately, it is unlikely that the Big Pharmas will collapse like the financial institutions. However, we do have to acknowledge the cold fact that job lay-offs are inevitable as a measure to cut the costs of operations.

Perhaps, the silver lining in this cloud is that the BMS industry will emerge stronger after this financial meltdown.

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