..or blood in the streets – what does the future hold?
With darkness clouding the economic horizon in Autumn, the prospects for the lifescience industry seemed turbulent enough to warn about battening down the hatches. It is anything but comfortable to be right in the application of Murphy's Law – but on analysis of recent events in the global economy, Murphy was probably too optimistic.
As 2008 got underway after the new year celebrations, we have seen financial markets in turmoil with foreign currency gyrations, panic measures to head off a pending recession with interest rate cuts by the Fed and markets slaughtering investors already on the run from property values, pumped up by cheap money, collapsing from gravity defying heights
Shares in pharma have been particularly hard hit although biotechs that managed to survive the lean years since 2000 have been relatively resilient. What is now really spooking economists is the ugly spectre of inflation coupled with a slow down in growth, a.k.a. "stagflation."
To lower interest rates in an effort to stimulate growth risks pouring highly flammable fuel on the fire of inflation. The battle could be one of attrition with higher taxes prescribed by fiscally prudent politicians no longer boasting how they had licked the problem while blaming it on global markets.
It's tempting to imagine that an ocean of cash from property and commodities sloshing around the world will start to find a forgotten home in value investing for the future, driven by demand for improved healthcare provision. However, while the global lifescience industry struggles to get to grips with the high costs of discovery and development, which is not helped by the spectre of stagflation, maybe we haven't yet seen enough blood letting. While the gleam of gold might give the illusion of a safe haven, there's a glimmer of hope from the news items and short articles in AiLS as we see organisation and management changes, some axe wielding, consolidation, takeover speculation - and maybe lots more outsourcing….
Keywords : Lifescience prospects, Global economy, Analysis, R&D, Discoery and Development costs, Value investing, Outsourcing,
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