My #2 resolution for the new year was going to be, "Stop pontificating about the financial crisis and corporate malfeasance!" Really, it was. (#1 is to finish reading Montaigne's essays and stop pontificating about them. #3 is to get back to doing yoga.) After all, I've rambled on about finance, risk, and hubris ad nauseam these past few issues. I thought the subject was pretty much as drained as I am.

I even got done with my private ranting about Bernie Madoff's decades-long pyramid scheme before January 1! (Key lesson from that one? When people who are much smarter about money than you are get fleeced for billions, you may as well throw in the towel on the idea of "smart investing.")

By the time I was wrapping up this issue of the magazine, I thought, "Well, at least there hasn't been a major outsourcing story tied to the financial collapse."

And then the Satyam scandal broke, with the IT outsourcer's CEO writing a detailed letter to the board explaining how 94% of Satyam's cash-on-hand wasn't exactly on hand. In fact, it wasn't in anyone's hand; it didn't exist.

Just when I think I'm out, they pull me back in!

It's early days on this one, but the Satyam scandal doesn't appear to tie directly to the pharma/biopharma outsourcing industry. It does, however, raise some questions about corporate governance in Satyam's home country of India, where a number of drug companies are engaged in significant outsourcing.

The big question: Will Satyam's collapse turn out to be a canary in the coalmine of outsourcing to India?


It's a little comforting that the U.S. pharma industry hasn't followed other hordes of corporate America under the bailout TARP. Now that everybody and his brother is asking the federal government for a bailout, we should be thankful that pharmas haven't gone hat-in-hand to Congress to beg for loans. As someone meaner than me pointed out, Chrysler's plea of "It's not a bailout to keep us from failing; it's a loan to help us succeed," sounds remarkably similar to what a crack-addled relative would tell you when hitting you up for a loan (and shortly before pawning your TV).

We all know that major players in the pharma industry face a ton of lost revenue in the next few years, but they seem to be addressing their problems by changing their strategies: cutting costs, revising their R&D structures to focus on certain therapeutic areas, and otherwise trying to develop new business models. Maybe they're pursuing it a little late in the game, but at least they're not just making cosmetic changes. Big Pharma certainly doesn't possess the same baggage as the auto industry, but it's not exactly noted  for its nimbleness.

The big question: How will the economic slowdown affect the (generally cash-rich) major pharma companies? And the nearly-as-big question: Will it lead to more outsourcing or will the majors slow the pace of their divestments and keep more operations in house?


The greater concern with the freeze-up in credit and venture investment is that capital-needy startups and smaller pharmas and biopharmas will be forced to truncate their development programs, creating a years-long ripple effect among contract service providers, first affecting the preclinical sphere and eventually reaching Phase III and commercial-scale providers.

The big question: How will providers adjust if their smaller, strategic clients are cutting back programs?


The world of finance had a lot of negative lessons to teach us this past year, but I'm glad to say it also yielded a little positive wisdom. To quote a recent Wall Street Journal article about the frenetic activity leading up to the collapse of Lehman Bros.:

Gil Roth has been the editor of Contract Pharma since its debut in 1999.