At the top of the industry, consolidation has frozen out much additional M&A; horizontal mergers among large companies have become much more difficult to get through regulatory authorities as the industries themselves have consolidated. In medical devices, M&A is at a 10-year low, reflecting a paucity of high-value small-company opportunities. Perhaps as important, some successful big-company development programs undermine a basic assumption of medical device investing: that big companies must source innovation from small ones, usually through acquisitions. Meanwhile In biotech, the number and value of M&A is down, despite the apparent logic of consolidation and the unprecedented willingness of sellers to accept low valuations. The key problem is that there are few buyers: those without extremely strong balance sheets aren't willing to take on additional burn rates, having seen some acquirers come to grief as their new, apparently stronger companies are unable to raise money in this bear market.

Hungarian start-up Solvo Biotechnology is attempting to create therapeutics to treat multidrug resistance--a phenomenon describing a cancer cell's ability to resist the toxicity of chemotherapies. Solvo is developing compounds targeting molecular pumps that expel cytotoxic drugs from cancerous cells.

Xiangmin Cui's vision, in co-founding Pan Pacific Pharmaceuticals two years ago, was to combine his personal knowledge of traditional Chinese medicines with the scientific training he received both in China and at Stanford University. Pan Pacific's lead compound for rheumatoid arthritis has been successfully cloned and expressed, and shown to be identical in structure and activity to a naturally occurring molecule with potency against the disease.

Boehringer Ingelheim has restructured to emphasize partnering--both to bring in new products and technologies, and to boost its global market share. The strategy is paying off.