From Corey Goodman's fifth-floor office window in San Francisco's new Mission Bay neighborhood, he can see cars rush along an elevated freeway, he can hear the clangs and groans of a commuter train and he can watch construction cranes add yet another building to the University of California, San Francisco's biotech campus. It's constant activity, and it's the perfect setting for him.

The biotech veteran is a heralded neuroscience researcher, a professor, a co-founder of Renovis Inc., since acquired and shut down, and Exelixis Inc., still going strong, and most recently, the architect of drug giant Pfizer Inc.'s attempt to build a network of research nodes. The Pfizer gig ended after only two years; Goodman says he was "getting antsy to get back to the biotech world."

He has done so with alacrity. In July he oversaw a merger of two stem-cell startups and became chairman of the board. He was elected chairman of another startup working on cellular "pumps" that limit toxic side effects of drugs. He's dipping a toe into greentech, with a startup based on a chip that identifies and measures bacteria in environmental samples. He's also working with former MPM Capital LP partner Kurt von Emster and Morgan Stanley alumnus Paul Brooke on an investing vehicle they're calling venBio.

In his spare time, he's also helping his wife selectively breed sheep for milk (think really expensive cheese) and meat on their property in Marin County. (Goodman is just as eager to talk about his favorite local chef "honoring the animal" by using all the parts in a dish called "two brains ravioli" as he is about the genetic pitfalls of the meticulously bred sheep.) e_SPar In his office, Goodman sat still recently, at least between phone calls, to discuss new financing models and scientific advances, Big Pharma's Washington problem and his time at Pfizer with The Deal.

The Deal: You and others say Big Pharma is too monolithic and the model is unsustainable. But we've seen three megamergers this year.

Goodman: These are very smart people, they understand what's going on. We're going through a period of consolidation just to deal with near-term pipelines. You'll see for the long term, R&D models are going to change to smaller, more entrepreneurial-type units, like what we were doing with Pfizer. You hear similar ideas coming out of GlaxoSmithKline. You hear about the CEO of Sanofi-Aventis thinking about new models.

You're also going to see more acquisitions and deals with biotech. I'll guess you get better ROI from the deals [Big Pharma has done] with biotech than what they have from internal programs. The people running those companies know it. They have to morph.

Different companies will do different experiments. There's not one right answer. The most extreme is you have no more R&D pre-proof of concept [about half way through clinical development]. Everything before comes from the farm system of biotech. And within that possibility, are you acquiring companies or compounds after Phase 2 POC [proof of concept]? Doing deals? Partial ownership? Like Roche and Genentech, with a 50% ownership? Do you have them off your P&L with less than 20% ownership? Is it done through different venture or private equity groups? You and I could come up with a dozen different models of how to build this satellite system.

I still think pharma has to have enough internal scientific excellence to evaluate what's outside and help move technologies along, so I favor a hybrid model: research in small nimble groups inside, but also groups that were outside, like Pfizer owning Rinat and CovX.

There are things you can partially own with put and call options, all kind of creative ways to take your money and leverage how you're investing in these entities. To me, that's the future.

For years, pharma has had its way in Washington. But the record over the past few years has not been great, with R&D costs rising but fewer innovative drugs coming to market. Can pharma really claim to be the protectors of innovation?

You're raising several issues. First of all, they are driven like any public company by the bottom line. We live in a system with so much focus from the outside on quarterly earnings and less on innovation and long-term growth.

That's not their fault. It's part of the system we live in. So each of these companies has to face how to make earnings per share but how to drive long-term innovation and come up with the next generation of drugs.

When it comes to Washington and regulation, our government does have the capability to stifle innovation. It's something I worry about. Take importation. I cringe a little when I hear members of Congress say we can't import drugs because we need to protect the safety of the American people. We're not talking about importing drugs from Nigeria. They're from Canada, so that's a bogus issue. But before you could buy things over the Internet, our government allowed industry to make a pact with Europe and other countries that's now coming back to haunt us. We have to renegotiate. Obama and his team have to break down the barrier of these price controls. We have to find a way -- perhaps for Europeans to pay more and Americans pay less.

I was in a friendly debate with a guy from NICE [National Institute for Health and Clinical Excellence, the British health-service group that sets reimbursement rates]. His argument was "Well, if you guys didn't do all that advertising on TV, you wouldn't have to pay so much for drugs. You're asking us to pay for your television advertising." I'm not sure that goes, because a lot of drugs aren't advertised on TV. It's a big issue and has to be solved politically by our government.

If I were the chief executive of NICE, I'd say, "Why pay pharmas more when they've been tripping over themselves to get drugs to market?"

Fair enough. And so now we need a new model, and we need to be more entrepreneurial in how we do R&D. I still think the English and Europeans and others will have to pay a bit more if they want to see new drugs developed. There's such enormous opportunity in our lifetimes to see cancer become a chronic disease, to see Alzheimer's and diabetes solved, that this is not the time to give up on investment.

As for getting drugs to market, some of the new biologic technologies will lower attrition from toxicology issues and increase productivity.

Some next-generation antibody technologies and antibody-like proteins, new peptide technologies, nucleic acids, regenerative medicine and stem cell technologies -- there's a lot coming along with the potential to solve major medical needs and lower attrition.

There will also be more emphasis on the biology, on primate studies, on human genetics, on taking cells from patients with known genotypes and phenotypes and make them into specific cell types to screen drugs on. This is what induced pluripotent stem cells allow you to do. It's the capability to do earlier experiments on cells from humans with particular diseases and to probe the human genetics. I think you'll be killing more [compounds] earlier, and the things you take into the clinic you'll know more about. You no longer have to rely on a rodent model.

The hope for faster, more efficient R&D has been around for years. Will improvements really matter when we're at a point where VCs might never come back to early-stage startups?

It's true, when you go to the academic centers right now, there are a lot of interesting ideas that are hard to get funded. We're going through changes in models in exit strategies and changes in the venture world. I believe we're going through a period of consolidation; the word is that perhaps 25% of biotech and healthcare venture firms will go away, unable to raise new funds.

But I'm an optimist. I think there are still great biotech companies to start. Months ago people were saying biotech companies can't get funded. Well, I've just become chairman of two companies I've helped get funded. Things are starting to thaw out a bit. There are VC groups investing in new companies. Two I like are Third Rock in Boston, and the Column Group, run by [Tularik co-founder] Dave Goeddel. They're getting some of the smartest scientists.

I'm not saying there aren't smart people out there. But until the pool of capital expands, should we look to the government to do more funding?

We shouldn't ask [the National Institutes of Health] and taxpayer money to make drugs and therapeutics. They're good at funding basic biomedical research. What they do is key, but when you ask them to do what commercial enterprises can do better, it's a mistake. We have to find new models of garage investments, incubator investments, that sort of thing.

Is that what venBio is?

I'm not prepared to talk about it right now.

What about increasing ties between pharma and academia? Any worry that the public good and private interest might diverge?

I'm not worried as long as you're transparent, people understand what's going on and make sure things are properly disclosed. Taxpayers are counting on their investment in NIH and the universities to be paying off and that the discoveries get translated into therapeutics. We can't leave academia as an ivory tower.

When I was a professor, I had over $1.5 million a year coming into my lab. I had major support from the Howard Hughes Medical Institute, I had support from NIH grants and disease foundations, all sorts of post-docs and grad students on various fellowships. You're already running a small business with a budget that's greater than a million dollars a year, and it's your choice where you get your money from. If you don't want to get your money from Abbott or Pfizer or someone like that, that's fine. You have the choice.

With the UCSF-Pfizer deal, the university gets the IP rights and Pfizer gets rights of first negotiation. I helped negotiate it, and I think it's fair for both sides. There are people at UCSF who have ideas that, with a little more money, might have a chance for more clinical application, so let them work with Pfizer or somebody else. If they want to spin out their own company or get some other kind of funding, it's free will.

Why did you leave Pfizer?

I was there two years. We got the model up and running. It was working beautifully, and I was getting antsy to get back into the biotech world. And now there's a transition with the acquisition of Wyeth, so it seemed an appropriate time to hand it off to others and come back into this world.

Did the Wyeth deal surprise you?

No, I was part of the decision. I completely supported it. Nonetheless, when you have such a huge acquisition going on, there's a lot of focus making sure you have the cost savings you've promised to the Street. I thought it was the right juncture to leave. I never viewed Pfizer as my permanent job. I had turned down Big Pharma jobs before, but I like to tease Jeff Kindler and say he seduced me into this job. When he recruited me, he was very charismatic and smart. I found the notion of building the model seductive.

Because of the recession, do you see fundamental shifts in financing models?

We have to find the most frugal ways to move early things along. I like some of the incubator models, or starting a bunch of companies and letting them use a common management and capabilities. You can't build a company where you have everything inside.

I'm in the process of starting a new biotech, not Limerick or iPierian. I'll be chairman, and it's a very different model. It's based on technology out of the Lawrence Berkeley National Laboratory and involves the Phylochip. You can use molecular biology, genomics and informatics to look at every microbe in a sample of air, crops, water or soil, look at all 50,000 bacteria, including the pathogenic ones, simultaneously to say what's there, how much of it is there, is it growing and even get a sense of where it comes from.

The dream is, can we make it cheaper and faster so it's the standard the Gates Foundation and others use in Africa and other parts of the world? We're looking at a fast-to-market business model.

Time to market is a fundamental difference among high tech, greentech and biomedical. Is it tempting to switch over?

It's fun as one of the things I do to intellectually stretch me. The science is very familiar to me, using chips in different kinds of array technologies with nucleotide sequences and informatics. Just the thought of starting a company that could be making profits so quickly, that's fun.