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Archive for November, 2008

Biotech Companies Filing for Bankruptcy in Bad Economy

Written by on Friday, November 21st, 2008

Biotech companies are facing the new reality of having to contemplate bankruptcy filing in the bad economy.

Bloomberg.com is reporting that five biotech companies have already had to seek bankruptcy protection in the last month, and that more bankruptcies are likely on the way.  According to Bloomberg.com, the companies most at risk have less than six months of cash on hand, only a few drugs in development, and no "definitive" clinical data.  Bloomberg.com reports that a quarter of biotech companies currently fall into this category.

Bankruptcies have in the past been rare in the biotech world.  Troubled biotech companies have historically been acquired or have entered into licensing and other types of deals to survive.  However, the scope of this particular financial crisis is making bankruptcy filings more likely for biotech companies, since no one is available to bail them out from their current financial situation. 

Bloomberg.com reports on the reasons for this new biotech reality as follows:

The amount raised this year by biotechnology companies fell by $9.7 billion through September, or 54 percent, compared with the same period in 2007. . .  Biotechnology companies in the U.S. are raising less cash than they have in a decade. . . .Financing fell to $8.2 billion through September, from $17.9 billion last year. Venture capital funding fell 16 percent, to $2.9 billion. . . .

So what can biotechs in this situation do to survive?

Well, if they are lucky, they will be acquired by a pharmaceutical company.  Otherwise, they can try to just go into hibernation until the economy is better–a strategy that many businesses out there will likewise be doing.

The biotech community can only hope that this will be a short-lived crisis.  But isn’t that what we all are hoping for right now?

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Biotech Industry Begins to Assess Likely Impact of New Administration

Written by on Monday, November 10th, 2008

The biotech industry is beginning to assess what the impact of the new Obama administration is likely to mean for individual biotech companies.

A key concern for the industry is the likely financial implications of the Obama presidency on biotech companies, according to an article by SFGate

What financial concerns are at issue?

While biotech companies are definitely concerned about the bad economy and the credit crisis, they are also  concerned about an anticipated push for cheaper drug prices, which could potentially have a very detrimental impact on biotech companies, since any such increase could negatively affect the profits that biotech companies could potentially achieve on their drugs and would perhaps impact companies’ valuations as well.

Another concern for the industry is what will happen to the Food and Drug Administration under an Obama presidency, accoding to the SFGateDuring the Bush Administration, Congress criticized the Administration for how the Food and Rug Administration was run–in particular, they viewed it to be "underfunded" and "ineffective." As Adam Feuerstein of the Street.com reported: "The agency is in turmoil. Morale is low, resources are scarce and too many drug approvals have been delayed at best, or worst, have become politicized."  President-Elect Obama will presumably sink some money into the organization and try to take it in a new direction, which he may begin by choosing new leadership.  According to SFGate and  Feuerstein, a few of the names being considered include: Dr. Steven Nissen, a cardiologist for the Cleveland Clinic;  Dr. Scott Gottlieb, who worked directly under Mark McClellan when he was FDA commissioner; and Janet Woodcock, a veteran agency official who is the favored choice of drug manufacturers.

One highly anticipated change by the new administration is the likely adoption of a new view on stem cell research, reported Yahoo News, which reported that  Obama’s Transition Chief John Podesta indicated this weekend that Obama is currently reviewing President Bush’s executive order on stem cell research and may reverse that order fairly quickly.

As for other changes that might be in the works which would affect the industry, the Patent Baristas have provided an extended list of potential changes that we may see under the new administration, including but not limited to doubling federal funding for basic research over the next ten years, making the research and development tax credit permanent, and reforming the Patent and Trademark Office.

All in all, it seems clear that the new administration will bring "change" to the biotech industry; however, the jury is still out as to whether any such "change" will be for the better or for the worse.   The industry is hoping–like the majority of Americans that voted for Obama on election day–that the "change" Obama will bring will be for the better.

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Biotech Facing a Long IPO Dry Spell

Written by on Monday, November 3rd, 2008

The biotech industry is facing the likelihood of a long IPO dry spell, which could extend beyond what is being forecasted in other industries, according to a report by Reuters.

According to Reuters, the last biotech IPO was in November 2007 with Nanosphere, Inc., which develops diagnostic tests, and in the last few weeks, over half of the biotech companies in the IPO pipeline have dropped out, including drug delivery company CyDex Pharmaceuticals Inc., Xanodyne Pharmaceuticals, which focuses pain management, and Phenomix Corp, which specializes in diabetes treatments. Reuters reports that only  five companies remain in the IPO pipeline.

Instead of IPOs, Reuters reports that biotech companies are continuing to turn to mergers; however, pharmaceutical companies are only interested in biotech companies that have products ready for sale, which means that they need to be past Stage 1 and Stage 2.  Pharmaceutical companies are not interested in investing another five years in research and development right now.  Rather, they are looking for products that can quickly replenish their pipelines.

When the IPO market returns, Reuters reports that biotech companies with marketable therapies for hepatitis C, cancer and Alzheimer’s therapies will be the best prospects for an IPO.

Having said this, Reuters reports that what may delay the return of the biotech IPO is the poor price of biotech stocks, and the fact that the biotech companies who have gone public have not increased their stock prices since their IPO.  Reuters reports:  "Only seven of the 61 biotech companies to have gone public since 2000 are currently trading above their IPO prices."

Thus, it appears that biotech is headed for a long IPO dry spell that is not likely to change course, until after the economy picks back up and the industry can show that IPOs make financial sense.   In the meantime, biotech companies will have to continue to rely on alternative exit strategies.

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