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?


Site search

Topics

Archives

RSS Software Law Blog

RSS Firm Events

© 2008-2018 The Prinz Law Office. All rights reserved.

The Prinz Law Office | Silicon Valley | Los Angeles | Orange County | San Diego | Atlanta | Tel: 1.800.884.2124

Silicon Valley Business Office: 2225 East Bayshore Rd., Suite 200, Palo Alto, CA 94304: Silicon Valley Mailing Address: 117 Bernal Rd., Suite 70-110, San Jose, CA 95119 Silicon Valley Office: (408) 884-2854 | Los Angeles Office: (310) 907-9218 | Orange County Office: (949)236-6777 | San Diego Office: (619)354-2727 | Atlanta Office: (404)479-2470

Licensed in California and Georgia.

Protected by Security by CleanTalk and CleanTalk Anti-Spam