The financial crunch is shaking the foundation of the global biotech industry, threatening to slow the development of new meds and cut high-tech jobs in the US and Europe, The Wall Street Journal writes, adding that many small biotechs are expected to file for bankruptcy, cancel trials, lay off workers or sell out to large companies over the coming year.

As the paper notes, in the long run, a hobbled biotech industry would be bad news for big drugmakers, which increasingly rely on biotech start-ups to invent products they can acquire and market. “The whole way of doing business is gone, at least temporarily. Companies that don’t have a lot of cash or assets to generate cash” are in jeopardy, George Scangos, chief executive of Exelixis, tells the paper.

The financial-market crunch is mostly hitting small biotechs with low revenue and little cash in the bank, according to the Journal. In the US, 38 percent of 370 small biotechs are operating with less than a year’s worth of cash, and nearly 100 publicly traded biotechs have less than six months’ cash, according to the BIO trade group.

Big drugmakers, such as Glaxo and Novartis are eyeing opportunities. And venture capitalists are cutting back investments in biotechs, while selling stock publicly and obtaining bank loans has gotten tougher. To obtain funding, some biotechs are selling a drug’s potential future revenue streams to investment funds, which is an expensive way to raise cash when choices are few, the Journal writes.

Oramed Pharmaceuticals, which is based in Jerusalem, needs $25 million to carry out human trials of an oral form of insulin. Instead of trying to sell stock, it is asking large drugmakers and other investors in Russia, South Africa, South Korea and India for cash in exchange for some of the drug’s eventual revenue in those markets should the drug gain regulatory approval for sale, the Journal reports.

The Wellcome Trust, a charitable group in London that funds medical research, has seen the number of biotech companies seeking funding double over the last 12 months, Richard Seabrook, head of business development and technology transfer, tells the paper.

“A number of companies are going to find it very difficult to survive,” Aisling Burnand, chief executive of the BioIndustry Association in the UK, tells the Journal.

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