Biotechs Start Shrinking Before Our Eyes
2 CommentsBy Ed Silverman // December 2nd, 2008 // 1:10 pm
Recent reports have warned of looming bankruptcies, scuttled drug development and overall cutbacks among biotechs (back story). Well, consider the announcements from just the past 24 hours - a handful have disclosed plans to layoff staff, scale back clinical and manufacturing work, discontinue operations, sell products and reduce executive salaries.
Titan Pharmaceuticals is cutting its workforce by 40 percent and will reduce “all current clinical and manufacturing development activities to the minimal level necessary.” And more layoffs are promised (see the statement). Pressure BioSciences is closing a research facility, consolidating another facility and laying off 40 percent of its workforce (look here).
Targeted Genetics is cutting its workforce by 25 percent (here is the statement), InSite Vision is eliminating 35 percent of its 40 staffers (statement), and WuXi PharmaTech Cayman plans to discontinue its US biologics manufacturing operations and lay off about 100 workers at its Philadelphia facility (statement).
In the past few weeks, at least five biotechs filed for bankruptcy, according to a recent Bloomberg News report. Of course, those at highest risk have experimental compounds moving into costly human research. The amount raised this year by biotechs fell by $9.7 billion through September, or 54 percent, compared with the same period in 2007, according to Burrill & Company, a life sciences investment bank, cited by Bloomberg.
Hat tip to fiercebiotech
Ron leuty
Hey, Ed: Can I give a shout out to myself? Is such self-promotion breaching Internet protocol?
Among the recent biotech job cuts we’ve covered (that I haven’t seen elsewhere): Poniard, Exelixis and Anesiva.
I went a little deeper in my Nov. 14 column about Anesiva’s cuts:
http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2008/11/17/newscolumn4.html
For all the talk of filling “unmet medical needs,” the small-cap biotech mantra is increasingly boiling down to maximizing shareholder returns.
Take Avigen Inc., which on Oct. 21 announced the midstage trial failure of a drug to control muscle spasticity in multiple sclerosis patients. At the time, the Alameda company said it would shift its focus to AV-411, its drug for neuropathic pain and opioid addiction and withdrawal.
Two weeks later, Avigen said it would cut 70 percent of its workforce, opt out of the lease of its labs, consider vacating its headquarters and sell or find a partner for AV-411 and its potential blood-clotting product, AV-513.
Why the about-face?
Biotechnology Value Fund LP, which owned about 27.5 percent of Avigen as of Oct. 23, told Avigen’s board Oct. 30 that the company should “immediately reduce” expenses, partner or sell remaining assets without further investment and distribute as much of the resulting cash as possible to stockholders, according to a Securities and Exchange Commission filing.
BVF, as reported to the SEC by President Mark Lampert, said Avigen’s plan to spend more on “high risk” AV-411 and its corporate infrastructure are “fundamentally flawed, especially in light of the current environment for raising additional capital.”
BVF and its various entities sold more than 640,000 shares of Avigen stock from late August to late September at prices ranging from $3.9565 to $4.60 per share. On Oct. 21 — the day the multiple sclerosis drug trial failure was announced — they bought more than 8 million shares at prices ranging from 55 cents to 58.53 cents.
Christopher
With so many biotechs operating with less than a year’s cash it’s no surprise to see such pressure and even failures, as unfortunate as that may be. It’s not just their inability to raise new money but the pressure that comes from existing investors, as Ron’s article describes. There will be more over the next few months. On the other hand, we’ll see the quality of management in how companies go about surviving this tough market.