Crisis forces biotechs to cut R&D, preserve cash

With the public markets closed and venture capital slowing, small biotechs are taking steps to make their cash reserves last as long as possible, reports the New York Times. Skittish investors aren't as eager as they once were to pump money into biotech companies, which are a risky investment even in good economic times. And that is having a serious impact on smaller developers who rely on regular influxes of cash to keep going.

"Some 113 biotechnology companies, up from 68 in the first quarter, now have less than a year of cash at their current spending rates, according to Rodman & Renshaw, an investment bank," reports the NYT. In addition, biotech companies now make up about 25 percent of the 344 companies that could be delisted from the Nasdaq because their share prices have dipped under $1.

We've already seen a number of companies fall victim to this new trend. AtheroGenics went bankrupt [1], Iceland's deCode Genetics is struggling to retain its Nasdaq listing [2], and Orchestra Therapeutics went under [3], to name a few. Other developers have been forced to sell out to larger companies for a bargain price, and Big Pharma is on the hunt for undervalued companies with promising technology.

In order to survive, many biotechs are cutting costs by axing staff and halting all but their most advanced programs. Yet early early-stage R&D is essential to the long-term health of the drug development industry. Forced to focus on only the most immediate programs, companies are neglecting innovative R&D essential to fill future pipelines. Only time will tell what kind of impact that will have on the industry's long-term health.

- read the New York Times article [4]

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Economic crisis rips biotech's bargaining position [7]
Economy catches up with biotech investing [8]
Venture funds hit the brakes on biotech investing [9]