Economic crisis hammers small, mid-sized biotechs

The Philadelphia Business Journal is outlining the drop in investment cash for biotech companies in New Jersey and Pennsylvania. Last year, developers in both states were able to haul in over a billion dollars for their work. In the first three quarters of this year, the figure slumped to $550 million.

The weekly quoted E&Y's Keith Brownlie, a partner in life sciences, who said that the sudden drop in fortunes could be traced straight to the Wall Street collapse. With no biotech IPOs this year, Brownlie was looking to the fall of 2009 or into 2010 before that "window" reopened. "It's not that the window has closed," he said. "It's as if the entire house around the window has collapsed."

Pennsylvania Bio's Mickey Flynn, though, says the industry simply has to ride out a tough cycle. "Our industry is all about peaks and valleys," Flynn said. "Although the economy is not where we want it to be, our efforts will not slow down. We will simply have to control our costs even more until the economic pendulum swings back to a more positive position."

John McCamant of the Medical Technology Stock Letter, meanwhile, is taking a decidedly Darwinian view of the fate awaiting many small and medium-cap biotech companies. For developers without cash or generous backers, he says, choices are likely to be few and harsh.

"It's no wonder that the sharks have begun to circle, as they sense a 'perfect storm' in which beaten-up biotechs take whatever is offered," said McCamant. The San Francisco Chronicle lists a lineup of biotech companies with stock trading under $1 a share.

- read the article [1] in the San Francisco Chronicle
- check out the report [2] in the Philadelphia Business Journal

ALSO: One of the few investment bright spots appears to be in the stem cell field, which is welcoming a new president likely to take off the financial wraps [3] put in place by President Bush. Article [4]

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Top Biotech Mistakes (and how to avoid them)  [6]
Economic crisis rips biotech's bargaining position [7] [8]
Crisis will spur new biotech deals on worse terms [9]
Crisis forces biotechs to cut R&D, preserve cash  [10] [8]