The credit crisis hits home

Steven Burrill is one of the rare industry commentators who put his money where his mouth is. Late in 2008, he spelled out the impact that the credit crisis was clearly going to have in biotech [1].

"The more mature and blue chip biotech companies will do just fine since they have plenty of cash, product revenue streams, strong pipelines and big pharma partners," he wrote last November. "It is the large universe of small public companies, and private companies looking for venture capital who will feel the most pain."

Even a casual reader of FierceBiotech would have noticed the wreckage [2] piling up in biotech's fast lane in the last quarter of 2008. Once high-flying companies crashed to earth as cash reserves dwindled. The number of biotech companies exploring their "financial alternatives" spiked. Stock prices of weak public companies were blasted after even a hint of bad news. Just the idea of floating a new IPO became an awkward joke.

And there's plenty more damage ahead. As we continue to chart the industry's course after the Crash of 2008, you can expect to see more downsizings [3], more desperate maneuvers, more SOS signals. But in chaos lies opportunity. While Burrill was making his dire prediction of what lies ahead, he also helped bankroll several promising developers in his portfolio. Good companies with good science and bright prospects--and two years' operating capital in the bank--can reasonably look forward to working out new partnerships, posting positive data and building real value. It will be important--and difficult--to keep that in perspective at a time grim headlines will dominate news coverage.

We switched from a seller's market to a buyer's market in a neck-snapping turnaround, but Big Pharma is still positioned to snap up promising new drug programs. Mergers and acquisitions will likely soar in the year ahead. And who knows, maybe by the end of the year we'll see the beginnings of a fresh appetite for an IPO from a developer. But don't look for a significant upsurge ahead of 2010.

Related Articles:
Biotech leaders to ask Congress for bailout
[4]Credit crisis pushes biotechs to the brink [5]
More biotech bankruptcies on the horizon [6]
Economic crisis hammers small, mid-sized biotechs [7]
Burrill: Biotech faces "a long down-turn" [1] [4]