The barbarian investors are at biotech's gates

The credit crunch has caused a number of biotech investors to demand that struggling biotech companies should shut down and distribute any remaining funds rather than try and find a new way forward. Andrew Pollack of the New York Times says that trend was evident in the case of Avigen, which has been muscled to shutter its ops after disclosing last fall that its lead drug had failed a clinical trial.

It's not at all unusual for a drug developer to spend millions of dollars over a number of years before switching technologies or lead programs. But with credit tightening and big players like Merck getting into biotechnology directly, investors may have little stomach for such an expensive odyssey. Stumble now and you may not get back up again.

Pollack counts eight cases in the past year where investors "have fought with management for control of the corporate carcass." Simply put, they want what funds are left to claim rather than leave it to the board to make the final determination.

"I hear that argument" about shareholder rights, says Avigen CEO Kenneth G. Chahine. "But it's really 'I want to raid the cash.' We're back to 1987 and ‘Barbarians at the Gate.'"  

- read the report from the New York Times

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