A growing number of biotech companies are veering closer to the financial abyss. The Wall Street Journal counts 10 biotech bankruptcies since the economic crisis hit. And more and more developers like Altus Pharmaceuticals are facing going-concern warnings from their auditors.
The sudden plunge in venture investments is hitting the biotech industry hard. As venture capitalist Steven Burrill notes to the Journal, it's not unusual for a biotech company to operate on just a few months worth of capital as it raises fresh rounds of investments. But "we are clearly in unprecedented times. This isn't a 'This too will pass,'" he says. "The implicit assumptions that we've built the industry off of for 30 to 40 years have changed." And in an interview with FierceBiotech, he warned that those expecting a swift resolution to the current crisis should think again. "We're not going to be out of this by the summer of 2009," he predicts. Instead, the funding crisis won't improve until late 2010 or 2011.
Surviving these days also calls for a greater sacrifice from the developers. "If you had to give up 50 percent of your company for five or 10 or $20 million a year ago, you probably have to give up 90 percent today to get the same amount of money," Burrill says. "The capital markets are always open," he notes, but "the availability and price have changed."
- check out the article from the Wall Street Journal