Noted biotech venture capitalist Steven Burrill says that after more than 40 years of red ink, the biotech industry turned its first profit last year. But he's quick to add that the numbers this year will not paint a very pretty picture.
"As our Biotech 2009 book title says, a sea change has occurred," says Burrill, the CEO of Burrill & Company. "Financing and investor confidence in biotech's hopes and dreams has helped spawn many world-class biotech 'powerhouses' such as Amgen and Genentech and these two companies are a big reason why the industry turned a profit in 2008. But a majority of the industry's companies are still a 'work in progress' whose umbilical cord is cash to fuel product development.
And that umbilical cord has been severed by the economic crisis. Looking over a field of 370 publicly traded biotech companies, Burrill found that the market cap of almost 60 percent of them had dropped to less than $100 million. More than 100 public and private biotech companies have announced plans to restructure. And that kind of pain will likely continue for 18 months.
"Companies were shrinking to conserve cash and extend their runway," says Burrill. "The more mature and blue chip biotech companies weathered this period quite well since they have plenty of cash, product revenue streams, strong pipelines and big pharma partners. Investors viewed these large cap companies as safe havens, which is why a 10 percent drop in the Burrill Biotech Select Index, during 2008 can be viewed in a positive light when set in context of the Dow falling 35 percent and the NASDAQ falling 42 percent in the same 12 month period."
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