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Burrill: Biotech faces "a long down-turn"
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Anyone looking for some solid reasons to feel bullish about the biotech industry's near-term prospects might want to avoid Steven Burrill's latest assessment. Black October, he says, hit the biotech industry hard. And the roundhouse blows delivered by the economic crisis, says the investment banker, is putting more than a few developers on the ropes.
"We know that finance has been the industry's umbilical cord for the past forty years...the implosion of financial institutions has served to sever the cord and now the biotech ‘infant' is left to fend for itself," said Burrill, CEO, Burrill & Company. "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. It is the large universe of small public companies, and private companies looking for venture capital who will feel the most pain.
"The prognosis for the almost 200 publicly-listed biotechnology companies that have seen their market cap drop to less than $100 million will find the next 12 months challenging since they are often trading at almost no multiple to their cash. These companies will need to find ways to extend their runway and stretch out the funds that they have remaining."
Close to a third of the public biotech companies tracked by the monthly Burrill Biotechnology Report were facing the specter of Nasdaq delisting notices until the Nasdaq Stock Market announced that it had suspended its minimum bid price and market value requirements for continued listing for three months. Even this extension, he adds, may not be long enough as the consensus appears to be that the industry is facing a long down-turn.
"When the markets do return in late 2009/early 2010 we are likely to see a very different industry than exists today," observed Burrill. "Already we are seeing that companies with limited cash are starting to cut their work forces and even eliminate research and drug development projects in a desperate effort to extend their runway."
- check out the release for more
Related Articles:
Economic crisis rips biotech's bargaining position
Economy catches up with biotech investing
Venture funds hit the brakes on biotech investing
Comments
By oldchemist | Posted 2:20pm | November 5, 2008
Reduction of expectations is long overdue. Everyone has forgotten just how much time and money the development of any new technology truly requires; there is no way around, no shortcuts, and it cannot be deferred.
The impact current financial conditions will have on the costs of technology licences from universities is of considerable importance but likely to be overlooked, and it is here that expectation will need to be reduced first. If financing of start-up is now limited, the only recourse is to reduce licensing fees and royalties while not requesting increased equity positions. Leaving enough equity in a start-up to allow future investors some return remains essential.
By Anonymous | Posted 11:49am | November 6, 2008
During the biotech boom of the 1990's, virtually anyone with a business plan, a bunsen burner and a petri dish could get venture capital financing. The new economic reality will Darwinize this industry, which has been long overdue.
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