biotech investing

Roche's chance for $45B Genentech deal dwindles

John Carroll — Mon, 01 Dec 2008 10:38:07 -0500

Earlier this year, Roche's plans to raise $45 billion to acquire the outstanding shares to Genentech looked like a simple transaction in the world of high finance. One global economic crisis and a few months later, though, and the bankers close to the money say that the breeze at Roche's back has turned into a gale-force headwind.

Just days ago Roche reaffirmed that it is 100 percent ready to go ahead with its $43.7 billion bid for the 44 percent of Genentech it doesn't already own. Now banks aren't making many loans at all, and a jumbo loan like the one Roche would need to complete the buyout is looking like an increasingly tall order.

- read the report from the New York Times

Economic crisis hammers small, mid-sized biotechs

John Carroll — Mon, 17 Nov 2008 09:48:03 -0500

The Philadelphia Business Journal is outlining the drop in investment cash for biotech companies in New Jersey and Pennsylvania. Last year, developers in both states were able to haul in over a billion dollars for their work. In the first three quarters of this year, the figure slumped to $550 million.

The weekly quoted E&Y's Keith Brownlie, a partner in life sciences, who said that the sudden drop in fortunes could be traced straight to the Wall Street collapse. With no biotech IPOs this year, Brownlie was looking to the fall of 2009 or into 2010 before that "window" reopened. "It's not that the window has closed," he said. "It's as if the entire house around the window has collapsed."

Pennsylvania Bio's Mickey Flynn, though, says the industry simply has to ride out a tough cycle. "Our industry is all about peaks and valleys," Flynn said. "Although the economy is not where we want it to be, our efforts will not slow down. We will simply have to control our costs even more until the economic pendulum swings back to a more positive position."

John McCamant of the Medical Technology Stock Letter, meanwhile, is taking a decidedly Darwinian view of the fate awaiting many small and medium-cap biotech companies. For developers without cash or generous backers, he says, choices are likely to be few and harsh.

"It's no wonder that the sharks have begun to circle, as they sense a 'perfect storm' in which beaten-up biotechs take whatever is offered," said McCamant. The San Francisco Chronicle lists a lineup of biotech companies with stock trading under $1 a share.

- read the article in the San Francisco Chronicle
- check out the report in the Philadelphia Business Journal

ALSO: One of the few investment bright spots appears to be in the stem cell field, which is welcoming a new president likely to take off the financial wraps put in place by President Bush. Article

Burrill: Biotech faces "a long down-turn"

John Carroll — Wed, 05 Nov 2008 10:37:22 -0500

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

Crisis forces biotechs to cut R&D, preserve cash

Maureen Martino — Wed, 29 Oct 2008 10:20:46 -0400

With the public markets closed and venture capital slowing, small biotechs are taking steps to make their cash reserves last as long as possible, reports the New York Times. Skittish investors aren't as eager as they once were to pump money into biotech companies, which are a risky investment even in good economic times. And that is having a serious impact on smaller developers who rely on regular influxes of cash to keep going.

"Some 113 biotechnology companies, up from 68 in the first quarter, now have less than a year of cash at their current spending rates, according to Rodman & Renshaw, an investment bank," reports the NYT. In addition, biotech companies now make up about 25 percent of the 344 companies that could be delisted from the Nasdaq because their share prices have dipped under $1.

We've already seen a number of companies fall victim to this new trend. AtheroGenics went bankrupt, Iceland's deCode Genetics is struggling to retain its Nasdaq listing, and Orchestra Therapeutics went under, to name a few. Other developers have been forced to sell out to larger companies for a bargain price, and Big Pharma is on the hunt for undervalued companies with promising technology.

In order to survive, many biotechs are cutting costs by axing staff and halting all but their most advanced programs. Yet early early-stage R&D is essential to the long-term health of the drug development industry. Forced to focus on only the most immediate programs, companies are neglecting innovative R&D essential to fill future pipelines. Only time will tell what kind of impact that will have on the industry's long-term health.

- read the New York Times article

Pfizer looks for perfect fit for their VC funds

John Carroll — Mon, 27 Oct 2008 11:04:22 -0400

Pfizer execs turned up at AusBiotech 2008 to talk up the role that pharma plays these days in providing venture capital to emerging drug developers. The drug giant says that they're looking for a strategic fit for their pipeline work, but also expect to get a return on the money they invest. And that can be problematic when you consider that the IPO drought for biotech companies is now 11 months old.

"A large number of pharmaceutical companies now are using venture capital as a tool to create relationships with the entrepreneur world," said Pfizer vice-president for venture capital Barbara Dalton.

- read the story in The Age

ALSO: Xanodyne Pharmaceuticals isn't going to try and break the IPO logjam. The developer dropped its plans for an $86 million offering. Story

Credit crisis could cripple European drug pipeline

John Carroll — Mon, 27 Oct 2008 10:59:54 -0400

Anyone looking for some upbeat news about the U.K biotech scene might want to avoid reading The Times today. The British paper outlines deep cuts in Big Pharma's R&D departments at the same time the credit crisis is driving new money out of the biotech field. The end result: A cash crunch that is directly threatening the development of new medicines.

"Like many other sectors, the pharmaceutical industry has had tough times...there is seemingly no way to speed up and improve the drug discovery pipeline, and heavily increased R&D has not increased the number of new drugs," says David Wield, director of the Economic and Social Research Council. "As a result, big companies have been laying off staff and closing down research units, instead of looking to biotechnology start-ups for new ideas."

"An AIM-listed company in the UK is likely to need to be able to raise cash soon, as they tend to have less cash than in the US," adds Andy Smith, healthcare fund manager at Axa Framlington. "They will have problems as investors are more risk-averse than in the States and market conditions will be much more difficult than when they last raised money."

- read the article in The Times

Analysts: Investors find safety in biotech stocks

John Carroll — Wed, 22 Oct 2008 12:37:46 -0400

Everyone's attention is focused on earnings this week, and it's Amgen's turn to face the music this afternoon after the markets close. Will those stricter rules on anemia drugs drag down its profits further? Can they beat analysts' forecasts of $1.08 a share?

Interestingly, the analysts are telling the Wall Street Journal that biotech stocks--generally considered the high-risk plays of earlier days--have become a safe haven in a stormy market. While the Dow is down 30 percent, the Dow Jones Wilshire U.S. Biotechnology Index has fallen only about 1 percent.

"People need their drugs" and biotech firms have numerous blockbusters already on pharmacy shelves. With patent expirations looming for many drugs owned by large pharmaceuticals, biotech's product line represents "some very valuable biologic capacity," says William Tanner, analyst at healthcare investment bank Leerink Swann.

- check out the AP report on Amgen
- and read the stock story from the Wall Street Journal

ALSO: Shares of Biogen Idec slid more than six percent after the company reported a slowing growth rate of new Tysabri patients. Report

Roche: Economic crisis won't stop Genentech bid

John Carroll — Thu, 02 Oct 2008 11:40:18 -0400

Roche is reassuring everyone that despite all the market turmoil that has occurred worldwide in recent weeks, it's still on track to raise the $43.7 billion it's bid to acquire all the outstanding shares of Genentech. And that's a major issue for the investment field, which sees that deal as a sign that the M&A business isn't completely dead--for now.

A spokesperson for Roche declined, though, to tell the Wall Street Journal if the company plans to bid more than the $89 per share already on the table. Genentech had rejected the offer as too low, but kept the door wide open to a richer bid. Investors, meanwhile, are feeling distinctly nervous about the whole affair. After bidding Genentech shares up to $98, the stock price slipped to $86.50 yesterday afternoon.

- read the report from the Wall Street Journal

ALSO: Biotechs in Europe, meanwhile, say they are feeling the heat. Report

In rocky market, Fluidigm withdraws IPO

Maureen Martino — Fri, 26 Sep 2008 11:31:26 -0400

Fluidigm was prepared to boldly go where few have gone this year: the public markets. The South San Francisco based company, which develops, manufactures and markets microfluidics products, previously announced plans for an IPO designed to raise as much as $85 million ($14 to $16 a share). Fluidigm hoped its big-name backers and promising technology would help it succeed where so many others have failed. Unfortunately that wasn't enough. Citing "historic instability in the market," Fluidigm announced today that it has withdrawn its registration statement for its IPO.

"We went out on September 5th with a very strong story and Fluidigm received a warm reception from the investment community. We explained how our technology contributed to life science research and how the company was poised to grow," said Gajus Worthington, Fluidigm President and CEO. "While these messages were well-received, pushing ahead with a deal in the current market was not in our best interest."

- check out Fluidigm's release

Economic crisis rips biotech's bargaining position

John Carroll — Fri, 19 Sep 2008 09:50:52 -0400

Up to now it's been a sellers market for European biotechs when it comes to making deals with pharma organizations out to the beef up their pipelines. Now the Financial Times says that the credit crisis and other market woes (IPOs have evaporated and venture capitalists are looking for 25 to 30 percent returns) have begun to cut off other sources of cash for biotech companies, leaving them more willing to accept lower offers from cash-rich pharma outfits. The same trend will drive more consolidation of the industry, such as we saw in yesterday's marriage of BTG and Protherics.

"In the past few years, it was a sellers' market driving up valuations for less and less mature technology," says Tibur Papp, head of advisory at PharmaVentures, a UK-based consultancy. "Now the environment is changing and with a significant impact on biotech finance, it has become more difficult to find partners and good deals."

- check out the article from the Financial Times

Fund manager: Pharmas must buy biotechs--or die

John Carroll — Thu, 11 Sep 2008 12:10:37 -0400

Some of the smartest money on Wall Street is betting that the hot pace of biotech buyouts still has a long way to run. Andrej Hrovat, who runs the RH&Partner Global Life Science Fund, says investors are likely to see a short term correction in pharma as the mergers continue at a frenetic pace right into 2009. And it's not hard to see what's driving M&As, he adds. Biotech companies are in control of the future of medicine, with emerging cures for ailments as opposed to treatments for side effects.

"The companies from the biotech sector are producing drugs which are directly curing the cause and not just the pain," he tells CityWire. "So you cure the real problem and the old, traditional medicine has to disappear. The future is all about biotech companies and conventional pharma companies are buying biotech firms because they have to--otherwise they will die. However, it will be 10 to 20 years before they over take completely."

Hrovat has acquired a taste for big biotech. He lists his favorites as Gilead Sciences, Genzyme, Genentech and Amgen.

- read the report from CityWire

Economy catches up with biotech investing

Maureen Martino — Fri, 29 Aug 2008 09:21:13 -0400

Early in 2008, life science investment was on a roll. It seemed as though the industry wouldn't be bothered by many problems affecting the rest of the economy, and that it was a safe haven compared to other more volatile markets. But Robert Dellenbach at Genetic Engineering News observes that the poor economy has caught up with the industry.

"Despite an abundance of funding as well as scientific and technological progress, the environment for investing in the life science industry seems to have changed dramatically," said Dellenbach.

In the last quarter of 2007 and the first quarter of 2008, life sciences enjoyed a record level of investment. But by the second quarter of this year, there were only 215 investments totaling $1.9 billion; that's compared to 315 investments totaling $3 billion in the first quarter. For the biotech industry, the numbers are even worse. "The number of biotechnology venture backings fell by nearly 50 percent, and the dollar amount invested fell by more than 40 percent from the first quarter...Outside the U.S., the venture financing value fell nearly 50 percent in the same period." On top of that, the IPO market is downright bleak--there were no VC-backed IPOs in the second quarter.

According to Dellenbach, three factors are having a negative impact on the level of life science investment:

Biotech is notoriously risky and investors may be waiting for a better economy.
Drug development investments are longer-term than medical device and other healthcare ventures. Investors looking for a quicker return are drawn to these options.
The emergence of clean and green tech investment opportunities have given VCs an alternative to biotech investment.

Because of the long-term nature of life science investments, the industry should be somewhat insulated from the current economic downturn. But increased caution on the part of life science VCs is causing them to wait for a better time to invest.

- see the GEN article

In tough market, biotech shines

Maureen Martino — Fri, 01 Aug 2008 09:57:19 -0400

Wall Street has been in a tough spot these last few months, with the S&P 500 losing 9.5 percent over the course of June and July. But the biotech industry has emerged as a safe haven for investors in the face of poor performance in other sectors. "The biotech index is up 9.9 percent so far this year, compared with a decline of 13.7 percent for the S&P 500," notes the Boston Globe.

Investors see small biotech as a smart investment for a number of reasons. The much talked-about weak pipelines at Big Pharma companies are good news for small biotechs. Now more than ever pharma is looking to small developers to fill the gap. Take, for instance, Roche's massive $43.7 billion offer for Genentech, or BMS's smaller but still impressive $4.3 billion bid for ImClone. These deals bolster the sectors as a whole, as investors anticipate similar mergers and pacts with other biotech companies.

The potential for big deals isn't the only reason biotech makes for a good investment these days. Drugs--and the companies who make them--are somewhat insulated from economic pressures. While consumers may opt to hold off on purchasing a new car or computer during tough economic times, patients will buy drugs as long as they work. Investing in biotech comes with its own very real set of risks, but for now, at least, it appears to be preferable to other sectors.

- read the Boston Globe article

ALSO: Take a look at the billion-dollar deals of 2008. Report

PLUS: Roche's bid for Genentech has triggered talk of more deals among big developers. Report

E&Y forecasts new wave of biotech deal-making

Tue, 20 May 2008 06:59:58 -0400

Ernst & Young took a look into biotechnology's crystal ball and came up with a world of opportunity and some troubling trends that could crimp a record run of new deals. Look for the ongoing convergence of biotech and big pharma, says the big accounting firm in its annual look at the global industry. And along the way, look for one or more near-term mega-mergers.

"One or more mega acquisitions of mature biotechnology companies along the lines witnessed with MedImmune--and nearly seen with Biogen Idec in 2007--is likely," says the report. The hunger to add more experimental therapies into the pipelines of mature developers will keep the most innovative biotech companies in the running for a wide variety of deals, says Ernst & Young. And that will make it a sellers market, with valuations running high.

Those trends will all keep biotech buffered from the worst effects of an economic downturn. The industry has long been a collective money loser, but with deal-making running hot and heavy, private investors are likely to take a long view in getting a return on their cash. Last year, says E&Y, biotechs raised $30 billion, including $5.5 billion in venture funds.

- see the E&Y report
- read the report from the San Jose Mercury News

ALSO: It's not all good news for biotech, though. E&Y's Scott Morrison also notes that the ongoing slowdown of FDA approvals bodes ill for the industry, with growing pressure from lawmakers on high drug prices and a distinct fallout being felt from the subprime meltdown. And cooling public markets won't make life any easier for biotechs. Report

European investors sour on biotech market

Tue, 13 May 2008 06:59:56 -0400

There's a loud drumbeat of warnings coming from Europe over the sour state of biotech investing. Zhining Xu, an analyst at Seymour Pierce, tells the Financial Times that 2007 was a "disaster for biotechnology in the U.K." Andrew Baker, chairman of the International Biotech Trust, calls the first half of 2008 "appalling." And in FierceBioResearcher, we feature the voice of Sir Chris Evans, one of Britain's pioneering biotech entrepreneurs, talking about the "perfect storm" that has smashed into the field, threatening the amount of research work that's being done on the continent.

The viral skepticism isn't restricted to Europe. Investors are noting an increasingly tough regulatory approach to approvals at the FDA, a string of late-stage drug failures and nervousness over the lengthy amount of time it will take to get new genetic therapies on the market.

Interestingly, biotech stocks have been beaten down so far that some of the pessimists are saying that there are grounds for optimism. In the investing world, what goes down must go up. Right?

- read the article in the Financial Times

ALSO: One bullish Danish expert says that Denmark's biotech companies have matured to the point where they are ripe for acquisition by Big Pharma. Report

In VC market, life sciences dominate

Tue, 22 Apr 2008 06:59:56 -0400

In the first quarter of this year, venture capital investment dipped 5 percent to $7.1B, signaling that the current economic slump could have an impact on venture financing. However, there was still a dose of good news for biotech, as the industry outpaced the software sector, raising $1.27 billion with 126 deals (software, with 234 deal, had more transactions overall). The Life Sciences sector (both biotech and medical devices together) took the lead in VC investing, raising with $2.3 billion in Q1--that's roughly a third of all VC dollars and a quarter of all deals.

"The continued interest in the life sciences and clean technology industries, as well as the traditional IT sectors, reflects the long-term investment horizon..." said Mark Heesen, president of the NVCA. "We do not expect to see significant declines in investment levels in the coming year. However, the dollars going to later stage investments could increase if the IPO window remains closed for an extended period of time and venture capitalists have to sustain companies longer than expected."

- see the release
- read this AP report

Biotech sees big money from corporate players

Thu, 06 Sep 2007 06:59:56 -0400

Corporations see some big advantages in investing in their own fields. A new report from the National Venture Capital Association finds that corporations funneled $1.3 billion in venture funds to private companies in the first six months--and biotechnology was one of the leading industries to attract this money. Corporate venture capital groups took a piece of the action in slightly more than one in five venture deals in the first half of this year, says the association, using money as the best tool for buddying up with companies that are developing new technologies.

"If corporate venture investment continues at this pace, we could see all-time record levels in the near future," said National Venture Capital Association President Mark Heesen.

- see the release for more
- read the report from the Pacific Business News

Related Articles:
Pfizer to invest $50M in biotech start-ups. Report
The 10 Commandments of biotech investing. Report

Invus invests $550M in Lexicon

Fri, 24 Aug 2007 06:59:57 -0400

New York-based investment firm Invus is purchasing up to $550 million in Lexicon Pharmaceuticals common stock to help finance Lexicon's 10 to 10 program. The 10 to 10 program is an ongoing company initiative with the goal of advancing 10 drug candidates into human clinical trials by 2010. Lexicon expects the new drugs to result from its genetics-based drug discovery platform and to include both small molecules and antibodies.

- see this release on the investment

Related Article:
Lexicon Genetics changes name. Report