A popular debate among biotech insiders nowadays is whether there could ever be another large, fully integrated company like Genzyme or Biogen Idec ($BIIB). And for those who firmly believe the answer is no, they've got some new ammo with recent analysis from venture capitalist Bruce Booth.
Crunching numbers from Capital IQ, Booth shows the number of small- to large-cap biotechs and pharmas has fallen to 240 from 329 in 2005. The steep drop is due to a combination of factors, including M&As, companies folding and others disappearing into the micro-cap abyss of having less than $50 million in market value. And as Booth and others see it, the shrinking herd of public biotechs points to danger on the biopharma landscape.
"It...raises alarm bells as it can't go on much longer like this without hollowing out the small- and mid-cap universe of biopharma companies that make up a critical and dynamic part of our ecosystem," Booth writes. "There [are] a few drivers of the shrinking trend: not enough companies are maturing into public companies, not enough new ones are getting started and/or too many are disappearing into mergers."
Booth, a partner at Atlas Venture in Cambridge, MA, is focused on growing early-stage biotechs--including his startup Nimbus Discovery. With a dearth of public market money available to young biotechs and fewer VCs taking gambles on risky science, company chiefs like Booth are trying to invent ways forward that can reward investors while keeping their early-stage operation on a path to advance new drugs. As Flagship Ventures Chairman Ed Kania put it during our Fierce 15 panel at BioPharm America in Boston this week, early-stage biotech backers are "all casting around" to see which business models work in the absence of rich sources of venture money and the public markets.
- read Booth's analysis on his blog LifeSciVC