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."
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