More biotech bankruptcies on the horizon

The biotech bankruptcy used to be a rare animal. Struggling small developers were usually saved by deals or mergers with bigger, healthier drug companies. But the ongoing economic crisis had made a once-uncommon occurrence a very real possibility for many biotechs.

Pharmalot reports that in the last month alone five developers have gone under, including MicroIslet, AtheroGenics and Orchestra Therapeutics. Many others are teetering on the brink of bankruptcy. Other biotechs are cutting staff and non-essential drug development programs to preserve cash. This means that essential early-stage research--the type of research needed to find the next big breakthrough--isn't getting done. In a recent report, investment banker Steve Burrill noted the funding environment isn't likely to improve any time soon. "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.

Biotechs with less than six months of cash on hand and few clinical programs will be hit the hardest. But while times may be tough now, this period of struggle could good for the industry's future. Biotechs that don't have much to offer won't survive the economic crisis, but stronger, better companies ripe for investment will emerge in the end.

- here's the Pharmalot post