Sluggish economy hits biotech

| 2 min read

Not one single venture-backed US company completed an linkurl:initial public offering;http://www.the-scientist.com/article/display/18293/ (IPO) in the second quarter of 2008, according to a linkurl:report;http://www.nvca.org/pdf/Q2_08_Exits_Release.pdf released yesterday (July 1) by the National Venture Capital Association, and the news means that small, privately-funded biotech companies may find it difficult to stay afloat in these uncertain economic times. "Companies will either disappear or tread water for a little bit," said Peter Winter, editorial director at Burrill and Company, which linkurl:tracks;http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080701005939&newsLang=en biotech industry trends. Approximately eight biotechs have filed for IPOs this year, with only one successfully going public, according to Winter. Last year, an estimated 35 biotech companies went public, raising a combined $5.5 billion in IPO financing, said John Craighead, director of investor relations and business development at the Biotechnology Industry Organization. "The markets are simply not allowing [biotech] companies to go public," said linkurl:Terry Winters,;http://www.the-scientist.com/article/display/53132/ a partner at Phoenix-based venture capital firm Valley Ventures. "It causes a problem because biotech is a voracious consumer of capital." Winters said that the dearth of private biotech startups going public is less a side effect of an overall sagging economy and more due to the lack of specific success stories coming from the biotechnology and pharmaceutical industry. "The health and biotech industry is more affected by its winners and its perceived winners," Winters, who is also the chairman and CEO of liver therapy device company, Vital Therapies. "We haven't had any real high-profile winners lately." If news of linkurl:failed drug trials;http://www.the-scientist.com/news/display/52861/ and linkurl:bankrupted biotech companies;http://www.ardana.co.uk/30062008.html continues to dominate the headlines, said Winters, an upturn in the biotechnology market will be hard to come by. "If all we're seeing are failed trials, then I'm afraid the market does not improve." In addition to these troubles, small biotech companies face the linkurl:Sarbanes-Oxley Act,;http://www.the-scientist.com/article/display/23561/ which contains strict accounting and disclosure regulations for publicly traded companies and represent increased costs. "It is very very costly for a small company to comply," said Craighead. Winters said that despite the worst IPO drought in 30 years, times like these make investing long-term in biotech attractive. "They yield good investment opportunities at very favorable prices," he said. Winters said that rather than investing in public companies where a short-term return is expected, he and his partners at Valley Ventures are concentrating more on investing in private companies whose "liquidity events" - such as linkurl:mergers,;http://www.the-scientist.com/blog/display/54762/ IPOs, or becoming cash positive - are five to seven years in the future. As of right now, said Craighead, biotechs are having trouble going public, but private investment remains strong. "While the financing environment might be quite poor in the public market, it's holding up quite well in the private market." With the chances of taking biotech companies public slim and corporations being forced to cut costs, Winters said that investors and administrators must find new ways of funding biotech ventures. "It's time for creative financing ideas."

Sluggish economy hits biotech

The Scientist ARCHIVES

Become a Member of

Keywords

Meet the Author

Bob Grant

Related Research Resources

Study Confirms Safety of Genetically Modified T Cells

Research Resources

Podcasts

Webinars

Videos

Infographics

eBooks

TaqMan Probe & Assays: Unveil What's Possible Together

Meet Aunty and Tackle Protein Stability Questions in Research and Development

Detecting Residual Cell Line-Derived DNA with Droplet Digital PCR

Making Real-Time PCR More Straightforward

Products

Product News

Fujirebio Receives Marketing Clearance for Lumipulse® G pTau 217/ β-Amyloid 1-42 Plasma Ratio In-Vitro Diagnostic Test

Biotium Launches New Phalloidin Conjugates with Extended F-actin Staining Stability for Greater Imaging Flexibility

Latest AI software simplifies image analysis and speeds up insights for scientists

BioSkryb Genomics and Tecan introduce a single-cell multiomics workflow for sequencing-ready libraries in under ten hours