Hold on Tight: Biotech Execs Predict Hard Times for Industry as Cash Dwindles

11/25/08Follow @xconomy

Most biotech companies live and die based on how much cash they have in the bank to fuel drug development. So we’ve combed through the cash statements of more than 70 publicly traded life sciences companies in Xconomy’s home cities of Boston, San Diego, and Seattle, to see just how well-positioned the local clusters are to weather the current economic storm.

The numbers aren’t pretty, as you can see from our analyses of companies in each city. We also asked several leading executives and investors in all three cities what sort of fallout we can expect from this crisis. Here are their responses via e-mail, edited for length and clarity.

Harry Stylli, CEO, San Diego-based Sequenom

“Healthcare is an important employer so if there are liquidity issues and funding issues we can expect downsizing (like with Amylin) and other forms of effective restructuring including mergers and acquisitions which can lead to more job losses. So it’s a net negative to the economy. Those of us who are better capitalized and are growing will likely benefit from more folks entering the employment pool. Also employee turnover rates are falling, as more folks stay put.

Another concern I have is with venture-backed companies, which are more numerous than publics. If these require cash within next 12 months then we can see cost-cutting, down-sizing, and as time goes on, bankruptcies. Those that are lucky will be acquired at value prices.

I have noticed some companies are already showing a greater willingness to partner key assets at more realistic values than even a few months ago. This is a good thing for well-funded companies.

There will be winners and losers, the current funding environment—if it continues—will exacerbate the situation.”

H. Stewart Parker, former CEO, Seattle-based Targeted Genetics

“I am very concerned about the long term implications of the lack of capital for biotechs, and do feel that we are going to see a huge impact on the availability of new medicines. I would hope that, in the context of any federal stimulus package, attention would be paid to mechanisms to incent investors to get back in the game. How about zero capital gains for investors who put money into healthcare stocks (meeting certain size or development criteria) and hold those stocks for 5 years or more?

I also think that in adversity there is always opportunity, and any state or local government wishing to benefit from having an innovative, well-paid work force can plant seeds now that can be harvested later for great benefit. It will take guts, but can be done… … Next Page »

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