The San Diego Biotech Survival Index 2: Clinging to Cash in the Downturn
Something like one-third of the public biotech companies are running with six months’ worth of cash or less, and it doesn’t look like San Diego companies are bucking this disturbing trend. When I last surveyed how much cash was available at San Diego’s public biotech companies in November, I found just 10 of 23 public companies had amassed $100 million or more to sustain them through the downturn.
But after reviewing the latest round of updated quarterly financial filings, one fell out of the $100 million cash reserve club—Orexigen Therapeutics. This time I again surveyed 23 publicly traded life sciences companies in the San Diego area, although I added diagnostics maker Quidel to the list and dropped ISTA Pharmaceuticals because it’s outside the local area in Irvine, CA. Looking over the numbers, I found there were six public companies with less than $50 million, which can’t be a good feeling for management teams in a recession, when it’s hard to raise new investment capital.
So to catch up on how your companies are doing, here’s the list in alphabetical order:
—Acadia Pharmaceuticals (NASDAQ: ACAD). This San Diego company, a developer of neurological drugs, burned through more than $66 million of cash during 2008, and entered this year with $60.1 million in the bank. It made some spending cuts last year that are designed to keep it going “into the first half of 2010.” That ought to be long enough to get a look at Phase III clinical trial results from its Parkinson’s drug candidate, pimavanserin, in the third quarter.
—Amylin Pharmaceuticals (NASDAQ: AMLN). This San Diego-based company cut 340 jobs at its local headquarters last fall after it saw demand fall off for its best-selling product, exenatide, (Byetta). The company had $816.8 million in cash stockpiled heading into this year, about $200 million less that it had stashed away a year ago. Amylin says its still expects to make the transition to become cash flow positive by the end of 2010.
—Anadys Pharmaceuticals (NASDAQ: ANDS). This San Diego-based company is in a much weaker cash position than a year ago. Its reserves dwindled from $56.5 million at the beginning of 2008 to $27.9 million at the beginning of this year. But this may be temporary, because Anadys has seen its stock triple since early January, on positive results from the first eight patients who took its ANA-598 drug for hepatitis C in a clinical trial. The combination of low cash reserves and a promising, late-stage drug candidate also could make Anadys a ripe acquisition target.
—Arena Pharmaceuticals (NASDAQ: ARNA). This San Diego drug developer, working on medicines for obesity and diabetes, has struggled to clamp down on its spending. The company began 2008 with $398 million in the bank, and it closed the year with $110 million. If clinical trial results of its lorcaserin drug for obesity are positive next month, the company will be in a stronger position to fatten up its reserves, either through investors or a corporate partnership.
—Cadence Pharmaceuticals (NASDAQ: CADX). This San Diego company had the good fortune to hit a home run in its clinical trial of intravenous acetaminophen, which prompted a group of venture investors to pump in $86 million in fresh capital, boosting its reserves to $124 million at the end of February. Then Cadence failed in a trial of its second product, a topical gel for treating catheter-related infections, which prompted a round of spending cuts. The company expects to close 2009 with $81 million to $86 million in the bank—almost $40 million more than it had on hand a year ago.
—Cypress Bioscience (NASDAQ: CYPB). The San Diego company won FDA approval of milnacipran (Savella) for fibromyalgia, so now it’s gearing up for the marketplace. This drug is important since it would be Cypress’ sole marketed product, but it can wait a while if need be. The company had $145.5 million in cash and investments heading into 2009, about $36 million lighter in the wallet than it was a year earlier.
—Cytori Therapeutics (NASDAQ: CYTX). This regenerative medicine company had just $12.6 million in cash and investments heading into 2009. The company has been cutting costs, and expects “significant reduction in total operating expenses in 2009. It just raised $10 million last week, which it says “may fund its operations through at least 2009.”
—Genoptix Medical (NASDAQ: GXDX). This Carlsbad, CA-based lab services company had about $103 million stockpiled heading into this year, but it reported a $20.7 million profit in the fourth quarter, so it’s not in a position where it needs to burn cash reserves to stay alive. The company generated $116.2 million in sales during 2008, and it forecasts sales will surge by 46 percent this year to about $170 million.
—Hollis-Eden Pharmaceuticals (NASDAQ: HEPH). This San Diego-based company still hasn’t filed its quarterly financial report with the SEC, almost three months after the end of the quarter. Hollis-Eden had $29.1 million in cash at the end of September in its last report. It cut about one-third of its workforce, or 20 employees, in February in order to “sustain our current clinical development programs through both 2009 and 2010.”
—Illumina (NASDAQ: ILMN). This San Diego-based maker of high-speed genetic analysis instruments, said it had about $687 million in cash and investments heading into this year. It expects to generate $690 million to $720 million in revenue this year, and continue to operate in the black, with about $1.10 to $1.20 expected this year in the all-important earnings per share number watched on Wall Street.
—Isis Pharmaceuticals (NASDAQ: ISIS). The Carlsbad, CA-based developer of antisense drug technology made major strides to firm up its balance sheet. Isis entered this year with $491 million in the bank, more than double the $193.7 million it had stashed away a year earlier. That cash horde, built up through a lucrative partnership with Cambridge, MA-based Genzyme and the sale of its diagnostics subsidiary to Abbott Laboratories, should last for years, the company says.
—La Jolla Pharmaceutical (NASDAQ: LJPC). This San Diego-based company hasn’t filed its fourth-quarter financial report with the SEC yet, although that’s the least of its problems. The company’s lead product in development, Riquent, failed in a pivotal clinical trial of patients with lupus. It is now “evaluating strategic options such as winding down the business” or a sale of the company.
—Life Technologies (NASDAQ: LIFE) This Carlsbad, CA-based maker of lab supplies and sophisticated lab equipment, the product of a merger between Invitrogen and Applied Biosystems, is one of the fortunate few in the consistently profitable life sciences companies. It had $448 million in cash and investments heading into this year, and it expects “low-single digit organic revenue growth” in 2009.
—Ligand Pharmaceuticals (NASDAQ: LGND). The San Diego drug developer’s balance sheet looks pretty similar to Halozyme. It entered this year with $82 million in cash and investments on the books. It expects to spend about $20 million more than it generates in sales this year.
—Neurocrine Biosciences (NASDAQ: NBIX). This San Diego developer of neurological drugs burned through almost $100 million of its cash reserves last year, and entered 2009 with about $80 million left in the bank. The company says it expects to use up about $50 million to $55 million of its remaining reserves this year.
—Optimer Pharmaceuticals (NASDAQ: OPTR). The future is looking brighter for this San Diego company than it did a year ago. Optimer’s drug for C. Difficile, a nasty bacterial infection transmitted in hospitals, was found to be about equal to a standard antibiotic at curing patients, and was significantly better at reducing recurrence rates. It had $39.3 million in cash and investments heading into this year, and raised another $32.9 million from investors this month.
—Orexigen Therapeutics (NASDAQ: OREX). This San Diego company, developing treatments for obesity, had $100.1 million in cash and investments at the end of September, and burned through about $14 million of that in the last three months of 2008, leaving it with about $86 million heading into this year. The company’s first result from a Phase III clinical trial of its Contrave drug for obesity disappointed Wall Street, but the company says it has results from three more trials expected to come in the third quarter.
—Quidel (NASDAQ: QDEL). This San Diego-based maker of diagnostic tests said it had $57.9 million stashed away heading into this year, compared with $45.5 million a year earlier. But all is not well. The company warned investors this week that it was hurt by this year’s relatively mild flu season, which weakened demand for its tests for flu and Group A Strep. The company reported a $6.1 million profit in the fourth quarter, but it now expects to run in the red during the first quarter of 2009.
—Santarus Pharmaceuticals (NASDAQ: SNTS). This San Diego maker of Zegerid for heartburn reported it had $34.4 million in cash and investments at the end of September, but it boosted that bank account up to $52 million by the end of December. It expects product sales of about $138 million this year, about a 24 percent increase over last year.
—Sequenom (NASDAQ: SQNM). This San Diego maker of a noninvasive prenatal test for Down syndrome entered this year with about $100 million stockpiled in the bank, meaning it spent about $20 million of its cash reserves in the last three months of the year. It has a big year in store as it has plans to commercialize its SEQureDx test beginning in June.
—Somaxon Pharmaceuticals (NASDAQ: SOMX). This San Diego company failed to win FDA approval of its insomnia drug doxepin (Silenor) in February. Somaxon finished the year with just $14.3 million left in the bank. This month, it said it paid back $13.7 million in debt to Silicon Valley Bank and Oxford Finance. Whatever cash it has left after that can’t be much—Wall Street is giving this company a market value of $5.5 million as of yesterday’s close.
—Vical (NASDAQ: VICL). This San Diego company had $49 million in cash and investments at the end of September, and reported it had about $42 million left at the end of December. The company said it expects to have $19 million to $23 million left at the end of this year.