Two questions matter most to the financial survival of a biotech company: How much cash does it have in the bank, and how fast is it burning through it? That’s especially true in dark economic days, so I checked on just how well-prepared Seattle’s public biotech companies are to weather this particular storm.
The findings aren’t encouraging. Only two companies in the Northwest—Seattle Genetics and Dendreon—had more than $100 million in the bank at the end of September, according to their filings with the Securities and Exchange Commission. The last time I remember doing a local analysis like this, in February 2004 for The Seattle Times, there were six companies in the $100 million club. They were Icos, Corixa, Dendreon, Cell Therapeutics, ZymoGenetics, and Seattle Genetics.
The economic downturn, of course, is a national problem for an industry that lives and dies based on investors’ willingness to take big risks with big chunks of capital that take years to pay off, if ever. Profitable industry heavyweights like Amgen and Genentech aren’t in trouble, but of the 248 unprofitable biotechs that are publicly traded, about half have less than a year’s worth of cash on hand, according to an October report by Eun Yang, an analyst with Jeffries & Co.
“It looks like 2009 and 2010 will be pivotal years for Seattle biotech,” says Carl Weissman, president of Accelerator, the Seattle-based biotech startup incubator. “These companies have to find great partnerships that will bring in cash, or they need to cut spending, or they have to hope the financial markets turn around.” He added that several companies may have little choice but to sell at a bargain price. “Some of the signs on the front doors may be changing.”
For those of you looking for a silver lining, you can include Amgen. It has about 1,000 employees in Seattle and Bothell, a mind-boggling $9.8 billion in cash and investments in the bank, and another potential blockbuster drug being primed for the market next year. Amgen, for one, has indicated it may scoop up some of these cheap biotechs, according to this Bloomberg report.
So here’s where the 10 publicly-traded, unprofitable, Seattle-based life sciences companies currently stand, in no particular order. I left out Sonosite (NASDAQ: SONO), because it’s profitable, so cash on hand isn’t quite as vital.
—Seattle Genetics (NASDAQ: SGEN). This Bothell, WA-based company is one of the bright spots. It had $187 million in cash at the end of September, and because it generates revenue from technology licenses, it expects to still have $150 million on hand at year’s end. It is also negotiating with the FDA on a pivotal trial design for a drug for Hodgkin’s disease that has produced stellar clinical trial results.
—Dendreon (NASDAQ: DNDN). Dendreon had almost $107 million stashed away at the end of September, and collected another $20 million in a stock offering last month. It has enough cash to operate the business well past the middle of 2009, when it will get critical information on whether its lead drug candidate for prostate cancer is able to extend lives. Still, Seattle-based Dendreon has socked enough away to advance a second candidate into clinical trials, D-3263, early next year.
—ZymoGenetics (NASDAQ: ZGEN). It’s been a wicked year for this anchor of the local scene. Sales of its sole marketed product, recombinant thrombin for surgical bleeding, have been disappointing to say the least, with just $7 million expected in its first year on the market. The Seattle company had $81.1 million left at the end of September, and is burning it very fast with a quarterly net loss of $28.8 million. ZymoGenetics is able to borrow as much as $100 million from Deerfield Management, but its ability to pay off the debt depends on product sales taking off in the future. The company now has cash to last “into 2010,” which is less than its usual two-year cash cushion, says CFO Jim Johnson. To save pennies, ZymoGenetics has cancelled its holiday party and won’t put up lights this holiday season on its famous smokestacks along Interstate-5, says spokeswoman Susan Specht.
—Trubion Pharmaceuticals (NASDAQ: TRBN). This Seattle-based company had $61.6 million in cash at the end of September, and burned through a more modest $6.6 million net loss in the quarter. Still, Trubion has had to find ways to conserve $12 million of its cash this year, the company said.
—Targeted Genetics (NASDAQ: TGEN). When H. Stewart Parker, the founder, CEO, and spiritual leader of this determined Seattle company heads to the exit, you know things are looking grim. It had $9.2 million left in the bank at the end of September, and only enough money to run the business into the first quarter of 2009. New CEO Susan Robinson once worked at Cambridge, MA-based Genzyme, one of the few healthy biotechs still pursuing gene therapy, so I wouldn’t be surprised if Genzyme is at least kicking the tires on this penny stock.
—Cell Therapeutics (NASDAQ: CTIC). Things are so dark at CTI, that they released data showing their experimental drug for non-Hodgkin’s lymphoma caused tumors to completely disappear for 20 percent of patients, compared with 6 percent on standard chemotherapy, and it only boosted its stock by one penny, to 34 cents. Cell Therapeutics had $11.7 million in cash left at the end of September, and an operating loss of $17.8 million. That means it needs to raise more cash in a hurry, before the end of the year, the company said.
—Oncothyreon (NASDAQ: ONTY). This Seattle-based cancer drug company had $11.4 million left in the bank at the end of September, and lost $3.6 million in the most recent quarter. It has enough to run into the first quarter of 2009.
—OncoGenex Pharmaceuticals (NASDAQ: OGXI). This cancer drug developer, with offices in Bothell and Vancouver, BC, which inherited the balance sheet of Sonus Pharmaceuticals, had $17.2 million at the end of September. It says it has enough to run its operation “through 2009.”
—Northstar Neuroscience (NASDAQ: NSTR). The Seattle maker of an electrical brain-stimulation device for patients with severe depression has already made significant cuts this year, after its machine failed to help stroke patients restore movement to disabled arms. It had $70.2 million at the end of September, and expects to still have $53 million left at the end of 2009, the company said.
—MDRNA (NASDAQ: MRNA). This RNA interference drug developer, in Bothell, reported its finances today. At the end of September, it had $10.9 million in cash and investments, and reported a net loss of $16.1 million. It has already made layoffs, and former CEO Steven Quay left last month, but retains a seat on the board. MDRNA said it believes it has enough cash to operate into the first quarter of 2009.
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