When I last crunched the financial numbers of the Northwest’s life sciences companies in November, the local contingent was taking a beating, and it has only continued. Just three of the 12 publicly-traded life sciences companies in the Northwest—Seattle Genetics, SonoSite, and Dendreon—were really well-positioned to weather this downturn with more than $100 million in cash heading into this year. Six of the 12 are in a far more vulnerable position, with less than $20 million in cash left on their books.
It’s not exactly a news flash that these lean times have led to some painful moments of layoffs, scrapped R&D projects, and even the death of one company here in the Northwest (Northstar Neuroscience). But this quarter had bright spots too. ZymoGenetics and Seattle Genetics both took important steps to shore up their finances in ways that could sustain them for years.
This quarter I’ve beefed up the analysis a bit from last quarter by adding one new drug developer from the south, Portland, OR-based AVI Biopharma, and one medical device company, Bothell, WA-based Sonosite (which I overlooked last time). I’ve already run the financial numbers on 44 public life sciences companies in Boston and 23 in San Diego, for those of you who want to see how the local biotech cluster stacks up in terms of financial health (not all that well, frankly). Here’s the Northwest list in alphabetical order:
—AVI Biopharma (NASDAQ: AVII). This Portland, OR-based biotech company, which is betting on antisense technology for treating Ebola virus and other horrific infectious pathogens, closed the year in a weak position, having burned through $13.6 million in cash during 2008, with just $11.5 million left heading into this year. But then, good fortune struck at the end of January. AVI was one of the rare biotechs to successfully hit up investors for more money, raising $16.5 million from select institutional funds. The company isn’t saying how long the new money will last.
—Cell Therapeutics (NASDAQ: CTIC)). This Seattle company’s financial woes have been well-documented. It had about $10.7 million in cash heading into this year, and warned at one point in February that it had run down to its last few weeks of cash. The company has responded by closing down its research center in Italy with 62 employees, selling its ownership stake in its lone marketed drug for non-Hodgkin’s lymphoma, and cutting 34 more jobs. That leaves it with enough cash to run through May, when it hopes to revive its fortunes by presenting data on another drug, pixantrone, to researchers attending the American Society of Clinical Oncology’s annual meeting. The company has about 85 employees left.
—Dendreon (NASDAQ: DNDN). Seattle-based Dendreon was one of the lucky ones in the past quarter, having pulled in $20 million in an October stock offering. This actually enabled the company to enter this year with $109 million squirreled away, a smidge more than the $107 million it said it had in the bank three months earlier. Dendreon is facing another important judgment day next month, when it expects to report the final analysis of a clinical trial that looks at whether its immune-boosting drug, Provenge, can help men with terminal prostate cancer to live longer, with minimal side effects. If this trial is successful, Dendreon will race off to the FDA for permission to take Provenge to the U.S. marketplace. If not, that cash cushion will come in very handy as the company regroups.
—MDRNA (NASDAQ: MRNA). This RNA interference drug developer, in Bothell, WA, has been running dangerously low on cash for months, as I reported back in January. The company entered this year with just $3.4 million in cash and investments left, and hung on until it got a boost this week from Novartis, which agreed to pay $7.25 million upfront in exchange for a non-exclusive license to some RNAi delivery technology. But easy come, easy go. MDRNA immediately sent former CEO Steven Quay a severance check for $870,000. The company didn’t say in its latest financial report how long its existing cash reserves ought to last.
—Northstar Neuroscience (NASDAQ: NSTR). The Seattle maker of an electrical brain-stimulation device for patients with severe depression was relatively flush with $70.2 million left at the end of September. It had a plan to watch its pennies, spending only about $16 million in 2009. That appalled Northstar’s investors, who didn’t want to see any more money spent at all. Rather than allow the company to continue to develop the technology, RA Capital, a Boston hedge fund, put the screws to Northstar and demanded it shut down and liquidate its assets to shareholders, who had already taken a big-time bath. In January, Northstar threw in the towel and did just that.
—Oncothyreon (NASDAQ: ONTY). This Seattle-based cancer drug company was running down to its last few months of cash back in December, when it took drastic measures to keep the company alive. CEO Bob Kirkman sold off the company’s cancer vaccine manufacturing assets to German partner Merck KgAA for $13 million, and consolidated R&D at a central site in Seattle. This helped the company boost its cash reserves to $19.2 million heading into the year, and lower its spending rate this year to about $12 million, meaning it still has more than a year to show it has enough promise against cancer to keep going.
—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. That balance was whittled down to $12.4 million as the company headed into 2009, putting it in a delicate bargaining position with potential partners. OncoGenex has some good cards to play—its OGX-011 showed an impressive 10 month survival advantage over standard chemotherapy in a small clinical trial. That boosted its stock price for a while, but OncoGenex is hoping to make a bigger bang when it lets doctors scrutinize its full presentation at the American Society of Clinical Oncology meeting in late May and early June. It had better generate a serious investor frenzy, because CEO Scott Cormack says the budget for final stage clinical trials of this drug will cost $70 million, way more than he has in the company bank account.
—Seattle Genetics (NASDAQ: SGEN). This Bothell, WA-based company is starting to separate itself from the pack in Seattle. It released impressive data on its “empowered antibody” for Hodgkin’s disease at a medical meeting in December, and has now, for the first time in its 10-year history, entered the ultimate proving ground in drug development—Phase III clinical trials. Seattle Genetics has the money to do this on its own, without giving away too much ownership to a partner. It had $160.7 million in cash as of December 31, meaning it burned through $27 million in the last three months of the year. But then it opened eyes around the industry in January, when it raised a fresh $55.8 million in a secondary stock offering, the first time that had been done in the industry since August. The company now expects to spend about $80 million to $90 million of its cash this year, and end 2009 relatively flush with $120 million in the bank.
—SonoSite (NASDAQ: SONO). The Bothell, WA-based maker of portable ultrasound machines is consistently profitable, so it doesn’t need to tap its cash reserves to make payroll. The company had $279.7 million in cash heading into this year, but also had $144.7 million in long-term debt. That gives it a cushion of about $135 million in liquid assets. It’s cutting expenses by 5 percent this year to offset the slowdown in spending by U.S. hospitals, although it still expects to boost its revenues by 5 percent to 10 percent this year.
—Targeted Genetics (NASDAQ: TGEN). This Seattle-based gene therapy company has been very quiet since founder and CEO H. Stewart Parker left in November. It had $9.2 million left in the bank at the end of September, which it said at that time was only enough money to run the business into the first quarter of 2009. Earlier this month, it handed off its manufacturing capabilities to contract manufacturers, and renegotiated its partnership with La Jolla, CA-based Celladon to give that company expanded right to make its AAV vector technology for treating heart failure. These moves apparently bought the company a couple more months, even though we don’t know for sure, because it still hasn’t released its fourth-quarter financial statement. Targeted says it has enough cash to keep operating “through the first half of 2009.”
—Trubion Pharmaceuticals (NASDAQ: TRBN). This Seattle-based company burned through a little more than $25 million of its cash during 2008, and entered this year with $52.9 million on the books. It expects to use up $30 million to $35 million of its cash this year, and in order to keep from running too dangerously low, it cut expenses last month, laying off one-fourth of its workforce. The company got an additional headache in January when Pfizer bid $68 billion to take over its partner, Wyeth, meaning that top management at those companies will be more than a little distracted this year.
—ZymoGenetics (NASDAQ: ZGEN). Seattle-based ZymoGenetics has done more than any local company to reverse its fortunes so far in 2009. Zymo went into the quarter needing a boost—it had just $81.1 million in cash left at the end of September, and was burning through it at a rate of $28.8 million per quarter. After tapping a line of credit with Deerfield Management, it had $89.9 million in the bank by the beginning of the year. Then during the JP Morgan Healthcare Conference in mid-January, things turned around. Less than a month into his tenure as CEO, Doug Williams inked a deal with Bristol-Myers Squibb that transformed the company’s balance sheet by bringing in $105 million in cash this quarter. The deal is expected to generate more than $200 million total for ZymoGenetics in 2009, providing some breathing room and a few quarters of positive cash flow. Still, all is not well. ZymoGenetics is struggling to pump life into its lone marketed product, recombinant thrombin for surgical bleeding. Williams suggested in his presentation last week at Invest Northwest that cost cuts could be on the way.