GEN Exclusives

More »

Feature Articles

More »
Jan 1, 2010 (Vol. 30, No. 1)

Coping Strategies for Cash-Strapped Firms

Biotechnology Companies Are Hunkering Down Until New Funding Models Emerge

  • Click Image To Enlarge +
    With traditional funding mechanisms obsolete, companies are doing what they need to do to survive. (Valentin Belous/Fotolia)

    Of the thousands of meetings, formal and informal, that took place at “BIO-Europe 2009” in Vienna recently, one thing is clear, whatever deals eventually come of the meetings, they will need to be creative if they are to be successful. Denise Pollard-Knight, Ph.D., managing director at Nomura Phase4 Ventures, confirmed what most in the audience already knew: The business model that previously drove biotech was based on VC funding, and that model is now unsustainable.

    Whether there will be new, more sustainable ways of funding drug development going forward and what type of new business models biotech and pharma companies will need to adopt remains unclear, but, for now, many companies are doing what they have to to survive. Some of their coping strategies were revealed during a panel discussion moderated by Dr. Pollard-Knight.

    Hakan Björklund, CEO of Nycomed, reported that his company has focused more upon shorter-term and later-stage programs. “It is very difficult to focus solely on early-stage work, although we have not actually dropped any fantastic early projects. But we are more focused upon mid- to late-stage projects than we were two years ago and much more selective about early-stage projects.”

    Ian Nicholson, CEO of Chroma Therapeutics, noted that his company has been forced to reduce its head count from 50 to 40. On the positive side, the firm completed a financing round in June, with GlaxoSmithKline (GSK) on board as an equity partner. GSK’s involvement has allowed Chroma to extend its runway by a couple of years.

    “We have abandoned discovery research to focus on Phase III,” explained Arlene Morris, president and CEO of Affymax. The company raised over $90 million with an IPO in 2006 and has capital from a partnership with Takeda to advance Hematide, a treatment for anemia arising from chronic renal failure, into Phase III trials. 

    Dan Zabrowski, Ph.D., global head of pharma partnering at Roche, said his company is trying to do more creative deal making. “We are looking at new ways of working with biotechs to get to a win-win situation.” This means looking at late-stage assets, but earlier-stage deals are still of interest too. The company recently set up an arrangement with Pontifax, an Israeli VC, to look at opportunities at Israeli universities. “This is pretty new for Roche,” Dr. Zabrowski said. “We are really entering the era of more risk sharing, and it will become more prominent. It would be good for large pharma and biotech to hook up early in the life of an asset so that expertise and resources can be brought to bear to move on it faster.”

  • Survival of the Fittest

    These days biotech firms must think in terms of survival of the fittest, Nicholson said. He felt the lack of funding was not necessarily a bad thing. “In my view, the number of VCs and private companies is going to get a lot smaller. But the early feedstock for industry must be financed because of the rate of attrition.” Nicholson added that many of the current trends are positive; the industry is evolving and seeing the need for truly innovative medicines—not just me-too compounds.

    According to Morris, small companies are also being pummeled by regulatory concerns. “It is hard to afford Phase III now. The increase in regulatory costs make it difficult to get to the late-phase programs that pharma says it wants to partner with.”

    In response to a question on what deals panel members are looking for at the moment with respect to capital efficiency and prioritization, Björklund said, “to consider an M&A we want a late-stage, very solid opportunity. In a deal, we would be happy to leave North American rights with the partner and have the European rights.” Nycomed is also interested in rights to other regions because it has a strong emerging markets focus. 

    “We are open to a lot of different flexible solutions but based very much on risk sharing.” Proof of concept/Phase IIb opportunities are of interest to Nycomed at the moment, as are niche opportunities. “The target audience can be small if the medical need is sufficient. In fact, the smaller target group is easier to market to. But the innovation must be significant. We won’t get reimbursed for me-too drugs. A €100 million product, for instance, would be very attractive to us.”


Add a comment

  • You must be signed in to perform this action.
    Click here to Login or Register for free.
    You will be taken back to your selected item after Login/Registration.

Related content

Jobs

GEN Jobs powered by HireLifeScience.com connects you directly to employers in pharma, biotech, and the life sciences. View 40 to 50 fresh job postings daily or search for employment opportunities including those in R&D, clinical research, QA/QC, biomanufacturing, and regulatory affairs.
 Searching...
More »

GEN Poll

More » Poll Results »

Companion Animal Care

Do you think Americans spend too much on companion animal care?