Amid economic gloom and doom, signs of biotech industry resiliency

ATLANTA – There are no plans to hang crepe inside the Georgia World Congress Center, but the 2009 BIO International Convention will take place here this week against the backdrop of the toughest economic times ever witnessed by this still-young industry.

Venture capital investments in biotech companies have plummeted since the last time biotech’s 16,000 or so faithful gathered in San Diego. Many companies are cash-starved and a few are closing their doors or being swooped up by bargain-hunting investors at pennies on the dollar. It is largely a product of the recession that began in the public financial markets and which quickly filtered into the private equity world, a vital source of capital for many biotech companies.

Wisconsin biotech and life sciences companies are not immune from those global trends. For those companies at critical stages of development, the next round of investment may be necessary to buy equipment, hire the right staff or even launch a clinical trial. Unlike companies in some technology sectors, those in biotech and life sciences face a long and costly regulatory runway before products reach the market – and their capital needs reflect that.

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Not all companies will survive. "There are some biotechs out there just taking up space on the playground," observed one company executive from Madison. "This recession may clear some of them away, but those who remain will be that much stronger."

It’s less about survival of the fittest than survival of the most adaptable. Companies are finding ways to accelerate product releases, cut costs, investigate new markets and seek alternative funding. They are also investigating strategic partnerships, one of the primary functions of the annual BIO gathering. Other signs of life include:

  • The biotech industry was actually profitable, overall, in 2008.
    According to Burrill & Co., a respected investment bank that specializes in life sciences deals, that’s the first time it has happened in the 25 years the industry has been around.
  • Consolidation in the Big Pharma industry may work to help small biotech companies. Major pharmaceutical companies are spending less on internal research and development but aggressively shopping for ideas among small- and mid-sized biotechs. That phenomenon has reached Wisconsin, where Eli Lilly, Pfizer, Roche and others have investigated partnerships or purchased companies.
  • Federal stimulus dollars may provide cash for worthy R&D projects.
    While the Obama administration has not proposed to spend more on R&D in the fiscal 2010 budget, it included a $60 billion allotment for merit-based research in the stimulus bill. That money may find it way to cash-poor companies in the form of grants from the National Institutes for Health and other agencies.
  • Progress with biofuels and bioproducts appears to be accelerating, and the development curves for those products may be shorter in some cases.

 

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The Wisconsin delegation at BIO is smaller than in past years, mostly because the economy kept some companies at home. But it still includes representatives of the state’s major research institutions, tech transfer organizations, economic development groups and more. Companies will engage in partnership meetings and a number of events are scheduled to showcase Wisconsin’s biotech assets.

During the boom times, every state, city and region claimed to be a biotech hub. The reality was always that some of those places couldn’t back up the boast, either because they lacked the core R&D, the financing capacity or the ability to attract and retain the right people. The recession will sort through who is a biotech player and who is not.

Wisconsin’s historic strengths and recent commitments should help it remain among those states that may surge ahead once the recession ends.

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Tom Still is the president of the Wisconsin Technology Council.

 

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