Biotech financing 2008: Going to a dry well in first half

Biotech financing 2008: Going to a dry well in first half

Although Big Pharma’s appetite for deals and products has increased with ever increasing amounts of money, a logical question is how has the overall economic malaise in the U.S. (which is extending quickly to Europe and Asia) impacted the ability for biotech companies to raise money from the financial markets, the traditional source of biotech capital. As most biotech companies have not reached positive cash-flow, they are reliant on continuous market financings until they can strike a deal with Big Pharma (or Big Biotech).
Unfortunately, the market for such financings this year has not been a good one, according to numerous sources, including Recombinant Capital. During the first half of 2008, equity investments in biotech reached only $5.9 billion versus $18.6 billion during 2007, a whopping 68 percent drop. Let’s take a look at where the problem resides:
Biotech Equity Investments 2008 Vs. 2007

Type of Financing 2008 – First Half ($ Millions) % of
2007 – First Half
($ Millions)
% of Total %
Public Offerings (Public Companies) $710 12% $3,454 19% <79%>
Private Offerings (Public Companies) $2,765 47% $11,737 63% <76%>
Private Offerings
(Private Companies)
$2,413 41% $3,368 18% <28%>
TOTAL $5,888 100% $18,559 100% <68%>

Source = Recombinant Capital:
The significant gap in capital is for public companies. Capital has really dried up for this sector with a decline of over 70 percent. While equity raise-ups for privately-held companies also have dropped, the decline, while large, is not nearly as devastating. The Initial Public Offering (IPO) market has almost disappeared. According to Recombinant Capital, there has only been one biotech IPO during the first half of 2008 versus 16 IPOs for the same period last year. Overall, this is the smallest amount of biotech money raised since 2003!
This drop in financing, while to a certain degree reflective of the stock market downturn during the first half where the American Stock Market Biotech Index dropped 7 percent versus the NASDAQ Composite Index drop of 13 percent, is actually more severe than the market decline. Of the 227 public biotech stocks which Recap monitors, the average drop in biotech stock price was 25 % during the first half of 2008 with the median drop 39 percent. Not pretty!
Will the situation change during the second half of 2008? Good question! With the price of oil dropping from the $140+/barrel range to a more amenable $100 +/barrel level (isn’t it strange what we can get used to so quickly), and the U.S. stock market and currency directly rebounding, it remains to be seen how the second half of 2008 will look for the biotech industry.
Biotech sustenance
So what is sustaining the biotech industry? Big Pharma and Big Biotech with their voracious product appetite (and cash)!
According to Recap, $78.9 billion of M&A deals have been completed in 2008 versus a total of $32.2 billion for all of 2007!. Twenty-seven Pharma acquisitions have taken place in 2008 versus 17 during 2007; additionally, there are another 39 biotech-to-biotech deals that have taken place (versus 52 in all of 2007).
The top 17 deals thus far in 2008, according to the M&A scored card of are:
Leading Life Science M&A Deals 2008

Acquiring Company Acquired Company Date Acquisition Price
1. Novartis Alcon April, 2008 $11 billion
2. Takeda Millennium Pharmaceuticals April, 2008 $ 8.8 billion
3. Invitrogen Applied BioSystems June, 2008 $6.7 billion
4. Daiichi-Sankyo Ranbaxy June, 2008 $4.6 billion
5. Nordic Capital Convatec (Bristol-Myers) May, 2008 $4.1 billion
6. Roche Ventana January, 2008 $3.4 billion
7. Sanofi-Aventis Zentiva June, 2008 $2.6 billion
8. Kinetic Concepts Lifecell April, 2008 $1.7 billion
9. Fuji Photo Toyama Pharma. February, 2008 $1.5 billion
10.GlacoSmithKline Sirtris April, 2008 $720 million
11. GE Healthcare Whatman February, 2008 $710 million
12. Hologic Third Wave June, 2008 $580 million
13. Boehringer Ingelheim Actimis June, 2008 $515 million
14.Cardinal Enturia March, 2008 $490 million
15. Ipsen Tercica June, 2008 $440 million
16. Galderma Collagenex February, 2008 $420 million
17. Teva Pharma. CoGensys January, 2008 $400 million

Note that perhaps two of the biggest deals of the year, Roche’s bid for the 44 percent of Genentech it doesn’t own ($44 billion was put on the table but Roche could ultimately have to pay $50 billion), and Bristol-Myers Squibb’s bid for the 83 percent of ImClone it doesn’t own (BMS put $4.5 billion on the table which ImClone rejected), don’t even figure here as they have not been completed yet. Last week saw King Pharmaceuticals $1.43 billion bid for Alpharma.
Another measure of deal flow is partnering (licensing) between big and small life science companies. Some significant deals have already been inked this year.
Leading Biotech Licensing Transactions – 2008

Rank Partners Date Value – US$ Millions
1 Genzyme – Isis Jan ’08 $1,900
2 Celgene – Acceleron Feb ’08 $1,900
3 GlaxoSmithKline – Mpex Jun ’08 $1,770
4 Takeda – Alnylam May ’08 $1,000
5 Takeda – Amgen Feb ’08 $900
6 Roche – Thrombogenics Jun ’08 $775
7 Astellas – CoMentis Apr ’08 $760
8 Merck – Addex Jan ’08 $702
9 GlaxoSmithKline – Regulus Apr ’08 $600
10 Kyowa Hakko – Amgen Mar ’08 $520
11 Sanofi-Aventis – Dyax Feb ’08 $500
12 Janssen – Astex Jun ’08 $500
13 Pfizer – Celldex Apr ’08 $440
14 Tibotec – Medivir May ’08 $435
15 Nycomed – Sepracor Feb ’08 $430
16 GlaxoSmithKline – Amira Feb ’08 $425
17 Bristol-Myers Squibb – Kosan May ’08 $425
18 Lundbeck – Myriad May ’08 $350
19 Genentech – Symphogen Jun ’08 $330
20 Takeda – Cell Genesys Mar ’08 $320

Source: CurrentPartnering, 2008
In retrospect, thank goodness for Big Pharma/Big Biotech’s tremendous need for new products which is keeping the biotech industry afloat in an otherwise tough year! I’m sure that the record level of deal activity will continue at this aggressive pace for the next few years due to the pending humongous sales/income hole that patent expirations will make.
See you soon!

Michael S. Rosen is president of Rosen Bioscience Management, a company that provides CEO services, including financing and business and corporate development to start-up and early-stage life science companies such as Renovar and Immune Cell Therapy. Rosen also is a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at
This article previously appeared in, and was reprinted with its permission. The article is not meant to be a stock recommendation.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC. WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.