Biotech financing on the rebound

Biotech financing on the rebound

CHICAGO – The first half of 2009 showed the tough road biotech, and other industries, had to hoe in order to survive. Earlier forecast this year were that many biotech companies would fail, go under, be delisted from the different exchanges, or barely hang on. But like the overall rebound in the stock market, the biotech financial situation has significantly improved during the third quarter.
The merchant bank Burrill & Co tracks assiduously this data and Steve Burrill, a Midwesterner transplanted to California and the industry’s biggest cheerleader, had been bearish earlier this year at the BIO 2009 annual conference in Atlanta.
But things can change rapidly in 3 short months! Let’s take a look at the Burrill analysis of biotech financing through September. Granted both October and November results are not reflected here, but it is still a good indicator of where we are headed.
U.S. Biotech Financings 9 month – 2009 ($ millions)

Financing Segment Cumulative 2008 (9 months) Cumulative 2009
(9 momths)
% Change
Public $4,983 $10,236 +105%
IPO $6 $94 >+999%
Follow-Ons $1,706 $3,550 +108%
PIPE’s* $881 $1,371 +56%
Debt $2,390 $5,221 +118%
Private $3,191 $3,208 +1%
VC $2,929 $3,094 +6%
Other $262 $114 <56%>
Total Financing $8,178 $13,444 +64%
% of Total 45% 38%
Partnering $10,194 $22,169 +117%
% of Total 55% 62%
TOTAL $18,372 $35,613 +94%

Source: Burrill & Co. Report, Genetic Engineering News , Nov. 1, 2009
* Private Investment in Public Equity
The third quarter results were amazingly robust led by Big Pharma and Big Biotech’s voracious thirst for new products and deals galore! Almost all categories of financing grew sharply. Venture capital, which had lagged some 40+% previously over the prior year, rebounded, and even an IPO market surprisingly reopened. What a difference three months can make! Summer months are historically slow but not this year!
While Burrill is encouraged by this uptick in the biotech sector, he reminds us that of the 328 publicly -traded biotech companies in the U.S. (down 8% since last year), that almost 50% have market caps below $100 million and this segment of the biotech market is still struggling to raise money and keep the lights on. Additionally, there are:

  • 51 public biotech companies with market caps > $ 1 billion
  • 36 public biotech companies with market caps between $500 million and $999 million
  • 136 biotech companies with a market cap < $100 million

There is still great uncertainty for the biotech (and pharma and medical device industries) over the next 12 months: the outcome and implementation of a healthcare reform policy as to be approved by Congress is still unknown. The approval of a biosimilars (generics) program by the FDA will radically affect the biotech and pharma industry that has hereto been sheltered for its biotech drugs.
Burrill deals mainly with the public biotech companies which are generally the cream of the crop; the almost 1,200 privately-held companies are still struggling to raise monies and have no exit strategy for their investors other than acquisition by a larger more liquid entity.
With a little more than a month left in this calendar year, it would appear that 2009 has recovered from an abysmal 2008, but great uncertainty is still in the air for 2010 given the two great reforms underway: overall U.S. healthcare and the FDA!
Recent columns by Michael Rosen

Michael S. Rosen is Senior Vice President, New Business Development for the Science + Technology Group at Forest City Enterprises, a NYSE-traded real estate development company which develops and builds bioscience parks across the U.S. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at
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