Lobbying for the biotech industry in Washington DC doesn’t sound like fun now. The industry is being left for dead by Wall Street, the IPO market has closed down, and about half of the 370 public companies are reporting they have run down to less than a year’s worth of cash on hand. Many of the 900 member companies in the Biotechnology Industry Organization are laying off workers, being forced into shotgun mergers, and shelving once-promising product candidates.
Inside the Beltway, a new President and Congress have a host of policies in mind that would upset the status quo for the pharmaceutical and biotech industry. There’s universal health care and cost control, for starters, and then the perennial threat of laws to make it easier to develop cheap, generic-like biotech drugs seems more real than ever. Patent law changes might discourage investors from making big bets on new drugs. This week, President Obama said he wants to spend a billion dollars for studies that compare the effectiveness of brand-name drugs against cheaper alternatives. (Doctors might discover that an over-the-counter heartburn drug is just as good as a branded pharmaceutical that Americans spend $6 billion a year on! Horrors!)
I live in Seattle, 3,000 miles away from where all this DC political hardball occurs, but I joined in on a press conference this morning with Jim Greenwood, the president of the Biotechnology Industry Organization, to get up to speed on how these issues will affect members in our Xconomy network cities of Boston, Seattle, and San Diego. Greenwood, a former Republican congressman from Pennsylvania, tried to maintain an upbeat tone, but the news wasn’t encouraging.
“Our companies are pretty resourceful,” Greenwood said, when I asked how many companies will die. “They’re pretty good at crunching down their burn rates to get it as lean as possible until the sky clears and they can go back to investors. These are committed people. They’re not quitters.”
The numbers from BIO itself paint a pretty dark picture, including:
—About one-third of all publicly-traded biotech companies (120 out of 370) now have less than six months of cash on hand. The number of companies living with this dangerously thin amount of cash has climbed 90 percent in the past year, BIO says. Almost half of the companies have less than a year of cash on hand at last count.
—Companies can’t lean on actual product revenues to float their ships, because only about one in 10 public biotech companies have positive income, BIO says.
—That’s why Wall Street’s willingness to swing for the fence, in the high-risk, high-return world of biotech
