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Technology & Biotechnology

Washington Business Journal

December 26, 2008

Media

The D.C. tech scene

In February, the D.C. Technology Council
disbanded, hoping to re
-
emerge as a part of the
Washington, D.C. Economic Partnership, but
the transition has been

slow. After 10 months, the group has
completed one goal: a feasibility study on creating a technology
incubator in the city.


The District’s best
-
known tech company, Blackboard Inc., was
awarded $3.1 million in a March court decision


almost ending its p
atent infringement
saga with Desire2Learn Inc., a Canadian company. The decision has allowed Blackboard,
which makes software for higher education, to sustain its market leadership position, at
least until all appeals are exhausted.


In the meantime, Black
board is trying to prevent the U.S. Patent and Trademark Office,
which is conducting its own review of the company’s patent, from declaring that patent
invalid.


In December, the D.C. Council approved a 15
-
year franchise agreement with Verizon
Communicatio
ns Inc. to make the FiOS television, high
-
speed Internet and telephone
service available throughout the District, although the installation won’t be completed for
another decade.


D.C. Jobs with Justice, a nonprofit organization, said the agreement does no
t include
enough job opportunities for District residents.


Biotech companies become penny stocks


This year, a rocky economy turned survival into a daily game of wait
-
and
-
see for many
companies.


The year began with several admissions of cash shortages an
d share prices drooping
dangerously close to the level that could cause a delisting from the Nasdaq stock market.


The credit crunch delivered a blow to the local biotech industry, as investors became
more wary of spending money on young companies with lon
g pipelines for their
products. Before the year ended, the worsening economy and funding obstacles


described as the worst since the Sept. 11 attacks


left some companies mortally
wounded.


By Thanksgiving, 17 local biotechs were considered penny stocks,

with share prices
trading below $5 on the Nasdaq Stock Market and American Stock Exchange. Five of
them were trading below $2, and a whopping nine below $1. Nearly all hit their 52
-
week
lows in the fourth quarter.


Many smaller private companies have not
been faring much better. After finding investor
doors closed, they began courting acquirers.

The telecom industry’s big boys win bandwidth


The Federal Communications Commission raised $19.6 billion in its 700
-
megahertz
spectrum auction, which closed March

18. Verizon Communications Inc. and AT&T Inc.
won most of the bandwidth, defeating an effort to bring new competition to the network
provider market.


In addition, the commission’s attempt to auction some airwaves for a nationwide public
safety network fa
iled. The FCC was unable to attract buyers willing to meet the minimum
bid price and other requirements for building the network in both urban and rural
markets.


Tech tax repealed


Maryland’s General Assembly repealed in April a computer services tax that

was
expected to generate $200 million annually to lessen a $150 billion budget gap. The
controversial “tech tax,” which would have levied a 6 percent sales and use tax on
computer services, could have put the state’s high
-
tech sector at a disadvantage, cr
itics
said. In conjunction with repealing the tech tax, the General Assembly decided to
increase certain corporate taxes to make up for the foregone revenue.


Moves, mergers and acquisitions, oh my


Computer Sciences Corp., an information technology consul
ting company, moved its
headquarters to Falls Church from El Segundo, Calif., and changed its name to simply
CSC.


Sprint Nextel Corp. left Reston to establish a new headquarters in Overland Park, Kan.


The Carlyle Group bought McLean
-
based Booz Allen Hami
lton Inc. in May for $2.45
billion and spun off Booz & Co., the commercial part of the business.


Sirius Satellite Radio Inc. finally completed its acquisition of XM Satellite Radio Inc. in
July. Shares of the newly coined Sirius XM Radio Inc. sunk from ne
ar $1.50 in August to
14 cents by the end of November, and at least 50 to 80 employees were axed from the
D.C. operations.


BearingPoint Inc. was removed from the New York Stock Exchange and placed on the
over
-
the
-
counter bulletin board. The McLean
-
based c
ompany struggled to keep from
going under.


VC deal flow stunted


Technology companies and federal contractors generally were able to weather the
financial downturn. Their deal flow was slow and steady in 2008, with software
companies getting the largest p
ortion of investments in most quarters.


However, there was a decline in venture capital investments to fund tech startups. The
slowdown was largely attributed to difficulties that existing VC
-
backed companies had in
going public or being acquired. That me
ant VC firms had to shift money to later
-
stage
financing to continue supporting their portfolios.

International firms buy up local biotechs


The region’s roll of acquisitions continued from 2007 to the end of this year. Avalon
Pharmaceuticals Inc., Prestwi
ck Pharmaceuticals Inc., Iomai Corp. and CoGenesys Inc.
were bought, almost all by international firms.


Avalon and Iomai’s auditors had expressed concern over whether their cash could last
them the year.

Three biotech products meet with approval


The loca
l biotech community received approvals for three new drugs, a rare occurrence in
an industry that has been facing tighter federal standards.


The three products are Moxatag, a strep throat treatment, developed by MiddleBrook
Pharmaceuticals Inc.; Xenazine,

a treatment for chorea associated with Huntington’s
disease, developed by Prestwick Pharmaceuticals Inc.; and Amitiza, newly approved for
irritable bowel syndrome, developed by Sucampo Pharmaceuticals Inc.

Losing local roots


MiddleBrook Pharmaceuticals I
nc. got a $100 million equity investment from a Chicago
company and a new management team from the Dallas area, a combination that shifted
its headquarters to Texas.


Prestwick Pharmaceuticals Inc. sold itself to Canada
-
based Biovail Corp. for $100
million

in cash, and its remaining D.C. employees were let go.


Celera Corp., at one time a biotech bellwether for the Washington region, split off from
its parent company and moved its headquarters to California.

Rejections and delays


In July, Vanda Pharmaceuti
cals Inc. was smacked with a rejection letter from the Food
and Drug Administration for its schizophrenia drug candidate.


The company, whose stock plunged to record lows and whose employees bore the brunt
with layoffs, has since submitted another request
for approval and awaits the FDA’s
decision in May.


Even the region’s mightiest biotech, MedImmune LLC, wasn’t spared the fate of FDA
delays. The application for its next
-
generation Synagis drug was returned by the FDA in
November with questions and reques
ts for more information.


MedImmune, now a subsidiary of London
-
based AstraZeneca PLC, said it plans to
resubmit that application in the first half of next year.