Baby Biotechs Walk “Valley of Death” in Search of Funding - HCPLive


Dec 1, 2012 (5 years and 7 months ago)


Abraxis Alfacell Corporation Allos Therapeutics Amgen AngioChem Ariad Pharmaceuticals AstraZeneca Aurobindo Pharmaceuticals Bausch &
Lomb Bayer HealthCare Biogen Idec Biothera Bristol Myers-Squibb Cell-Sci Corporation Celgene Cornerstone Pharmaceuticals Dendreon Eli Lilly
Gentinge AB GlaxoSmithKline Gloucester Pharmaceuticals HR BioPetroleum Infinity Pharmaceuticals LEO Pharma Merck & Co Novartis AG Nucryst
Pharmaceuticals Oncothyreon Pfizer Rexahn Pharmaceuticals Roche Holding Genzyme Corp Merck KgaA Sanofi-Aventis TransMolecular Watson
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Oncology & Biotech News
inding investors for small-but-promising
biotechnology companies has, to hear at
least one executive tell it, become a struggle
of Biblical proportions. “Private equity and capital
markets are increasingly failing to fund promising,
early-stage scientific research, primarily because
it is viewed as too high-risk relative to other
investment opportunities,” Martin Sabarsky, the
financial head of HR BioPetroleum, a Hawaiian-
based energy biotech, told Congressional leaders
in October. “This critical phase of commercial
development is often referred to as the ‘Valley of
Death’ within the biotechnology industry, given
the potential for companies and technologies at
this stage of their existence literally to die for
lack of sufficient funding.”
Sabarsky was speaking on behalf of the Wash-
ington-based Biotechnology Industry Association
(BIO), which represents >1200 biotech companies.
He offered these impassioned words in support
of the “Small Business Early-Stage Investment Act
of 2009,” which would create a funding program
at the Small Business Administration to stimulate
growth in early-stage technology companies, in-
cluding biotechs.
Oncology sector not immune
The pharmaceutical side of biotechnology, consid-
ered more bulletproof than other biotech sectors,
is not enduring the recession unscathed. Several
biopharmaceutical companies involved in devel-
oping various anticancer therapies are shelving
pipeline projects, scaling back, or scrapping the
more ambitious plans.
In March, the Virgina-based Cell-Sci Corporation
halted phase III trials for Multikine, an immuno-
Things may look bleak, but analysts say savvy companies
can survive & thrive during the drought
-Diane West
Abraxis Alfacell Corporation Allos Therapeutics Amgen AngioChem Ariad Pharmaceuticals AstraZeneca Aurobindo
Pharmaceuticals Bausch & Lomb Bayer HealthCare Biogen Idec Biothera Bristol Myers-Squibb Cell-Sci
Corporation Celgene Cornerstone Pharmaceuticals Dendreon Eli Lilly Gentinge AB GlaxoSmithKline Gloucester
Pharmaceuticals HR BioPetroleum Infinity Pharmaceuticals LEO Pharma Merck & Co Novartis AG Nucryst
Pharmaceuticals Oncothyreon Pfizer Rexahn Pharmaceuticals Roche Holding Genzyme Corp Merck KgaA Sanofi-
Aventis TransMolecular Watson
Baby Biotechs Walk
“Valley of Death”
in Search of Funding
therapeutic cancer therapy. (Trials may be resum-
ing, however, with new investors interested in the
company’s development of a treatment for people
hospitalized by the H1N1 flu virus.) Onconase, a
second-line treatment for unresectable malignant
mesothelioma (UMM) from the New Jersey–based
Alfacell Corporation was on the FDA’s fast track
early this year. Since then, the company has had
to make drastic cuts—even the board of directors
sacrificed their salaries—to fund phase III trials.
Another New Jersey–based company, Enzon Phar-
maceuticals, makers of Oncaspar (pegaspargase)
for acute lymphoblastic leukemia, scrapped plans
to spin off their oncology pipeline into a separate
biotech for lack of funds.
Recession not the only reason for
investor retreat
While the global recession has certainly had an
effect on the pullback of investments in biotech
companies—particularly new or smaller firms—Alan
F. Eisenberg, executive vice president for emerging
companies and business development for BIO, said
the industry has never been for the faint-of-heart.
“First and foremost, it’s the economy,” Eisenberg
said. “But biotech, at its heart, is a long-term, high-
risk business.” Unique challenges come with the
territory, such as the challenge of mass producing
living substances.
The vast majority of expenses are what Eisenberg
describes as pre-market costs, and this is where
many newer or smaller biotech companies find
themselves struggling. When the credit markets
started to dry up two years ago, said Eisenberg,
investors high-tailed their assets from long-term,
high-risk sectors like biotech in favor of short-
term, lower-risk bets. The change was dramatic:
in 2007, according to BIO’s data, 41 biotechs
launched initial public offerings (IPOs). In 2008
there was one IPO, with 20 withdrawn; as of Sep-
tember 2009, there were two IPOs, one of which
was quickly dropped. Eisenberg and colleagues
see this as nothing less than a trend “threatening
the next generation of cures and therapies.”
“Biotech, at its heart,
is a long-term,
high-risk business.”
–Alan F. Eisenberg
Justin Horrocks (iStock)
Oncology & Biotech News
“Aging populations,
emerging middle classes
in the developing world
with increased prosperity,
all of these still drive the
need for medicines.”
–Gautam Jaggi
Greener pastures and still waters
Not all is bleak in the so-called “Valley of Death.”
Much like the rest of the famous psalm, some bio-
tech companies expect to find greener pastures and
still waters on the other side of the recession. Will
biopharmaceutical companies focused on cancer
cures reach them first? Eisenberg points to Seattle-
based Dendreon and the company’s growth fueled
by the company’s prostate cancer drug, Provenge.
After surviving a bumpy ride, Dendreon recently
filed an amended Biologics License Application to
the FDA. If approved, Provenge will become the first
anticancer vaccine available in the United States.
Others in biopharma are encouraged by signals of
support from some in the House and Senate for
legislation providing for a 12-year exclusivity pe-
riod for new biopharmaceuticals before biosimilars
can enter the market.
No matter the economic or social climate, finan-
cial analysts say biopharmaceuticals will remain
subject to market basics. “All of the long-term
drivers [of growth] are still out there,” said Ernst
& Young’s Gautam Jaggi, managing editor and co-
author of the financial group’s 2009 global biotech-
nology report, Beyond Borders. “Aging populations,
emerging middle classes in the developing world
with increased prosperity, all of these still drive
the need for medicines,” he said. “The innovative
drugs that truly raise the bar are the ones that
have the best shot.”
Global US Europe Canada Asia-Pacific
Revenues 89,648 66127 16,515 2041 4965
R&D expense, $ 31,745 25,270 5171 703 601
Net income (loss), $ (1443) 417 (702) (1143) (14)
Employees, No.
200,70 128,200 49,060 7970 15,530
Public companies, No.776 371 178 72 155
Public & private companies, No.4717 1754 1836 358 769
Employment totals are rounded to the nearest hundred in the United States and nearest ten in other regions.
Source: Ernst & Young.
Global Biotechnology in 2008 (US$m)
Many factors go into determining whether a company makes money during a specific quarter besides product
sales. The sale of a chunk of business might plump the third quarter (3Q) bottom line, or the expiration of a
contract might take a bite out of it. Most of the world’s major pharmaceutical companies reported a profit for
3Q, and they expect the trend to continue through the fourth quarter.
Big Pharma’s (Mostly) Sunny Third Quarter
Amgen—The world’s largest biotechnology
company reaped higher profits in 3Q despite a 2%
drop in revenue. Amgen reported a 24% increase in
net income, which reached $1386 million; earnings
per share increased 30%, to $1.36.
AstraZeneca—For this company, 3Q revenue
rose 10% compared to this time last year, largely
attributed to an increase in sales for Toprol-XL
(metoprolol succinate) and H1N1 vaccine. Earnings
per share increased 22%, to $1.46.
Bayer HealthCare—This subdivision of Bayer
Group saw pharmaceutical sales rise by 3%,
largely driven by 29.6% growth in Nexavar
(sorafenib) sales. Total 3Q earnings grew 12.1%.
Biogen Idec—Increased drug sales and lower
amortization costs gave the company a 34% boost
in 3Q, with profits of $277.6 million (95 cents per
share). Revenue rose 3%, to $1.12 billion.
Bristol-Myers Squibb (BMS)—This drugmaker had
little to complain about in 3Q, with a solid revenue
increase compared with 3Q last year. While net
income declined nearly two-thirds compared to 3Q
last year, $2 billion gained from selling a business
offset the steep drop. Excluding the $2 billion,
profit rose 64% in 3Q, with revenue at $5.49
billion. Earnings per share totaled 48 cents, up
from 29 cents in 2008.
Celegene—Compared to 3Q 2009, the company
reported a 58% boost in third-quarter profits
attributed largely to a surge in sales of Revlimid
(lenalidomide) and Vidaza (azacitidine). The company
earned $216.8 million, or 46 cents per share.
Eli Lilly—Revenue from global sales grew 7% in 3Q,
beating Wall Street expectations. The company re-
ported earnings at $941.8 million (86 cents per share).
GlaxoSmithKline—The London-based company
announced an 11% jump in earnings for 3Q 2009,
primarily because of sales from its flu drug. The
company reported net profit of £1.44 billion compared
with £1.29 billion one year ago. Revenue grew 15%,
to £6.76 billion.
Merck & Co—Not only did Merck see a huge jump
in profits for 3Q, it also saw an increase in sales. Net
income totaled $3.42 billion, more than triple the $1.09
billion in 2008. The increase was largely due to a busi-
ness sale, but even without the sale profit was up 58%
compared with 3Q 2008. Merck’s revenue increased
2% to $6.05 billion and earnings per share were $1.61.
Novartis AG—Though not as great as some of the
other players, Novartis still eked out a 1% profit for
3Q 2009, reporting earnings of $2.1 billion compared
with $2 billion in last year’s 3Q. Novartis also saw an
8% gain in net sales for its pharmaceuticals division,
driven up in part by sales of Afinitor (everolimus) for
kidney cancer. Novartis shares were up 0.1%.
Pfizer—The New York–based company has been
slashing operating costs after acquiring Wyeth in
2009. The company reported 3Q profits of 26%,
though sales were down 3%, at $11.62 billion.
Roche Holding—The Swiss drugmaker saw
3Q sales grow 14%, fueled largely by sales of
drugs to treat flu and cancer. Sales of Avastin
(bevacizumab) grew 21%; Rituxan and Herceptin
(trastuzumab) also saw increased sales.
Genzyme and Merck KgaA were two of the few
major pharmaceutical companies to report a drop
in profits for 3Q 2009 as compared to 3Q 2008.
Genzyme Corp—For 3Q, Genzyme reported
an 87% dip in profit, largely attributed to
the temporary closing and remediation of its
Massachusetts production facility. The company
said things should be back to normal soon and
plans to regain lost footing in 2010.
Merck KgaA—The German company Merck KgaA
suffered a 27.8% decline in net profits for 3Q,
down €144.4 million from 3Q 2008. Growth in its
pharmaceuticals division contributed
to a 2.7% rise in revenue for 3Q.
Allos Therapeutics
Pralatrexate (Fotolyn) for peripheral T-cell
ANG1005 for glioblastoma
Ariad Pharmaceuticals
AP24534 for chronic myeloid leukemia, acute
myeloid leukemia
Imprime PGG for metastatic colorectal cancer
& non–small cell lung cancer (NSCLC)
Cornerstone Pharmaceuticals
CPI-63 for pancreatic cancer
Gloucester Pharmaceuticals
Romidepsin for cutaneous T-cell lymphoma
Infinity Pharmaceuticals
IPI-504 for NSCLC
PX-866 for advanced metastatic cancer
Rexahn Pharmaceuticals
Archexin for pancreatic cancer
I-TM601 (Chlorotoxin) for glioblastoma
New Jersey, home to several major pharmaceuti-
cal firms including Abraxis, Bayer, Bristol-Myers
Squibb, Celgene, Merck, Novartis, Sanofi-Aventis,
and Watson, is becoming a top destination for drug
manufacturers to set up shop. In 2008, New Jersey
claimed more than 283 biotechnology companies
and at least 24 Fortune 500 healthcare companies.
Combined, the pharmaceutical, biotechnology,
and medical device industries contributed nearly
three-quarters of a billion dollars to the state’s
coffers and paid $129.2 million in property
taxes in 2008. The high-income jobs
delivered by these companies also pad
state and local revenues. Together, these
industries employ nearly 600,000 New
Jersey workers.
In the coming year, several companies
plan to open facilities in this growing ha-
ven for pharmaceutical and biotech firms,
which New Jersey is hoping will ease the pain
from a rate of unemployment that exceeds the
rates in neighboring New York and Pennsylvania.
Ironically, recent mergers involving New Jersey
pharmaceutical companies helped darken the
state’s unemployment picture. For example, Roche’s
acquisition of Genentech in March prompted Roche
to move its headquarters from Nutley, New Jersey,
to Genentech’s offices in San Francisco, California,
sending several people to the unemployment line.
(Roche recently announced plans to convert the
Nutley site into a research facility and is recruit-
ing 70 scientists to help develop drugs for cancer,
arthritis, and asthma.)
New companies preparing to become part of
New Jersey’s booming biotech industry include Al-
los Therapeutics, a Colorado-based company that
recently received FDA approval for Folotyn (prala-
trexate) for peripheral T-cell lymphoma. Allos is
establishing commercial operations in Princeton.
Seattle’s Dendreon, which recently submitted
a Biologics Licensing Application to the FDA for
its Provenge vaccine—a potential blockbuster—is
shelling out $50.5 million to gear up its Morris
Plains facility to handle production of Provenge.
Dendreon expects the plant to be operational in
April 2010. One reason Dendreon selected New
Jersey is its proximity to several major airports.
Men with prostate cancer will be able to fly to the
state to receive the vaccine, which Dendreon’s
facility must tailor to each patient.
The New York–based Bausch & Lomb, best known
for eye care products, opened its pharmaceutical
headquarters in Madison, New Jersey, in July 2009.
The company cited New Jersey’s vibrant pharma-
ceutical and biotechnology industries as leading
factors in its decision.
Several overseas pharmaceutical companies have
announced plans to open new facilities or expand
existing ones in New Jersey, including LEO Pharma
in Denmark, which anticipates opening headquar-
ters for its US division in the state. Gitte Aabo, CEO
of LEO Pharma, said, “We expect to start operations
in the beginning of 2010.”
The Swedish medical technology company
Gentinge AB announced an expansion of its affili-
ate Maquet Cardiovascular. Also anticipating the
need for more space is the India-based Aurobindo
Pharmaceuticals, which is constructing a second
manufacturing facility in New Jersey thanks to
a grant from the state’s Economic Development
Authority (EDA).
EDA grants are available to companies wishing
to relocate to or expand in the Garden State. In
2008, Nucryst Pharmaceuticals received a $543,900
EDA grant for opening offices in Princeton; Ax-
can Pharmaceuticals, maker of gastroenterology
products, secured $579,000 for relocating to New
Jersey from Birmingham, Alabama. New Jersey also
boasts a large talent pool of employees with PhDs
and pharmaceutical or biotechnology experience,
another draw for biotech firms.
Pharmaceutical Companies
Flocking to New Jersey
Elsevier Business Intelligence and Windhover
Conferences have announced their “Top 10 Projects
to Watch” for the Therapeutic Area Partnerships
( meeting in Boston,
Massachusetts, on November 17-19, 2009. Previous
Top 10 candidates have gone on to broker major deals
or form strategic alliances. Here are the Therapeutic
Area Partnership’s Top 10 oncology projects to watch,
selected by a panel of industry experts:
Ten Oncology
Projects to Watch
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