First quarter 2009 biotech company restructurings and layoffs reach a brisk pace. Rarely a day has gone by recently when there has not been an announcement of one or several biotechnology company restructurings, headcount reductions, notice that the cash will run out next week, or month, or of a company announcing it is in search of a cash infusion. The Burrill Report’s analysis of the first quarter of 2009 finds 66 U.S. life sciences companies have had to restructure their operations, put R&D on hold, and reduce their workforce to conserve cash.
The headcount reductions at these 66 companies amount to about 8,600 lost jobs. Another 1,300 jobs were lost through staff reductions at 18 global firms, mostly in Europe and Canada. Big Pharma companies also announced workforce reductions in the first quarter of this year, amounting to 18,000 jobs that have been or are about to be axed.
This week, Cambridge, Massachusetts-based Dyax Corporation said it was eliminating 60 positions to focus its resources on commercializing DX-88, which has orphan drug designation and fast-track status as a treatment of hereditary angioedema, a painful swelling below the surface of the skin. According to the company, the workforce reduction is necessary to preserve cash in preparation for the commercial launch of DX-88 in the United States, pending U.S. Food and Drug Administration approval.
Medical device company Xtent, developer of customizable drug-eluting stent systems for the treatment of coronary artery disease, slashed 93 percent of its workforce in January, leaving a staff of nine to pursue strategic alternatives. In mid-March, Xtent’s Custom NX system received CE Mark approval, enabling the system to be marketed in the European Union as well as other countries that recognize the CE Mark certification.
Adventrx Pharmaceuticals, based in San Diego, reduced staff for the second time in the past three months, leaving a skeletal staff of five to evaluate their options. TorreyPines Therapeutics has only three employees left as of last week, and is considering the possible sale of its assets or company.
The doom and gloom is not limited to the United States. It is happening worldwide. Canadian biotech companies are in crisis. Executives there fear that Big Pharma consolidations over the past few months do not bode well for small firms, as pharma will put strategy on the back-burner and shift their focus internally. Canada’s biotech industry market cap stands at just $4.6 billion, according to the Burrill Canadian Biotech News, with only 13 companies closing 2008 with a market cap greater than $85.6 million. In February, Canadian diagnostics company PreMD let go of everyone except for the CEO, who remained to explore alternatives that would allow the company to continue operation until the outcome of its appeal contesting the FDA delay in approving its non-invasive test for predicting heart disease.
The outlook in Europe is not any better. According to a recent study commissioned by European Biopharmaceutical Enterprises, an EU industry organization, one in five European biotech companies could go bust by the end of 2009 if new funding doesn’t emerge soon. The group sounded the alarm that if 20 percent of the European companies go into liquidation, up to 20,000 high-skill and high-level jobs will be lost. It also noted that the number of bankruptcies could increase in 2010 if no action was taken. As much as 50 percent of the small biotech companies interviewed for the study felt “under threat.”
That threat is all too real for Iceland’s DeCode Genetics, a veteran biotech firm and pioneer in genetic testing and personalized medicine. Its attempt to enter the consumer genetic-testing market has been disappointing and the company has been struggling. Even as the company warned investors this week that it had insufficient funds to make it through the year, it was not giving up. “We have lined up investors willing to come into the company with new money once we restructure our debts,” says CEO Kari Stefansson. “At the end of the tunnel, once we emerge, we have a business, we believe, with spectacular potential.”
As we continue to bite our nails in anticipation, it will be interesting to see how these companies weather the storm, which ones will make it to shore, leaner and stronger, and which ones will take their last gasp of breath, remaining only a memory of biotech’s headier times.
A complete list of the 90 Company Restructurings will be available in The Burrill Report Issue 2, available April 30, 2009. www.burrillreport.com