Biotech Snake oil

Desperate communities all across the nation (including Buffalo/University at Buffalo) are to turning to biotech to replace jobs lost in manufacturing and finance. The NY Times, Fortune Magazine, Business Week, The Wall Street Journal, Nature Biotechnology, Buffalo News and Business First of Buffalo have all recently pointed out what an expensive, failed subterfuge this is.

Since 2001 the University at Buffalo has presented biotech as sure bet guaranteed to produce thousands of jobs for the WNY region (Support Runs Strong for UB Biotech Center, Buffalo News, August 26, 2001). The truth, as usual, is not so clear cut.

• Biotech industry made a profit only once in the last 40 years.
• Sector employs small number of people. Will NEVER come close to replacing the manufacturing jobs lost in WNY
• Economic downturn has made it extremely hard to get the money needed for research and development. Investment down 75%
• Successful biotech clustered in only three regions of the county, NYC, Boston and San Francisco.
• Developments don’t generally benefit the local area, researched here but developed elsewhere.
• Risky business in any economy; testing can take a decade or more, and a single drug or medical device can cost hundreds of millions of dollars before it even reaches the testing stage.
  

Despite Odds, Cities Race to Bet on Biotech
At a recent global biotech convention in Atlanta, 27 states, including Hawaii and Oklahoma, paid as much as $100,000 each to entice companies on the
exhibition floor. All this for a highly risky industry that has turned a profit only one year in the past four decades.

Skeptics cite two major problems with the race for biotech. First, the industry is highly concentrated in established epicenters like Boston, San Diego and
San Francisco, which offer not just scientific talent but also executives who know how to steer drugs through the arduous approval process.

“Most of these states probably don’t stand much of a chance to develop a viable biotech industry,” said Gary P. Pisano, a Harvard Business School professor and the author of “Science Business: The Promise, the Reality and the Future of Biotech.”
Second, biotech is a relatively tiny industry with a lengthy product-development process, and even in its largest clusters offers only a fraction of the jobs of traditional manufacturing. In the United States, only 43 biotechnology companies employ more than 1,000 people.

There is no guarantee that if a blockbuster drug materialized, it would be manufactured and marketed in the same place it was developed and tested.
Cities like Shreveport, where public and private money have built the InterTech Science Park, remain steadfastly optimistic, though a biotechnology manufacturing center at the park was occupied for only six months in 2001 before the tenant went under. Three times in the last three years we have almost had a tenant in that building.”

New York Times June 10, 2009
http://www.nytimes.com/2009/06/11/us/11biotech.html?scp=1&sq=biopolis&st=cse

Biotechnology: Biotech funds scarce in new economy
Biotech is risky business in any economy; testing can take a decade or more, and a single drug or medical device can cost hundreds of millions of dollars before it even reaches the testing stage.

Add a recession to the mix, and investors are even more skittish about pouring money into a notoriously chancy industry.

“For a long time, bio was the darling. Then [investors] found out it would take some time to develop a product,” Dordick said.

It can take between 10 and 15 years, and cost up to $1.5 billion, to develop a single drug before it hits shelves.

Nationally, venture funding for all sectors is at a 12-year low; investments dropped 42 percent below the first quarter of 2008, according to the latest MoneyTree report by PriceWaterhouseCoopers for the National Venture Capital Association. VC funding for life sciences and biotechnology fared only a little better than the average, dropping 40 percent over last year. Still, not one biopharmaceutical company in the Capital Region was funded by venture capital in all of 2008 and the first quarter of 2009.

Business First of Buffalo May 15, 2009
http://www.bizjournals.com/buffalo/othercities/albany/stories/2009/05/18/focus1.html

Cleveland BioLabs waxes optimistic at annual meeting
(But reality is not quite so rosy)
Cleveland BioLabs, as a development- stage company, depends on the funds it raises from investors to finance its operations. The company’s revenues more than doubled last year to $4.7 million, but that covered just a fraction of its $19 million in operating expenses during 2008, leading to a $14 million loss over the course of the year.

Buffalo News, 06/26/09
http://www.buffalonews.com/businesstoday/localbusiness/story/715231.html

Embattled NY Governor Lays Out Strategy for Boosting State's Life-Science Sector
Patterson talks the talk but doesn’t walk the walk. Despite much talk of continuing to spend $hundreds of millions on biotech, reality is stark. NYS budget deficits have forced the state to draw more on existing resources and less on new funding.
Budget shortfalls have all but gutted New York's much more modest efforts to promote itself to life-sciences employers.

New York was one of a handful of states not to sponsor even a booth for recruiting life-sci businesses and their jobs at last month at the Biotechnology Industry Organization's BIO 2009 International Convention, held in Atlanta. The state even cut the $160,000 subsidy it gave a year earlier toward a public-private life-sci recruitment effort, NY Loves Bio.

http://www.genomeweb.com/bioregionnews/embattled-ny-governor-lays-out-strategy-boosting-states-life-science-sector?page=3

Biotech Goes on Life Support.
For this high-risk, cash-intensive industry, it's crunch time. Biotech companies have always been notoriously risky. They tend to burn through cash-to develop one drug can cost as much as $1 billion-and operate on a "pre-revenue" basis for years. Now the credit crunch is hitting the lab-coat crowd harder than most. For private outfits venture money is drying up on one end, and on the other there's no easy exit in an IPO; on the publicly traded side, small and midsize listed companies are struggling to find enough funding to stay afloat.

G. Steven Burrill of life sciences research firm Burrill & Co. says one-third of publicly traded biotechs have less than six months' worth of cash left-and he predicts that as many as 100 might go under or be forced to merge this year (10 have filed for bankruptcy since November).

Fortune, 00158259, 5/11/2009, Vol. 159, Issue 10

BIOTECH'S GOOD NEWS, BAD NEWS
The biotech industry as a whole turned a profit in 2008 for the first time in its 40-year history, reports the latest survey by venture capital group Burrill & Co.

The bad news behind the good news: Of the $9.4 billion in total profits, $8 billion came from just three companies--Amgen, Genentech, and Gilead Sciences. The rest lost a combined $6 billion, with just 67 of the survey's 370 publicly traded companies in the black.

The financial crisis pushed the market capitalization of almost 60% of the biotechs to well below $100 million. And more than 120 firms had less than six months of cash on hand, a 90% jump over 2007. "After 40-plus years of relatively easy access to capital, the rules of the game have changed," says Burrill CEO Steve Burrill.

BusinessWeek, 00077135, 3/16/2009, Issue 4123

Cash Dries Up for Biotech Drug Firms
Shortage of funding available to small firms in the biotechnology industry. In the wake of consolidation among large pharmaceutical companies, biotech ventures are finding it difficult to raise cash. By one count ten biotechnology firms have gone bankrupt since November, 2008.

Wall Street Journal - Eastern Edition; 3/16/2009, Vol. 253 Issue 61, pB1-B2, 2p

Venture capital shifts strategies, startups suffer
While total US healthcare VC investment dropped 25–50% in the final quarter of 2008, Topper estimates, early-stage biotech funding plummeted about 50–75%.

Nature Biotechnology 27, 103 - 104 (2009)