Biotech suffers as recession hits

pharmafile | September 11, 2009 | News story | Medical Communications biotech, intercytex 


The fears of many biotech leaders are being realised, as a string of small-scale companies face liquidation at the hands of the economic crisis.

The latest casualty is Cambridge skin and wound treatment specialist Intercytex, which has been forced to suspend from trading and seek buyers for the components parts of the business.

This follows the downfall of York Pharma and Alizyme which both went into administration in July, after falling victim to major funding gaps.

The trend fulfils expectations of many industry experts, who earlier this year predicted a ‘Darwinian moment’, where only the most adaptable biotechs would survive the downturn.

UK biotech Intercytex was established in 2000 and used its cell technology platform to develop living, human cell-based products. Until now it had employed around 50 staff.

The company had four products in development and enough cash to survive until the end of 2009, but suffered a disappointing clinical trial result for its leg ulcer treatment.

It then announced it would not be in a position to release interim financial results before 30 September 2009 due to the ongoing divestment process, and would therefore be suspended from trading until such results are released.

Intercytex remains in discussions with a number of parties to divest certain business assets, and says it will continue to update shareholders on both the progress of the strategic review and the potential timing on the release of financial results.

Rumours circulating last May indicated Pfizer might buy out the smaller UK firm, but Intercytex said back then it was meeting with a number of potentially interested parties, though no deal was secured.

Lack of funds

2009 has seen various reports predicting a tough future for biotech, indicating that the funding crisis paralysing the global sector shows no sign of abating, with more companies expected to go bankrupt this year.

The sector is still suffering from a lack of venture capital funding despite national industry associations around the world calling for government intervention to keep it afloat.

By June one or two early stage companies had gone bust every month since the end of 2008, according to consultants at Ernst & Young, who expected that number to rise.

But while the industry has seen some failures, a number of biotech companies managed to secure new funding. These include Heptares Therapeutics, which raised £21 million in February, and Proximagen subsequently raised £50 million in June.

Paul Cuddon, a biotechnology analyst at KBC Peel Hunt, told the Financial Times this was a surprising turn of events after a total of 24 companies were identified last November as running out of cash.

However, Cuddon said the latest cash injections would only keep them afloat for another 12 months before they needed more.

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