These are grim times for many industries, and the life sciences are no exception. Most of these enterprises depend on the ability to raise fresh investment capital on a regular basis, so when investors turn cautious, things can get ugly fast.
To get a sense of just how big of a bruising San Diego biotechs are heading for, I combed through the balance sheets of 23 publicly-traded companies. My main questions are the most vital ones to any biotech company—how much cash does the operation have, and how fast is it burning through it?
This, of course, is a national story that will reverberate locally. Profitable industry powerhouses like Amgen and Genentech aren’t in trouble, but about half of the 248 unprofitable biotechs that are publicly traded have less than a year’s worth of cash on hand, according to an October report by Eun Yang, an analyst with Jeffries & Co. Of the 23 publicly traded companies I analyzed in San Diego just three are what could be called consistently profitable: Invitrogen, Illumina and Genoptix. Of the 23 sampled, just 10 have more than $100 million of cash and investments socked away in the bank.
If the markets don’t turn around by the middle to late 2009, it’s clear that a lot of these companies will be suffering. “A considerable amount of companies will have to consider drastic measures or go out of business. It is indeed not pretty,” says Kleanthis Xanthopoulus, CEO of Regulus Therapeutics, in an email. (Xanthopoulus, an Xconomist, runs a private company that spun off two relatively healthy companies. Both have more than $500 million in available cash: Carlsbad, CA-based Isis Pharmaceuticals and Cambridge, MA-based Alnylam Pharmaceuticals.
This isn’t a comprehensive list, and it’s in no particular order. My hope is this covers most of the major publicly traded players in the region. If you have any suggestions for companies to add, please send me a note at firstname.lastname@example.org. (For the real masochists out there, I did a similar analysis in Seattle last week, so you can see which region is worse off.)
—Amylin Pharmaceuticals (NASDAQ: AMLN). This San Diego-based company made headlines when it cut 340 jobs at its local headquarters. The move was made to cope with a double whammy of declining demand for its best-selling product, exenatide, (Byetta) and an FDA delay in approval of a more convenient once-weekly form of the medicine. The company had $806 million in cash at the end of September, and says the cuts should enable it to preserve $80 million in 2009 and turn cash flow positive by the end of 2010.
—Somaxon Pharmaceuticals (NASDAQ: SOMX). This San Diego company has an important FDA deadline coming up on Dec. 1 for the review of an insomnia medicine. Any delays, which have become common at the overworked agency, could spell trouble. Somaxon had $22.6 million in cash and investments at the end of September, and ran up a net loss of $10.3 million in third quarter.
—Arena Pharmaceuticals (NASDAQ: ARNA). This San Diego drug developer, working on medicines for obesity and diabetes, has more cash than most. It expects to end the year with $115 million in cash on hand after paying off some debt. It reported a net loss of $56.2 million in the third quarter. One worrisome stat: Arena started the year with $398 million in cash and investments. Let’s hope for shareholders’ sake the company has turned off that gusher in spending.
—Genoptix Medical (NASDAQ: GXDX). This Carlsbad, CA-based diagnostics company reported a $15.4 million profit in the third quarter, so it’s not bleeding red. It raised its sales forecast for 2008 to $112 million, up from a range of $105 million to $108 million.
—Isis Pharmaceuticals (NASDAQ: ISIS). The Carlsbad, CA-based developer of antisense drug technology struck it rich in January through a partnership with Cambridge, MA-based Genzyme to co-develop the cholesterol drug mipomersen. That deal brought in $350 million upfront, and could generate much more if the drug succeeds in clinical trials. Isis ended September with a $512 million cushion in the bank, enough to last five years, the company says.
—Anadys Pharmaceuticals (NASDAQ: ANDS). The numbers say a lot for this San Diego developer of drugs for hepatitis C. It had $34.4 million in cash and investments at the end of September, and burned through $22 million of its cash reserves in the first nine months.
—Optimer Pharmaceuticals (NASDAQ: OPTR). This San Diego company has had some good fortune. Its drug for C. Difficile, a nasty bacterial infection that’s transmitted in hospitals, was found to be about equal to a standard antibiotic at curing patients, and was significantly better at reducing recurrence rates. It had $47.6 million in cash at the end of September, combined with a relatively narrow $6.5 million net loss.
—Santarus Pharmaceuticals (NASDAQ: SNTS). This San Diego maker of omeprazole sodium bicarbonate (Zegerid) for heartburn says its revenues are climbing to an anticipated $125 million in 2008, the high end of its previous forecast of $115 million to $125 million. It had $34.4 million in cash at the end of September, and a $4 million net loss.
—Cypress Bioscience (NASDAQ: CYPB). The San Diego developer of milnacipran for fibromyalgia has been held up by a delay at the FDA. This drug is important since it would be Cypress sole marketed product, but it can wait a while if need be. The company had $149.8 million in cash and investments at the end of October, and a $4.1 million net loss.
—Sequenom (NASDAQ: SQNM). This San Diego maker of a noninvasive prenatal test for Down syndrome has been on a roller coaster on Wall Street this fall since it said the test was 100 percent accurate in a trial of 400 pregnant women who had results verified with a more invasive amniocentesis or CVS procedure. The company had the good fortune to raise $92 million in July, before the blowup of Lehman Brothers and other banks led to a freeze in the credit markets. It had $120.7 million in cash and investments at the end of September, and a $10.4 million net loss.
—Acadia Pharmaceuticals (NASDAQ: ACAD). This San Diego company, a developer of neurological drugs, has already done some restructuring to conserve cash. It had $72.7 million in cash and investments at the end of September, and burned through $54 million of cash reserves in the first nine months of the year.
—Cadence Pharmaceuticals (NASDAQ: CADX). This San Diego company had $61.1 million in cash at the end of September and a $13.7 million net loss in the third quarter.
—Halozyme Therapeutics (NASDAQ: HALO). This San Diego company had $72.5 million in cash and investments at the end of September, and spent $25 million in the first nine months.
—Ligand Pharmaceuticals (NASDAQ: LGND). The San Diego drug developer’s balance sheet looks pretty similar to Halozyme. It had $72.5 million in cash at the end of September, but it had a wider net loss of $18.2 million. It spent $23 million in the first nine months.
—ISTA Pharmaceuticals (NASDAQ: ISTA). This Irvine, CA-based company had $22.1 million in cash on hand at the end of Septmeber, and burned through slightly more than that, $24 million, in the first nine months.
—Neurocrine Biosciences (NASDAQ: NBIX). This San Diego developer of neurological drugs had $118.2 million in cash at the end of September, and expects to finish the year with about $100 million, the company said.
—Orexigen Therapeutics (NASDAQ: OREX). This San Diego company, developing treatments for obesity, had $100.1 million in cash and investments at the end of September, and a net loss in the preceding nine months of $71.1 million.
—Invitrogen (NASDAQ: IVGN). This maker of lab supplies, which is merging with Applied Biosystems and changing its name to Life Technologies, is one of the lucky few in the consistently profitable club. It had $675 million in cash and investments on hand at the end of September, about $4 million more than it had nine months earlier.
—Illumina (NASDAQ: ILMN). This maker of high-speed genetic analysis instruments has been on a torrid growth pace for years, more than quadrupling its employee base in the past four years. Despite rapid spending, it had $649 million in cash on hand at the end of September, and plans to use some of that cash to buy new technologies if the opportunity is right.
—La Jolla Pharmaceutical (NASDAQ: LJPC). This company had $26.1 million in cash at the end of September, and reported a third quarter net loss of $17.1 million.
—Vical (NASDAQ: VICL). This San Diego company had $49 million in cash and investments at the end of September, and expects to burn through $27 million to $32 million during this calendar year.
—Hollis-Eden Pharmaceuticals (NASDAQ: HEPH). This company had $29.1 million in cash at the end of September, about $14.1 million less than it had nine months ago.
—Cytori Therapeutics (NASDAQ: CYTX). This regenerative medicine company had just $13.3 million in cash and investments left at the end of September, and reported a net loss of $6.8 million. It may have access to borrow another $7.5 million if it can meet certain lending restrictions, the company says.
By posting a comment, you agree to our terms and conditions.