3 Dec 2008

Biotech blues : 1.2bn over decade to develop a medically useful molecule

It takes an average of $1.2bn over 10-12 years to develop a medically useful molecule. This huge expense of time and money means that almost all biotechnology start-ups require top-ups of funding or other outside sources of revenue in order to survive. In normal times, companies with promising technologies are able to attract the funds needed to soldier on through clinical trials while those whose products fail to clear various scientific and regulatory hurdles are left by the wayside. But now, the financial crisis has left even healthy companies wondering where the cash is going to come from next.

Traditionally, struggling businesses have sought shelter in the arms of big drug companies or stronger rivals willing to buy their intellectual property and hire their scientific talent. Others can elect to go into "hibernation" if their technologies fail to bear fruit, shutting down research while holding on to their intellectual property in the hope it may one day prove useful.

This year looks different. Venture capitalists have begun to shun high-risk bets such as biotech. Meanwhile, the public funding market has all but dried up. So far this year, there has been just one initial public offering of a biotechnology company - for a minuscule $5.8m - compared with more than two dozen last year. At least five biotechnology companies have gone bankrupt in recent weeks for lack of funds, according to Bloomberg. Others have begun to shutter research projects in an effort to preserve cash.

Like many problems sparked by the financial crisis, this, too, will pass. Several big drug companies are set to lose patent protection on lucrative medicines over the next few years. Demand for medically promising molecules will eventually pick up as pharmaceuticals companies search for the next big thing. Unfortunately, these long-term dynamics are likely to come as cold comfort to medical patients who might have benefited from research projects now set for the chopping block.


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