17 March 2009 03:06 [Source: ICIS news]
NEW YORK (ICIS news)--The fall off in initial public offering (IPO) funding and its crippling effect on small- and mid-size biotech and pharmaceutical companies leaves these companies with limited choices -- in-licensing or acquisition by big pharma as the only means to get financing -- an industry official said on Monday.
“The number one manufacturing challenge that small bio/pharma companies are facing today is how to pay for it,” said Jim Miller, president of PharmSource, a US-based consultancy, at the 7th Annual DCAT Business Development Forum at DCAT Week ’09 in ?xml:namespace>
Early stage companies have become critical, and are growing increasingly critical, to the business strategies of the major bio/pharmaceuticals companies. The big firms are leaving much of the discovery and early development activities to these venture-supported companies, he said.
Down the line, big pharma and big biotech are looking to in-license the products under development or buy the company outright to feed their own pipelines, he added.
Although small- to mid-size companies account for less than 40% of total research and development (R&D) spending, they account for about 80% of the compounds that are in early development -- pre-clinical to Phase 2, according to Miller.
“So the care and feeding of those early-stage companies is really critical for the success of the industry. Unfortunately, they’re not being fed very well these days,” he said.
Small bio/pharma companies were hit hardest when the IPO window closed early last year. Their R&D spend declined 13% in the fourth quarter of 2008 from the previous year. Company cash positions fell 20% in that same period, according to Miller.
“One of the results of this shrinkage in R&D is that we are starting to see shrinkage in the total pipeline. We see a 20% fall off in terms of late-stage compounds, injectable products,” he added.
Today, both sides must face the challenges of how much development should be invested into, how to fit development activity to available resources, and how to align contract research/contract manufacturing objectives with client objectives, said Miller.
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