The Cross-Border Biotech Blog

Biotechnology, Health and Business in Canada, the United States and Worldwide

Q2 Canadian Healthcare Review Shows Biotech Financing Weakness but Some M&A and Regulatory Wins

Data in the Q2 2010 Canadian Healthcare Review from the Equicom Group (co-authored by James Smith, Vice President Healthcare at Equicom and myself) shows a continuation of the weakness in biotech financing that was outlined in last week’s Toronto presentation of Ernst & Young’s Beyond Borders global biotech report. The public Canadian development stage companies raised $72.7 and $187.9 million in Q2 and H1, respectively. The financing total in the first half of 2010 for these companies is 78% of the H1 2009 total but is less than one third of the first half average for 2005 to 2007.

As in the first quarter, the events for the sector were largely positive, including two NCEs receiving positive regulatory recommendations: Theratechnologies’ tesamorelin (Egrifta) from an FDA advisory committee, and Cardiome’s BRINAVESS (iv vernakalant) from a committee of the European Medicines Agency.

In the largest M&A transaction by a Canadian therapeutics company since Shire acquired BioChem Pharma, the Biovail name will be replaced by Valeant after the merger of the two companies. M&A was also prominent among the private Canadian companies as three companies announced in the second quarter that they will be acquired – VisualSonics, Resonant Medical and Verio Therapeutics – followed by Sentinelle Medical in early July.

After over thirty years in this industry, I have learned that the only constant in biotech is change – business models, funding levels, hot technologies, approval hurdles at the FDA, investor strategies, etc. Every company has its own unique set of risks and rewards and management has to balance these in the context of this constantly changing set of environments – not an easy task.

However, simply complaining and waiting for markets to improve is not an option. For companies which cannot afford to run the next clinical programs, shareholder value declines as the cash dwindles and the companies with competitive products and cash move ahead. Reduced R&D spending is an opportunity for those companies which have the clinical data needed to sell or license their products, but the markets for those products can also change rapidly.

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