Financial crisis affects biotech company's promising clinical trials on MS drug

From the intro to a Nov. 21 Bloomberg story:

The global economic crisis has cut funding for biotechnology companies to the lowest level in a decade, triggering bankruptcies and threatening development of drugs based on biomedical breakthroughs.

In the past month, at least five biotechnology businesses have sought bankruptcy protection, according to company news releases, and others may be heading toward a similar fate. Those at highest risk have experimental compounds moving into costly human research. Peptimmune Inc., a 6-year-old closely held firm, says it’s struggling to pay for clinical trials of its promising multiple sclerosis drug.

The amount raised this year by biotechnology companies fell by $9.7 billion through September, or 54 percent, compared with the same period in 2007, according to Burrill & Co., a life sciences investment bank in San Francisco. That may mean work on dozens of potential treatments will stall or die as companies fire workers and shelve early research projects, industry executives and investors said.

“I’m looking down the barrel of a gun,” said Peptimmune’s Chief Executive Officer Thomas Mathers in an interview. The Cambridge, Massachusetts-based company’s cut staff by more than half to 22 people, moved to smaller offices to conserve the $6.5 million on hand and is delaying research on new drugs for Alzheimer’s disease and Parkinson’s, Mathers said.

Biotechnology companies in the U.S. are raising less cash than they have in a decade, according to Burrill, which tracks investment in the life-sciences industry. Financing fell to $8.2 billion through September, from $17.9 billion last year. Venture capital funding fell 16 percent, to $2.9 billion.

“For the first time in the history of the biotech industry, you’re going to see unprecedented levels of bankruptcies and dissolutions,” said David Strupp, managing director in the life sciences group at Canaccord Adams, a research and investment bank in New York. “This all will play out in the next six to nine months.”

Bankruptcies in biotechnology have been rare because struggling companies often dodged trouble through mergers, licensing or development deals, or through investors willing to make cash infusions, Strupp said in an interview.

Now, a large number of companies are “not cycling out of this queue,” Strupp said. “Wall Street won’t finance them, and the pharmaceutical industry can’t buy all of them. They keep marching forward without the ability to get saved.”

Peptimmune’s most advanced drug, PI-2301, is a multiple sclerosis treatment designed to be taken weekly. It would compete with Teva Pharmaceutical Industries Ltd.’s daily treatment Copaxone, which generated $1.7 billion in sales last year. Peptimmune is counting on positive data from a study due in 2009 to show its drug is better than Copaxone.

“If the multiple sclerosis program doesn’t do well, it will be very difficult for this company to raise money,” Mathers said.

MS, which affects about 300,000 people in the U.S., is caused when the body’s immune system attacks the protective coating of nerve fibers. There’s no cure. Four of six MS treatments cleared by the U.S. Food and Drug Administration were developed by biotechnology companies.

Peptimmune, with no products on the market, has raised and spent about $85 million. Biotech companies without products on the market, or those unable to access equity markets by selling shares, are the ones in most need of cash to fund clinical studies, investors and company executives said.