Biotech Layoffs Hit Hardest In Discovery
As the financing drought continues and their cash supplies dwindle, biotechs are resorting to big layoffs to drastically cut back on spending (See exhibit 1). But however rigorous a company's turnaround effort, the target of the layoffs always seems to be discovery research, with the remaining employees focusing on clinical programs.
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The funding squeeze has relaxed, but discovery still doesn't attract much investor attention. Discovery-based Sunesis has opted to have its cake and eat it, too. It in-licensed at an early stage and thus didn't threaten its research group. And it's given its researchers perhaps another year and a half before they've got to put an invention of their own into the clinic-or in-license something else.
Given the cyclical nature of the biotech industry, companies--both public and private--are forced to weather financing storms every few years. During lean times, one strategy is to cut operations to create the basis for a financing event and stave off the inevitable cash cliff. But a company focusing all its efforts on one, or at most a few, projects has very little to fall back on should its lead opportunity fail. And the equity markets may not come back in time. BioTransplant's CEO-Donald Hawthorne, brought in to save the company, understood from the beginning that companies with just a few months of cash left tend to fail. His challenge: to avoid failure, while at the same time maximizing the chance that in the event of bankruptcy, at least some of the assets of the company could create additional value.
Lion's global SRS licensing deals with Eli Lilly and Johnson & Johnson in January endorse the company's decision to abandon drug discovery and focus on its bioinformatics roots.