San Diego biotech firms improving

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Several San Diego biotechnology firms that were on thebrink of bankruptcy in the depths of the recession this spring are findingtheir lifeblood -- cash -- easier to come by, it was reported today.

Adventrx Pharmaceuticals, which had whittled its employees to five andwas on the verge of ceasing operations in March, raised $4.5 million from Junethrough August, enough to support the company as it completes an application tothe U.S. Food and Drug Administration for approval of its first product, a newchemotherapy formulation, The San Diego Union-Tribune reported.

San Diego is home to about 50 publicly traded biotech firms, a third ofwhich were scrambling for cash this past spring. Of the 17 other local publiccompanies that had less than a year's worth of cash at the end of June, 11 haveraised money since then, the Union-Tribune reported.

In some cases, the companies raised enough to keep going for at least afew more months, but others have extended their lifelines well into 2010 orfurther.

"It's safe to say it's improving," Joseph Panetta, head of the localindustry group Biocom, told the newspaper. ``But there are still a lot of guyswho will tell you it's not improving for them."

The hunger for cash goes with the territory. The vast majority ofresearch-intensive companies are unprofitable and depend on periodic infusionsof investment capital. But those infusions depend on the whims of the market,with cash available during boom times and scarce during market pullbacks.

Longstanding La Jolla Pharmaceutical is planning a shareholder vote thismonth on liquidation.

Metabasis Therapeutics cut all but seven of its 52 employees and isexploring ``strategic options," such as a sale of the company, the Union-Tribune reported.

TorreyPines Therapeutics announced liquidation plans this year, butinstead arranged to merge with Northern California-based Raptor PharmaceuticalCorp.

Jim Greenwood, head of the national Biotechnology Industry Organization,acknowledged during a visit to San Diego last week that one function of theperiodic funding slumps is to weed out companies that haven't lived up to theirinitial hopes.

"Clearly, there's something Darwinian about what we're seeing," he toldthe newspaper. "But there are some companies that are doing everythingright, and they just run out of money."

Nationwide data from Burrill & Co. show that investment in biotech,whether ownership stakes or loans, fell to $10.1 billion last year from as highas $27.4 billion two years earlier.

This year, funding has recovered significantly, with $9.3 billion infinancing through June, according to Burrill. But by then, the firm estimatedthat more than 110 of the 343 publicly traded U.S. biotech companies had cutcosts by slashing staff or putting projects on hold.

San Diego's Somaxon Pharmaceuticals cut its staff to seven after the FDAdeclined to approve the company's insomnia drug, Silenor. But Somaxonresubmitted its application to the FDA and was able to raise $6 million inJuly.

Somaxon's chief executive, Richard Pascoe, said potential investorsstudied the company's progress with the FDA before putting the money in.

"The companies that have been successful in raising money in the lastsix to nine months have had to be very direct with investors," Pascoe said."The amount of scrutiny has increased."

Arena Pharmaceuticals, one of San Diego's larger companies with nearly500 people as of March, suffered a setback in March when study data weren't asstrong as some had hoped. Arena burned through $240 million last year and wasdown to $39.6 million by the end of June. It cut 130 jobs in April to conservecash.

But it has since gotten additional study data, and reassured investorshave enabled the company to arrange a $100 million loan followed by $52.1million raised in a July stock offering.

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