Burrill Says Biotech Industry Profitable for First Time in History

The big headline from the influential Burrill & Company merchant bank is "Biotech Scores Black Ink" for the first time ever.

According to Peter Winter(see photo), editor of the Burrill Report, the biotech industry turned profitable in 2008. Winter made this "startling discovery" after analyzing the numbers for 360 publicly traded biotech companies. Presumably the conclusion might change if private firms were included.

The Burrill finding is another piece to consider in the case for and against the $10 billion biotech federal assistance package championed by CIRM Chairman Robert Klein.

However, Winter also said that only 67 of the 360 companies were profitable with the largest sums coming from only three companies: Genentech, Amgen and Gilead.

He said the have-not companies are struggling, and he predicted that a year from now, perhaps only 200 of the 360 companies will survive.

Burrill did not offer a text version of Winter's findings -- only a podcast. We respect Burrill and the authoritative information it provides, but we regard podcasts and recorded videos as a cyberspace abomination when it comes to dispensing information. When recordings replace carefully crafted, written analysis, they are an inefficient, inadequate and miserable substitute.

Just consider the numbers: Normal speech runs about 150 words a minute. Question-and-answer interviews, including trivial remarks, take longer. Downloading and listening to the Q&A with Winter took about 9-10 minutes. In that time, we could have read about 6,000 or 7,000 words or more. We also assume that nearly all the readers of this blog and the Burrill website can handle written information much more rapidly than listening to oral presentations, which often miss important details and nuances. The discipline of writing almost forces the inclusion of those elements.

Recordings on the Internet have their place and can communicate certain kinds of emphasis and emotion better than text. But for the most part, they are used on the Internet like some new gadget, whose novelty is more alluring than its effectiveness.

Serious enterprises that deal with hard facts and numbers should avoid them. That's the conclusion from the California Stem Cell Report in our cyberspace rant of the day.

CIRM and the Stem Cell Industry: A Lobbying Question

The state of the stem cell/biotech biz drew some attention late last week in Business Week along with a piece on Stockpickr.com dealing with Geron.

Business Week reporter Ben Levisohn painted a depressing picture for most "middling" companies. He wrote that Big Pharma is buying Big Biotech – not the smaller companies. He said,

"That's bad news for small biotech companies, who are already facing a spate of problems. A recent study estimated that 50% of the roughly 380 publicly traded biotechs have less than one year of cash remaining. In the past, they would have raised new capital by selling shares, merging, or partnering with a larger outfit. But for publicly traded companies, equity deals are out—none has been brought to market in the last year, and few are expected to see the light of day in 2009. And even if a deal could be brought to market, with the smallest 10% of stocks in the Nasdaq Biotechnology Index trading down 84% from their 52-week high, vs. 21% for the largest 10%, an equity deal wouldn't make financial sense for many companies."

Over on Stockpickr.com, they had this to say,

"Over the last three months, shares of biotechnology firms Geron (GERN) and StemCells (STEM) are up roughly 200%, compared with a decline in the S&P 500 of almost 5% and a decline in the Nasdaq Biotechnology Index of about 3%.

"So why have both names massively outperformed the boarder market?"

Stockpickr laid out Geron's upcoming clinical trial and surrounding hoopla, but concluded:

"There are still several unknown variables that could take the short-term momentum out of both names."

The Business Week and the Stockpickr pieces could be construed as arguments for the $10 billion biotech aid package promoted by CIRM Chairman Robert Klein. However, the question for the stem cell agency is whether it should be in the business of lobbying the federal government on behalf of the industry. Klein would probably put the question another way: Should CIRM support assistance to the biotech biz so that therapies will result and suffering eased?

Klein Wants $10 Billion in Aid From Obama Administration

The chairman of California's state stem cell research agency, Robert Klein, has unveiled more details of what appears to be a $10 billion-plus proposal seeking assistance from the Obama Administration to aid the biomedical industry.

Some of Klein's proposals would clearly benefit industry and researchers in California, but they also could have an impact in locations throughout the nation that have either major biotech industry centers or research facilities.

Klein laid out his thoughts in a draft of a five-page letter during a meeting Wednesday of the directors' Finance Subcommittee. John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., who sat in on the session, said the meeting was running late and Klein's plan was not even discussed. Klein said people should read it so it can be taken up at CIRM's full board meeting next week.

Klein proposed five "federal initiatives." They include a $1.5 billion biomedical lab construction effort, $2.1 billion for assistance to some established state government research programs (presumably including California), a $3 billion loan guarantee program that appears to dovetail with Klein's $500 million biotech lending plan and $6 billion for increased NIH funding of biomedical research. The fifth element would allow some small biotech firms to sell their R&D credits. It contained no price tag.

The letter and accompanying chart promised that the proposals would generate 159,832 "job years" based on estimates provided by an unidentified Stanford economist. The Klein letter did not explain the assumptions underlying the multipliers that were used to come up with the job count.

The letter appears to be directed primarily at Congress. However, it is not clear whether it has actually been sent.

The proposals are the subject of a report scheduled to be discussed next Thursday by CIRM directors in Burlingame. We have asked Don Gibbons, chief communications officer for CIRM, if Klein intends to seek a vote on the proposals or whether he will simply ask them to sign it. He could take an assistance pitch under his signature alone, but we suspect that he would like to have all the board members endorsing it. One question that directors should ask is whether Klein or other CIRM employees will be traveling to Washington or other locations to lobby for the proposals. Another is how much staff time is being devoted to this effort at a tiny, 38-person agency that is chronically understaffed.

Klein's proposals to join the bailout/stimulus gravy train in Washington have grown rapidly over the past few months. CIRM itself, however, is currently well-financed and needs little assistance from the federal government. We have noted that there is a certain logic to Klein's effort. But we have also noted that the Obama Administration's financial pie is limited and that CIRM should step out of the federal hand-out line.