Raising Capital in a Tight Market
The global financial crisis has made it challenging for the biotechnology industry to raise capital to fund innovation. Experts say venture capital money is still available, but often the VC community is looking for lower-risk, short-term projects.
As a result, biotech companies are increasingly looking to alternative sources of capital. Experts say this is a natural reaction to normal business cycles, and when venture funding dries up companies embark on other strategies to survive.
For example, in 2008 and 2009 industry leaders say alliance deal making and applications for grants increased.
At The National Cancer Institute, applications for the SBIR grant program increased by almost 70% between 2008 and 2009.
This increase was a direct reflection of funding drying up in the venture capital market,” says Michael Weingarten, director of the NCI’s SBIR program. “We became the only game in town for many companies and a lifeline for biotech companies looking to fund new innovation and new technologies in the cancer field.”
The funding markets continue to be very tough, which is not a big surprise given the macro environment, says Oliver Fetzer, Ph.D., president and CEO of Cerulean Pharma. “There continues to be a fair amount of uncertainty in terms of the direction both biotech and venture capital are going to go,” he says. “Society is expecting more innovative products at potentially lower prices rather than higher prices. This creates a pricing environment that makes it tougher for biotech companies to find a clear path to profitability.” At the same time, Dr. Fetzer says, the venture capital firms are finding themselves in an environment devoid of many big success stories.
- Denise Myshko
PharmaVoice Magazine, PharmaVoice
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