Companies hoping for a christmas cash bonus

Analysis

It has not been the easiest of years for smaller biotech companies, who have struggled with crashing world markets and dented investor confidence. While things have got better and bourses rebounded as the year progressed, sending the shares of many biotechnology companies back up again allowing fundraising to flow again, for others who have suffered set backs or pipeline failures the prospect of raising money is still a distant dream.

So with Christmas only a few days away EP Vantage has done an analysis and identified 28 companies which have less than a year’s worth of cash and will be wishing that rather than the usual gift of socks or slippers Santa will be arriving with sacks full of money this year (see table below).

The following analysis is based on dividing latest cash figures (mostly 30 Sep 09) by forecast cash burn rate in 2010, according to consensus estimates from EvaluatePharma. The top ten companies with the shortest cash runway are shown here.

Companies with the shortest cash runways
Rank Latest Cash / Cash Burn 2010 2010 Cash Burn ($m) Latest Cash ($m) Market Cap ($m) Share price YTD
1  Repros Therapeutics 0.1 (40) 3 18 (93%)
2  Somaxon Pharmaceuticals 0.2 (24) 5 25 (25%)
3  Discovery Laboratories 0.3 (53) 18 87 (38%)
4  Sunesis Pharmaceuticals 0.4 (25) 9 45 309%
5  RXi Pharmaceuticals 0.4 (21) 9 73 (22%)
6  GTC Biotherapeutics 0.5 (24) 12 16 (81%)
7  MannKind 0.5 (110) 57 1,013 162%
8  Akorn 0.6 (3) 2 173 (17%)
9  ARIAD Pharmaceuticals 0.6 (93) 57 219 136%
10  Nile Therapeutics 0.7 (6) 4 35 54%

Repros Therapeutics is leading the pack when its comes to empty pockets. The group had already been struggling with money concerns when in July it revealed there are were safety concerns over the higher dose of its lead product, Proellex, a treatment for uterine fibroids and endometriois (Repros faces crunch time, July 6, 2009).

Fears that the already cash-strapped group would have to do additional trials and the safety concerns sent the group’s shares into a downward spiral that has since seen it issue an ongoing concern statement and wondering if it will keep its NASDAQ listing now that its shares are trading below $1.

For Somaxon, the situation is not quite so desperate, but the group who saw its sleep drug, Silenor, fail to get FDA approval for the second time earlier this month will be having a few wakeful nights trying to figure out how it can get more money when its cash runs out in the second quarter of 2010. The decision by the regulator to give Silenor the thumbs down has seen the stock lose 71% of its value and having tapped investors for money when the drug was first refused in February the company may this time round find them less willing to pay up again (Somaxon will find it hard to recover from nightmare, December 7, 2009).

One company that has not had a pipeline setback, and stands to change its fortunes dramatically is MannKind. The group is the only one left developing inhaled insulin and a decision on whether the FDA will give it marketing authorisation is expected on January 15. A positive verdict from the regulator is expected to be the catalyst for partnering talks, which given that Afresa will be a marketed product, could be substantial.

Conversely, if the FDA decides against the drug it will almost certainly spell the end for the company, unless founder and billionaire Alfred Mann, who has already funded the drug close to the tune of $1bn decides to once again dip his hands in his pockets. The company does have access to a $200m loan facility backed by Mr Mann himself.

While it may be a little unfair to include MannKind among some of the companies listed here given its access to Mr Mann's cash, one that is justifiably included is Discovery Laboratories. Over the last five years the company has received four complete response letters and held multiple conversations with the FDA over the approvability of Surfaxin, its treatment for respiratory distress syndrome in premature babies.

The latest knock back in July (Discovery Labs finds disappointment at end of the journey, July 2, 2009) has, however, not deterred the company that has not seen its shares trade above $1 since October. Discovery has vowed to soldier on with development of the drug after the FDA agreed in September to its programme to resolve the issues around Surfaxin. But what is now an issue is whether the company will find investors willing to take yet another gamble to see if this time it will be fifth time lucky for the drug before its cash runs out.

The trend this year for companies to strike a financing deal, normally a share issue, as soon as a positive event has driven share prices upwards suggests it would surprising if Sunesis did not follow suit over the next few weeks and seek a much needed injection of cash.

The company reported positive phase II data for its lead leukaemia drug voreloxin at this month’s American Society of Hematology (Ash) meeting, generating significant share price gains (Ash 2009 EventAnalyzer – winners and losers, December 14, 2009). Sunesis will not doubt be working hard to strike while the iron is hot and secure an equity offering or licensing deal in the near future.

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