Biotech industry facing financing crisis as capital dries up

Much of the coverage of the financial crisis and the stock market crash has focused on the highest-profile casualties -- major banks, for example, and the U.S. auto companies.

But the damage that's being inflicted on the nation's growth industries, as they starve for equity capital, could become a serious long-term drag on the economy -- particularly in hotbeds of innovation, including California.

Bloomberg News late last week chronicled the financing woes of the biotechnology industry, a critical growth business in the San Francisco Bay area and in San Diego County.

The story noted that there has been just one initial stock offering this year from a biotech firm, compared with 28 in 2007.

A few excerpts:

The global economic crisis has cut funding for biotechnology companies to the lowest level in a decade, triggering bankruptcies and threatening development of drugs based on biomedical breakthroughs.

In the past month, at least five biotechnology businesses have sought bankruptcy protection. Those at highest risk have experimental compounds moving into costly human research. Peptimmune Inc., a 6-year-old closely held firm, says it’s struggling to pay for clinical trials of its promising multiple sclerosis drug.

“For the first time in the history of the biotech industry, you’re going to see unprecedented levels of bankruptcies and dissolutions,” said David Strupp, managing director in the life sciences group at Canaccord Adams, a research and investment bank in New York. “This all will play out in the next six to nine months.”

Read the full story here.