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How is the economic crisis affecting tech companies?
Failed clinical trials have been a perennial problem to biotech companies, but in this economic environment, they can quickly have many drastic repercussions, including making a firm kill a product candidate, lay off employees, or even precipitate an acquisition.
Before the current recession, if the trial didn’t meet its goals, companies generally just went back and tried again, raising more money from a venture capitalist if need be. However, money is now tight, making a failure a very risky proposition for many companies, said experts. There are plenty of trials to fail at, too. During 2008, there were nearly 70,000 active Phase 1, 2 and 3 trials ongoing globally under the guidance of the U.S. Food and Drug Administration, according to an estimate from the Boston-based Tufts Center for the Study of Drug Development.
In Massachusetts, there were 995 clinical trials recruiting participants in 2008, according to statistics compiled by the Cambridge-based Massachusetts Biotechnology Council.
“To fail is frequent,” said Jeffrey Quillen, an attorney who specializes in life sciences practices at Boston-based law firm Foley Hoag LLP. “It’s a very risky business.”
Last month, Synta Pharmaceuticals Corp. suspended trial procedures for the cancer drug elesclomal. Now the company says the future of the drug is in question, and it has laid off 90 employees. In November, Cambridge-based CombinatoRx Inc. cut almost half of its staff after a poor Phase 2b trial for its Synavive knee osteoarthritis drug.
Last December, the FDA withheld approval for infection drug oritavancin from Cambridge-based Targanta Therapeutics Corp. and ordered another clinical trial. In response, Targanta cut 75 percent of its staff and sold itself to New Jersey-based The Medicines Co. In November, Branford, Conn. psychiatric drug developer Neurogen Corp. dropped development of insomnia drug adipiplon after it canceled testing in July.
The seriousness of the situation will most likely get worse in this economy, especially for startups, said experts. Biotech companies don’t have the resources or know-how of a large pharmaceutical to complete the later stage trials and get final FDA approval, noted Kenneth Kaitin, director for the TCSDD. Neither the pharmaceutical companies nor the investment community is particularly willing or able to fund risks right now, either. “One failure for a company can be a disaster,” said Kaitin. “The biotech industry is taking the brunt of the hit because they’re the ones relying on investors.”
On the other hand, it’s different for a revenue-making giant such as Cambridge-based Biogen Idec Inc. Last fall, the firm ceased development of its drug baminercept after a failed Phase 2 trial. This month, it announced poor results for the Phase 3 clinical study of a new application for its established Rituxan antibody.
“You win some and you lose some,” said company spokeswoman Jennifer Neiman. “This is something that occurs on an ongoing basis in drug development. You look to offset that by having a robust research and development pipeline.” Biogen has 60 active programs, with 22 in Phase 2 and beyond. In 2008, the company reported total revenue of $4.1 billion.
Drug headaches
Some of the recent problem trials for N.E. biotechs and pharmas
Synta
Drug: elesclomal
Aftermath: canceled test, layoffs, considering suspending drug
CombinatoRx
Drug: Synavive
Aftermath: layoffs
Neurogen
Drug: adipiplon
Aftermath: canceled test, ceased development
Biogen IDEC
Drug: baminercept
Aftermath: ceased development
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