Washington Editor

NEW YORK - Staying focused on a company's mission, remaining cash conscious and being up front and transparent with employees and investors to minimize anxiety are key to weathering the current economic storm, biotech CEOs advised.

Much of the talk at this year's BIO CEO & Investor Conference, which ended Tuesday, focused on the survival of the biotech industry during the economic downturn and what strategies firms were putting in place to stay in business.

"The best strategy you can have is to have enough money in the bank to get through," said Timothy Rodell, CEO of Louisville, Colo.-based GlobeImmune Inc.

But, he said, small private companies, like his, tend to finance in two-to-three-year cycles, "and this has been a fairly long cycle, so I think it is going to have an impact on a lot of companies."

One measure of how biotechs are being affected by the tough credit market, Rodell said, is the number of companies that are exiting.

"This is the first time companies have gone away in my experience," he told BioWorld Today. "You just didn't see bankruptcies before."

While it can be argued whether the economic downturn will simply weed out the weaker biotech firms - the survival of the fittest debate - there "also is going to be weeding out of some companies that do not deserve it as well," Rodell said.

While there is not a lot one can do retrospectively in times like this "without a huge amount of pain," he said, firms that acted prospectively before the credit markets closed are in a better position.

GlobeImmune, which focuses on the discovery, development and manufacturing of potent, targeted molecular immunotherapies, called Tarmogens, for the treatment of cancer and infectious diseases, has had to trim its work force "a little bit" in recent years, but "didn't have a lot to trim because we were already running lean," Rodell said.

His firm has kept the philosophy that "When times are fat, don't get fat yourselves."

One successful strategy for GlobeImmune, which has raised about $90 million in three financing rounds, is partnering on its clinical trials.

The firm currently has two ongoing clinical trials and five upcoming trials that are "essentially paid for by the institutions where they are running," including a Phase I trial being conducted by the National Cancer Institute, Rodell noted.

"We have been able to leverage our platform and get people involved and interested in a way that allows us to get clinical data that we otherwise would not be able to do," he declared.

Partnering also has worked well for Cambridge, Mass.-based Idera Pharmaceuticals, said CEO Sudhir Agrawal.

The firm, which develops therapies to treat infectious, respiratory and autoimmune diseases, and cancer, currently has partnerships with Merck & Co. and its German counterpart, Merck KGaA, and Novartis AG, which has garnered Idera $77 million to date in up-front payments and milestones, Agrawal said.

The collaborations also could result in additional payments and royalties if certain goals are achieved, he added.

While the cash has been "very helpful," the partnership strategy goes beyond financials, Agrawal said, "because the pharma companies also provide the development resources and development expertise."

In tough economic conditions, said James Bianco, CEO of Seattle-based Cell Therapeutics Inc., "people often lose their way."

"What I have always believed in was walk by faith and not by sight, in other words, you have certain principles about why you are focused in the business that you are in," he added.

Bianco urged his biotech colleagues in the public market not to spend too much time focusing on their stock prices, "because everybody's stock price is in the toilet."

"We are all in it together, and doing things to try to get your stock price up in the short term or in an economic downturn like this is probably a futile exercise and really distracting from the core of why you built the business," he told BioWorld Today.

Bianco said he started hearing the "buzz" about where the credit markets were headed in 2006 and began then to take steps to ensure his company was prepared for the downturn.

CTI first focused on development programs that had more chances of success in reaching the regulatory and commercial stages to ensure the company could generate sufficient cash flow.

"We wanted to be able to be cash-flow breakeven by the end of 2009, thereby minimizing in successive fashion our dependence on equity capital to operate our business and allowing flows from our products to do so," he said.

CTI first looked at cleaning up its capital structure, reducing all of the discretionary costs and taking its burn rate down to a target that ultimately would allow it to become sustainable just off of product revenues, Bianco said.

The company in 2007 acquired the rights to Zevalin (ibritumomab tiuxetan), a drug indicated for the treatment of patients with relapsed or refractory, low-grade or follicular B-cell non-Hodgkin's lymphoma (NHL), including patients with rituximab-refractory follicular NHL, from Cambridge, Mass.-based Biogen Idec.

The product, which had $14 million in sales, is under review with the FDA currently for use as consolidation therapy after remission induction in previously untreated patients with follicular NHL.

CTI's strategy also includes focusing on its Phase III internal programs, like Pixantrone (BBR 2778), which had successful Phase III trial results last year. The company plans to file a new drug application this year.

Novartis has an option to partner on the drug, which Bianco noted could bring the firm cash to survive the current market.

"We now have positioned the pipeline where we could become capital-market independent if we set our sights on this target of breaking even by the end of this year and being profitable in 2010," he said, noting that the success of that strategy depends on the success of Zevalin, and the firm's lead investigational products.

"If you stay focused on your mission, I think ultimately, you will be successful," he said.

Robert Blum, CEO of South San Francisco-based Cytokinetics Inc., also said his firm anticipated an economic downturn on the horizon early and "made some very difficult decisions" to focus the company away from multiple franchise biologies and therapeutic areas and instead on "where we thought we had a more clear differentiation and advantage in muscle biology."

Although Cytokinetics had encouraging data in its investigational cancer drugs, from a regulatory, cost, sales and competition standpoint, the firm decided to no longer pursue that area, which meant "saying goodbye to some longstanding and highly valued employees who were doing oncology research at our company for over 10 years," Blum said.

"We did that with the goal of ensuring that in 2009 and 2010 we had adequate runway and cash reserves so as to be able to build this company through these trying times and to be able to get to the next key inflection points in our business," he said.

The firm cut its fixed and variable costs and "engineered away" some of its outsourcing expenses that were contributing to a higher burn in 2007 and 2008, Blum noted.

Cytokinetics also dialed back some of its R&D programs so that they were "not moving forward on the same tempo and pace as we would in more euphoric times," he said.

"We are now a smaller company in 2009 than we were in 2008, Blum pointed out, but that "has extended our runway."

Blum noted that the firm also froze the salaries of its top executives, but not those for other personnel.

This environment, he said, was not "the right place to be talking about increased executive salaries while at the same time we were saying goodbye to valued employees and cutting back on key programs."

John Babich, CEO of Cambridge, Mass.-based Molecular Insight Pharmaceuticals Inc., whose firm also recently underwent a restructuring, emphasized that it is important to be transparent and up front with employees about the status of the company to ensure people do not get too anxious.

However, economic downturns also are the best opportunity to motivate employees to "buy into" the company's goals of conserving cash and resources and be more conscious about where funds are being spent to ensure the firm weathers the storm and survives in the long run, he said.