VANCOUVER, British Columbia - In the world of cash-starved biotechs, particularly platform-based firms whose limited resources support only a sliver of the pipeline potential, many have sought partnerships or set themselves up as acquisition targets to maximize that potential.

There are downsides to those strategies, however; merger and acquisitions are difficult to count on - only look at Biogen Idec Inc.'s failed attempt to attract a buyer - and partnerships are apt to leave small firms with little control over their newly licensed programs. But recent news from the acquisition of Human Genome Sciences Inc.'s spinout CoGenesys Inc. to the investment by Abbott Laboratories in Isis Pharmaceuticals Inc.'s diagnostic subsidiary Ibis Biosciences Inc. suggests that spinning out technologies or compounds into new companies might be the way to go.

In biotech, it's all about raising "enough cash to get to the end game," Kathleen Sereda Glaub, president of Plexxikon Inc., said during a panel session on industry trends at the sixth annual BioPartnering North America conference.

Glaub previously served on the executive team at Cell Genesys Inc., a company that has reaped the benefits of successful spinouts, most notably from antibody firm Abgenix Inc., formed in the late 1990s to capitalize on technology that the parent company, whose primary focus was on gene therapy, had put on the back burner. Glaub helped Cell Genesys separate Abgenix into an independent entity and assisted the new firm in obtaining its first financing.

"At the time, it was a very contrarian view," she said of the spinout strategy. A lot of people considered it "a harebrained idea, but when asked, 'If you started the company over, would you put these two technologies together?' the answer was no."

Spinouts not only are able to give rise to opportunities that had been sitting idle at the parent companies, but also allow those technologies and compounds a fresh start with investors, without the encumbrance of the larger firm's image. That also came into play for Abgenix, which investors clearly embraced. In 2000, a couple of years after it spun out of Cell Genesys, Abgenix raked in $230 million in a private financing round.

"We knew that [an] antibody [firm] would be able to raise more money than a gene therapy company," Glaub said. But a stake in Abgenix brought its own reward. During that same 2000 financing round, Cell Genesys tagged along and sold 750,000 Abgenix shares for $50 million cash.

All told, Glaub said, the gene therapy firm added about $250 million in cash over the years, simply by selling stake in its spinout company. Abgenix ultimately was acquired by Vectibix (panitumumab) partner Amgen Inc. in 2005.

Not above using a good trick twice, South San Francisco-based Cell Genesys in 2001 opted for another spinout, putting specific applications of its gene therapy technology for central nervous system disorders, along with a $10 million investment, into the hands of Ceregene Inc., a newly created subsidiary. Ceregene later became independent and last year signed a significant collaboration with Genzyme Inc., partnering rights to its Phase II-stage Parkinson's disease drug for $25 million up front and up to $125 million in milestones, plus royalties on product sales.

Hoping to mimic Cell Genesys' success, Seattle-based Cell Therapeutics Inc. established a wholly owned subsidiary a year ago to use the firm's Genetic Polymer technology for follow-on biologics. Executives even said at the time they planned to follow the "Abgenix/Cell Genesys model," eventually pushing the new company, Aequus BioPharma Inc., out on its own. CTI, meanwhile, is free to continue work on its late-stage Xyotax cancer program.

If structured well, a spinout strategy allows the parent firm to trim its cash burn while focusing on its core assets. The non-core assets, on the other hand, are able to reach new investors for accelerated development.

That's the plan Rockville, Md.-based Human Genome Sciences had in mind in 2005. The firm, looking to concentrate resources on its late-stage products LymphoStat-B (belimumab) in lupus and Albuferon (albumin-interferon-alpha) in chronic hepatitis C, decided to spin out its CoGenesys division, which focused on earlier-stage programs emerging from HGS' Albumin Fusion technology, a platform that uses human serum albumin to create long-acting drugs. Less than a year later, CoGenesys gained its independence with a $55 million Series A round in which HGS participated.

Late last month, CoGenesys reported that it is being acquired by Israeli generics firm Teva Pharmaceutical Industries Ltd. for $400 million cash. That deal, expected to close in the first half of this year, should provide a nice cash infusion to parent HGS, which retained a 13 percent equity stake in CoGenesys.

Also hoping to yield a financial boost from a subsidiary is Isis, which two weeks ago agreed to give Abbott a stake in its Ibis diagnostic subsidiary for $20 million up front, as well as the possibility for up to $230 million if Abbott ends up buying the whole firm. Isis originally created the subsidiary to develop the Ibis T5000 biosensor system, which is designed to identify and characterize thousands of infectious organisms, while the firm's primary focus remained fixed on its drug development pipeline, including the Phase III-stage lipid-lowering drug mipomersen that recently landed a lucrative partnership with Genzyme.

The Ibis agreement got a thumbs up from investors, and analyst Joseph P. Schwartz, of Leerink Swann & Co., who maintained an "outperform" rating, wrote in a research note that Isis "structured a deal that maximizes shareholder value," while retaining interest in the long-term commercialization of the T5000 biosensor in the form of a 5 percent royalty in cumulative net sales exceeding $150 million and 3 percent on sales over $2.1 billion.

Several other biotechs also are looking to cash in on the spinout model, including CytRx Corp., whose majority-owned firm, RXi Pharmaceuticals Corp., created in 2007 to focus solely on RNAi drug development, is seeking a listing on Nasdaq. RXi filed a registration statement in October, covering 10.8 million shares to be distributed by CytRx.

And Nastech Pharmaceutical Inc. announced in November that it plans to spin out its RNA-based research and development subsidiary, Mdrna Inc., into an independent, separately financed entity.