Capital Availability
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Drug research and development is time-consuming and capital intensive, and the
availability of capital is the key factor driving the development of biotechnology
and medical device products.
Today, the fully capitalized cost to develop a new drug, including
studies conducted after receiving regulatory approval, averages $897 million and takes fifteen
years according to an analysis by the Tufts Center for the Study of Drug Development.
The high cost due largely to the rigorous and time consuming regulatory drug approval
process. Notably, twenty novel medicines won U.S. Food and Drug Administration (FDA) approval
in 2005, down from a peak of 53 in 1996. (see Drug Development
& Approval Process).
Typical sources of funding include angel and venture capital, government grants,
institutional funds, public markets, and acquisition -- being acquired by a larger company
that will provide financial, manufacturing and marketing resources.
According to a study by Irving Levin Associates, venture capital firms invested
$7.3 billion in biotechnology and healthcare related firms in 2005, an increase of 5 percent over 2004.
The medical device and pharmaceutical sectors each accounted for approximately $1.4 billion in
venture capital while biotechnology firms received the largest share -- $2.1 billion, based
on 102 deals with disclosed prices.
Locally, more than $387 million was raised by Washington State based biotechnology and medical device
companies in 2005, according to Info.Resource data, compared to $790 million in 2004 a year that included
IPO's by Lumera ($41.7 million), Seattle Genetics ($66.4 million), and Xcyte ($33.6 millon), and secondary
stock offerings by Cell Therapeutics ($49.2 million), Dendreon ($130.7), and Targeted Genetics ($24 million).
In 2005, the single largest fundraising in Washington State was Dendreon's
secondary stock offering which raised $48 million. Leading local industry, however,
was Light Sciences Oncology -- a spin out from parent company Light Sciences
Corp. (2004) -- which raised $67 million in two separate venture capital investments.
Others successful recipients of sizable investments in 2005 included:
recent start-up (2004) Alder Biopharmaceuticals ($21 million), Calypso Medical
Technologies ($52.5 million), Microvision ($25 million), and Sonus Pharmaceuticals
($26.8 million). Another company, Cell Therapeutics raised $68 million through the sale
of Trisenox, its only FDA approved drug, which it used to repay an investor and fund
operations. The following are select private investments made in Washington State
firms in 2005.
Private Transactions, 2005 (>$2 million)
Company |
Investment Type |
$ Value |
Alder Biopharmaceuticals |
Schering-Plough Corp. Joint Venture |
$10.0 million |
Alder Biopharmaceuticals |
Venture Capital |
$11.0 million |
Calypso Medical Technologies |
Venture Capital |
$44.0 million |
Calypso Medical Technologies |
Venture Capital: Series C financing |
$8.5 million |
Cell Therapeutics Inc. |
Technology/product sale. |
$68.0 million |
Dendreon Corp. |
Secondary Stock Offering |
$48.0 million |
EKOS Corp. |
Venture Capital: Series B financing |
$18.0 million |
Helix Biomedix |
Private Placement |
$2.5 million |
Light Sciences Oncology, Inc. |
Venture Capital: Series A financing |
$32.0 million |
Light Sciences Oncology, Inc. |
Venture Capital: Series A financing |
$35.0 million |
Microvision, Inc. |
Private Placement |
$10.0 million |
Microvision, Inc. |
Private Placement |
$5.0 million |
Microvision, Inc. |
Private Placement |
$10.0 million |
Pathway Medical Technologies |
Private Placement |
$10.1 million |
SCLOR Pharma, Inc. |
Private Placement |
$15.0 million |
Sonus Pharmaceuticals |
Private Placement |
$20.0 million |
Sonus Pharmaceuticals |
Private Placement |
$16.8 million |
Targeted Genetics Corp. |
NIAID Grant |
$21.8 million |
Tessera, Inc. |
Private Placement |
$8.5 million |
Public Capital Markets
In 2005, twenty-two publicly traded biotechnology and medical device companies
were headquartered in the state. In 2005, only one company gained public
market access -- IsoRay located in Richland began trading on the OTC Bulletin Board.
IsoRay, Inc. (ISRY.OB) through its subsidiary, IsoRay Medical, Inc., is the sole
producer of the Cesium-131 brachytherapy seed, used to treat prostate and other
cancers.
In 2004, three IPO's were completed totalling $141.7 million. Corus Pharma's
planned $100 million IPO in 2005 was shelved due to poor market
conditions. However, Corus successfully raised $60 million in venture financing in
April 2004 one of the top biotechnology investment in the country during the
previous 12 months.
Initial Public Offerings, 2004
- Lumera Corp. (Redmond) - $41.7 million
- Seattle Genetics (Bothell) - $66.4 million
- Xcyte Therapeutics (Seattle) - $33.6 million
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Publicly Traded Companies in Washington
Industry Consolidation
Industry consolidation which has significantly impacted Washington State's
biotechnology and medical device industry in recent years continued in 2005 with
the acquisition of Corixa Corp. and ID Biomedical by GlaxoSmithKline,
Quinton Cardiology Systems merger with Cardiac Science, and the ProCyte Corp.
merged with PhotoMedex.
Consolidation of biotechnology and medical device firms will continue to change the
dynamics of local industry driven by larger company need to diversify their product
pipeline, and local company requirements for commercialization scale-up, marketing
support and ongoing capital investment.
Significant Mergers & Acquisitions (by year)
(Note: The following includes initial acquisition, and excludes follow-on mergers/acquisitions)
Company/Location |
Buyer & Location |
Year |
$ Value |
Corus Pharma
Seattle, WA |
Gilead Sciences, Inc.
Foster City, CA |
2006 |
$365 million |
ICOS Corp.
Bothell, WA |
Eli Lilly and Company
Indianapolis, IN |
2006 |
$2.1 billion |
Olympic Medical Corp.
Seattle, WA |
Natus Medical, Inc.
San Carlos, CA |
2006 |
$19.3 million |
Corixa Corporation
Seattle, WA |
GlaxoSmithKline
United Kingdom |
2005 |
$300 million |
ID Biomedical Corporation
Bothell, WA |
GlaxoSmithKline
United Kingdom |
2005 |
$1.6 billion |
Quinton Cardiology Systems
Bothell, WA |
Cardiac Science, Inc.
Irvine, CA |
2005 |
n/a |
Immunex Corporation
Seattle, WA |
Amgen, Inc.
Thousand Oaks, CA |
2002 |
$10.5 billion |
SpaceLabs Medical
Redmond, WA |
Instrumentarium
Helsinki, Finland |
2002 |
$140 million |
Spinal Dynamics
Mercer Island, WA |
Medtronic, Inc.
Minneapolis, MN |
2002 |
$269 million |
Rosetta Inpharmatics Inc.
Kirkland, WA |
Merck & Co., Inc.
Whitehouse Station, NJ |
2001 |
$615 million |
Optiva Corp.
Snoqualmie, WA |
Philips Medical System
Netherlands |
2000 |
n/a |
PathoGenesis
Seattle, WA |
Chiron Corporation
Emeryville, CA |
2000 |
$700 million |
ATL Ultrasound
Bothell, WA |
Philips Medical System
Netherlands |
1998 |
$800 million |
Heartstream
Seattle, WA |
Hewlett-Packard
Palo Alto, CA |
1998 |
$130 million |
InControl, Inc.
Seattle, WA |
Guidant Corporation
Indianapolis, IN |
1998 |
$128 million |
Physio-Control Corp.
Bothell, WA |
Medtronic, Inc.
Minneapolis, MN |
1998 |
$538 million |
Heart Technology, Inc.
Redmond, WA |
Boston Scientific
Natick, MA |
1995 |
$500 million |
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