By Dan Schell, Editorial Director, Life Science Leader
A brief article from the Associated Press caught my eye today. The headline read, “Hawaii Biotech To Be Sold At Auction.” I had never heard of Hawaii Biotech, but the story intrigued me because I wondered if this was just another example of a small biotech company suffering the repercussions of a poor economy. After a little online searching, I learned Hawaii Biotech was founded in 1982, has 23 employees, and has been conducting human clinical trials for the past few years to produce vaccines for dengue fever and the West Nile virus — not exactly a struggling start-up. What surprised me even more was the company’s success at raising funds — more than $55 million in federal and state research grants and more than $36 million in private equity financing over the past eight years. In fact, since declaring bankruptcy in December 2009, Hawaii Biotech has garnered an additional $2 million from investors to keep its doors open. But, those funds will come to an end on July 19, the date set for the auction.
Despite having some drama in its boardroom (you can look up what I mean) during this past year that helped lead to its bankruptcy filing, there’s no doubt this is a company that was adept at raising funds. And yet, in a few days it goes on the auction block.
The story of Hawaii Biotech should be a message to other small pharma and biotech firms. No matter how successful you think you’ve been with raising capital, a tough economy can quickly empty your coffers. You need to find a way to continue your scientific research while also generating revenue.
On page 14 of this issue, serial biotech executive Tillman Gerngross offers some important tips to would-be entrepreneurs. Gerngross has plenty of experience attracting investors; in 2006 he sold one of his companies to Merck for $400 million in cash. One of my favorite quotes from the article is “Too often, entrepreneurial scientists become enamored with new ideas and discoveries and then desperately look for ways to commercialize or build businesses around them. Companies built using this model invariably fail. Solving scientific problems that don’t exist or are not medically relevant just doesn’t make sense to me.” I’m not implying that statement pertains to Hawaii Biotech’s situation, but the part about prioritizing your commercialization efforts is a lesson not to be ignored.