1Q Cash Spending – Small Biotechs Still Spending Less

Inside BIO Industry Analysis

A comparison of cash spent on operations in the 1st quarter of 2010 vs the 1st quarters of 2009 and 2008 for small public biotechs shows a slowing in the precipitous drop seen over the last 2 years. However, the average small biotech is still spending less cash vs. 2008. When compared to 1Q08, the median cash flow from operations (CFO) in 1Q10 is down -40%. From 1Q09, median CFO is down -15%. See chart below.*

This is significant given that the number of small companies has declined since 2008, so you would expect the surviving companies to be healthier and generate higher average values in R&D spending. This data might suggest that the decline in spending was likely a widespread reaction to the financial market climate and not limited to a few troubled companies.

The slight rebound off the 4Q09 lows is a potential indication of change in the downtrend, but it is only 1 of 9 data points. Due to the lag time in reporting, we should have the 2Q10 data in late September, just prior to the BIO Investor Forum in San Francisco.

* Small companies are defined here as those with less than 250 employees.

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