Biotechnology Industry Ends Year of Frustration

SAN FRANCISCO _ Sometimes the fortunes of a single company can speak to the state of an entire industry. Sadly, for the biotechnology industry in 1994, that company was Synergen Inc., which entered the year weakened and exited acquired.

Synergen stock once traded as high as $67 a share, for a market value of about $1.7 billion, but plummeted after the company's lead drug repeatedly failed in clinical trials.

That, along with several other failures of high-profile biotech drugs this year, contributed to a protracted decline in all biotech stocks. In November, the Amgen Corp., one of the handful of profitable biotech companies, agreed to acquire Synergen for just $240 million in cash, or $9.25 a share.

What Synergen had in common with many other biotech failures is that it had staked its future on curing a very difficult disease, one that had defied all conventional therapies.

While the early biotech successes almost all relied on replacing some naturally occurring protein that was deficient in certain patients, like insulin or growth hormone, later-stage companies have focused on various cancers, deadly viruses like HIV and hepatitis, and neurological disorders like Lou Gehrig's disease. This is partly because the "easy" targets have all been taken by other biotech companies.

But it is also because the return for hitting one of the tough targets could be immense.

Synergen's once-stellar valuation had been based on the assumption that Antril, the company's lead drug, would prove to be the first effective treatment for sepsis, an often-fatal bacterial infection that strikes about 200,000 Americans a year, killing about half of them. At $1,000 a dose, a conservative estimate, Antril could have easily commanded a $200 million market in the United States alone. Some analysts' estimates were far higher.

In retrospect, "It's really easy to point the finger and say these guys should have known better," said Cynthia Robbins-Roth, editor of Bioventure View, a newsletter, and a consultant.

"But you have to make some gambles and you have to have a great deal of faith in your technology," she said. "What separates the companies is, do they have a strategy in place should the gamble fail?"

In Synergen's case, the company had substantial cash, a manufacturing plant and another drug in advanced clinical trials, albeit for yet another very difficult disease. Given the need for still more money to advance any drug to market and the chilly climate for biotech stocks, its management decided to pursue a merger. Now, its more promising scientific programs will fill Amgen's product pipeline.

"The biotech financing environment right now is atrocious and likely to remain so for some time, so we had to look for alternatives to charting an independent course," said Gregory Abbott, Synergen's president and chief executive.

Copyright 1995
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