Date: Jan 09, 2003 Author: Mike Freeman Source: Union Tribune (
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Ontogen Corp., a Carlsbad drug development company that has raised $100 million over the past decade, has laid off all but a skeleton crew after it failed to raise additional funds.
Barry Toyonaga, Ontogen's president and chief executive, said the 100-employee company terminated more than 90 percent of its work force last month -- many of them well-paid chemists and scientists. The company now has between five and 10 employees working in more than 70,000 square feet of lab and warehouse space.
"The company is not gone, it's just a lot smaller than it used to be," Toyonaga said. "Raising money in this environment has become increasingly challenging."
Founded in 1992, privately held Ontogen is among the old guard of Carlsbad's life science companies. It develops small-molecule therapeutic agents to fight cancer, infectious diseases and other chronic medical conditions. Investors included Johnson & Johnson Development Corp., and Allen & Co.
In October 2000, Ontogen announced that it had raised $16.4 million through a private offering of its preferred stock. In January 2002, it won a $1.3 million Small Business Innovation Research grant for development of enzyme inhibitors to aid in monitoring blood glucose levels in people with diabetes.
But those funds weren't enough to keep Ontogen going at the 100-employee level, Toyonaga said. By the middle of last year, Ontogen hired investment bankers CBIC World Markets to help it find a buyer.
Toyonaga, a former Johnson & Johnson scientist, kept his company's workers on board at that time because he believed they would be among Ontogen's most valuable assets.
Ontogen also believes the company's burn rate -- the speed at which it spends cash -- compares favorably with other drug developers, although a company spokeswoman declined to reveal the amount the company spent each month.
"A couple of years ago, we were admired for running an organization of that size so inexpensively," Toyonaga said. "Today, people don't care how inexpensively you run it. Anything is too much money."
Venture capitalists, stung by losses as the economy soured, have been shying away from putting their money into biotech companies. There are few signs that the investment spigot for biotech will open anytime soon.
"I'm certainly not hearing a whole lot of positive comments from CEOs about the ability to raise cash," said Joseph Panetta, president of Biocom, which represents more than 200 biotechs in San Diego.
Toyonaga said outside investors own only 30 percent of Ontogen. The company funded operations through research agreements with pharmaceutical companies, including a $40 million deal in 1996 with Germany's Boehringer Ingelheim. Ontogen also had agreements with Novo Nordisk of Denmark and Organon of the Netherlands.
Ontogen has completed Phase I clinical trials for one drug, ONT-093. The drug hinders cancer patients from developing resistance to Taxol and other cancer medicines. Ontogen also has another drug, an anti-inflammatory that assists in wound healing, under development.
