Investor dollars dwindling for clinical trials

Physicians who supplement their income by participating in clinical trials might soon have fewer chances to tap into this revenue source, industry insiders say.

Biotechnology companies have seen investment dollars drop significantly in the last year because of the weakened economy, causing many to either cut back on the number of trials they are doing or, in some cases, conduct them overseas, insiders say.

In one extreme case, Cogentus Pharmaceuticals of Palo Alto, Calif., abruptly stopped what was to be a 4,000-patient study and filed for bankruptcy in December 2008, citing a sudden and substantial loss of capital.

Venture-capital firms, which provide most of the funding, began tightening their purse strings when the stock market tanked, leaving the biotech industry strapped for the millions of dollars in cash needed for each trial.

"At the end of the day, the FDA requires these trials, so they won't stop. But the amount of money available to biotech companies has been reduced, so the companies will have to prioritize," said Jimmy Rosen, a senior associate with Intersouth Partners, a venture-capital firm in Durham, N.C., that invests in biotech.

Rosen said physician investigators in the trials won't feel the impact of the cutbacks immediately. "Trials ongoing still need to be funded. But there will be a trickle-down effect from where the cash comes from to the biotech company, and then to the investigators. It will take time, but it will be in the near future."

A spokeswoman for the FDA said that in 2007, pharmaceutical companies spent $58.2 billion on research and development, and the National Institutes of Health spends about $29 billion annually on medical research. She said private investors are needed for the bulk of research funds.

Endocyte, a biotechnology company in West Lafayette, Ind., is reacting to the money crunch by concentrating on only the most important studies and looking more seriously at overseas options, CEO and President Ron Ellis said.

"It's a lot cheaper to conduct these trials overseas. There usually isn't a problem with the country itself; it's with finding investigators," Ellis said.