It will be a mixed bag for Maryland's biotechnology industry this year, with a number of companies fighting for life while others come of age.
A continued shortage of venture capital and investor nervousness about a sector perceived as risky are expected to keep hindering the fund raising of the state's young biotech companies.
On the flip side are companies such as Martek Biosciences Corp. and United Therapeutics Corp., which put their first major products on the U.S. market last year and are nearing profitability for the first time.
"It's an environment where you have to prove what you have," said John McCamant, editor of Medical Technology Stock Letter, an investment guide based in Berkeley, Calif.
Analysts expect the fund-raising crunch to force more company mergers this year in an industry that traditionally has had few.
A few companies, such as Rockville's Human Genome Sciences Inc., still have significant cash left from fund raising in 2000, when investors flocked to the sector amid excitement over the mapping of the human genome.
Human Genome Sciences is using some of its cash to back construction of major manufacturing and laboratory facilities as well as a new headquarters.
Some contract manufacturers also are expected to benefit as biopharmaceutical companies choose to hire others to make their experimental drugs, rather than building expensive plants themselves.
In Baltimore, contract manufacturers Chesapeake Biological Laboratories Inc. and Cambrex Bio Science Inc. have plans to expand.
"There is quite a reluctance to invest in bricks and mortar at this point," Chesapeake Biological's President John T. Botek said about drug developers that are instead hiring contract manufacturers. "We're a beneficiary of that."
Chesapeake Biological opened a $16 million, 12,000- square-foot plant last year in Southwest Baltimore. The plant is being used to put smallpox vaccine into vials. The company, which already had a 70,000- square-foot manufacturing plant on South Paca Street, expects to begin renovating an adjacent 50,000-square-foot building this summer to increase manufacturing capacity.
Cambrex Bio Science announced an $18.5 million expansion that will nearly double the manufacturing capacity of its East Lombard Street drug-making plant.
The company, part of Rutherford, N.J.-based Cambrex Corp., expects to begin preparing land for the expansion early this year and to begin manufacturing there in mid-2004.
The company also said it expects to complete the $5 million renovation of an 80,000-square- foot building across from the Lombard Street plant in the second quarter. The renovation includes construction of a pilot plant that will make small batches of drugs to test production processes.
Also on the positive side, Columbia-based Martek posted its first profit in the fourth quarter, thanks to growing U.S. sales of infant formula containing the company's nutritional additive.
United Therapeutics Corp. of Silver Spring is expected to turn profitable in early 2004, thanks to its just-approved Remodulin drug for pulmonary hypertension, according a projection by Martin D. Auster, an analyst at SunTrust Robinson Humphrey.
Other companies, such as Baltimore's Guilford Pharmaceuticals Inc., Columbia vaccine developer Novavax Inc. and Gaithersburg's MedImmune Inc., have millions of dollars in potential revenue riding on Food and Drug Administration decisions.
Guilford wants to expand use of its brain-cancer treatment; Novavax awaits a thumbs up or down on its estrogen-replacement lotion, and MedImmune has applied to sell a nasal-spray flu vaccine that it has projected could mean $500 million a year in revenue for the company within five years.
Efforts to build two biotechnology business parks in the city - one adjacent to the University of Maryland, Baltimore and the other near the Johns Hopkins University medical complex - continue in their early stages, as do a pair of similar business parks planned in Montgomery County.
The state has so much faith in the long-term prospects for biotech companies that five of the 20 industrial specialists working in its Department of Business and Economic Development are focused on drumming up biotech business.
David S. Iannucci, the agency's head, said the state is working to attract two major bio-manufacturing plants, though competition for the facilities and other biotech development is fierce. At least 40 states now have initiatives to attract biotech jobs, he said.
"I think Maryland should justifiably celebrate its success as a biotechnology leader," Iannucci said. "At the same time, complacency would be a terrible enemy of our progress."
The push for more bioscience jobs comes as a fund-raising downturn has forced a number of biotech companies out of business.
Twenty biotech startups failed in the first 10 months of last year, according to international statistics tracked by San Francisco venture research firm VentureOne. That compares with 19 such failures in the previous four years combined.
In Maryland, public companies on the brink of running out of money as 2002 drew to a close included Antex Biologics Inc. of Gaithersburg and Celsion Corp. of Columbia. EntreMed Inc. of Rockville closed a New Year's Eve deal that allowed it to keep operating into 2003.
Vaccine developer Antex said in a November prospectus for a planned stock and warrant offering that it would need $2 million in operating cash for the rest of 2002. The company reported that it had $1.2 million in cash as of Sept. 30. Antex Chief Financial Officer Jeffrey V. Pirone said the company had since cut expenses to remain in business.
Celsion Corp. auditor Stegman & Co. said in a Nov. 18 letter filed with the Securities and Exchange Commission that there is "substantial doubt about the company's ability to continue as a going concern."
The developer of focused-heat treatments for cancer and other diseases closed on a $500,000 loan Dec. 31, Celsion spokesman Steve Chizzik said. It is trying to raise more by licensing its technology.
To solve its cash problems, Baltimore's PharmaKinetics Laboratories Inc., which contracts with drug companies to run early-stage clinical trials, agreed late last year to be acquired by Bioanalytical Systems Inc. of West Lafayette, Ind., in a deal slated to close this year.
Similar acquisitions may follow. Publicly traded companies that have experimental medicines in the late stages of development, have some cash in the bank and sport relatively low stock prices are ripe for acquisition, said Rene Salas, who heads Ernst & Young's mid-Atlantic life sciences practice.
"The bad news is ... the private companies will be left behind," Salas said. "Early-stage companies will have a very, very tough year. There's so many good deals out there on the public side, private companies will be set aside."