12:00 AM
Oct 21, 2002
 |  BioCentury  |  Finance

Debt hangover

While the cure for an alcohol hangover can be a little hair of the dog, the cure for a debt overhang is not more debt. As stock prices sink further and further below conversion prices, and public companies see no financing window in sight, the dates for conversion/payback don't seem quite so far away any more.

Biotech's debt problem is a leftover from the last financing bubble, when many biotech companies elected to use convertible debt to raise massive amounts of money. By BioCentury's count, 82 companies raised $16.4 billion via converts after the last biotech window opened in the fourth quarter of 1999.

The bulk of the money - $15.6 billion - was raised by 38 companies that sold deals of more than $100 million. But of the 38, only 14 were profitable (or were within spitting distance of a profit), meaning they had the cash flow to support the debt payments. That leaves 24 companies with big debt and no cash flow (see "Heavy Borrowers").

Not all of the companies on the list are in desperate need of financing: Human Genome Sciences Inc. (HGSI, Rockville,...

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