War Stories I: Turnaround Takes MDRNA from Two Weeks of Cash to Seven Deals

(MoneyWatch)  At the recent BioPharm America conference in San Francisco, biotech CEOs and investors swapped war stories and argued about whether or not the Darwinian attrition everyone started predicting last fall is over.

Plenty of biotechs have filed for bankruptcy or been acquired, and for every company that went belly-up, there are dozens that barely scraped by, thanks to some combination of good data, good strategy and good luck.

One such survivor is MDRNA, and CEO Michael French shared the company's story during the conference.

MDRNA was once an intranasal delivery company known as Nastech, but when its nasal spray for osteoporosis was dumped by partner Procter & Gamble and its nasal spray for obesity failed a Phase II trial, the company refocused on its RNAi programs. French, who formerly led corporate development for Sirna Therapeutics, came on board in June 2008 to help with the turnaround.

Then the markets melted down. By October, MDRNA had $10.9 million left in its coffers and Nasdaq threatening to delist its stock, which was trading at 17 cents. French knew his only option was a venture-backed PIPE, but the venture capitalists were hesitant. Fortunately, MDRNA had term sheets for a deal with a big pharma partner that would provide both the validation and cash to make MDRNA an attractive investment.

But the big pharma suitor got bought by another big pharma, and the deal was delayed. The venture capitalists backed away. At the J.P. Morgan healthcare conference in January, MDRNA had two weeks of cash left.

French's solution was a massive asset monetization push. He amended a deal with Amylin Pharmaceuticals, signed non-exclusive technology deals with Roche and Novartis, sold off some manufacturing facilities, renegotiated lease and equipment obligations, and restructured. By June the stock was up to $3.55 and the company was able to raise $10.5 million publicly.

Survival Lesson: French attributed his success to good science, tenacity and keeping his options open. And his relationships didn't hurt either ?€" if you've gotta close a big pharma deal in a matter of weeks, it helps to have someone on your side that the pharma already trusts.