Another once-promising life sciences company has died.
Codon Devices Inc., a five-year-old Cambridge, Mass., biotech working on ways to synthesize DNA and other genetic material, is quietly shutting down.
A week ago, board members voted to close the doors after they failed to raise additional money, said a person affiliated with the company who did not want to be named. Flagship Ventures, one of Codon’s investors, recently removed Codon’s name from its list of portfolio companies, but declined to comment. No one responded to messages left on the company’s voice mail, and its chief executive, Brian Baynes PhD ’05, did not return phone calls or e-mails seeking comment, and no one came to the door at the company.
Codon is the latest in a string of small life sciences companies in the area to shut down in the past few months, as privately held firms find it increasingly difficult to raise money to develop products that are years away from generating profits.
At least two local companies filed for Chapter 7 bankruptcy protection this year — Dynogen Pharmaceuticals Inc. in Waltham and OmniSonics Medical Technologies Inc. of Wilmington — clearing the way for their liquidation. Cyberkinetics Neurotechnology Systems Inc. of Foxborough said it is winding down its operations, and Epitome Biosystems of Waltham shut down several months ago.
“This environment is unforgiving,” said Keith Dionne PhD ’90, chief executive of Surface Logix Inc., a Boston biotech trying to develop drugs to treat hypertension, metabolic diseases, and other afflictions. “This is a sharper knife than it has been in the past.”
There are several reasons for the cash crunch. One is that few companies have been able to launch initial public offerings since the stock market meltdown, making it difficult for start-ups to raise money directly from the public. In addition, venture capitalists are reducing their investments in young companies, because it’s hard to raise cash and also they need to divert money to sustain more mature companies that otherwise would have gone public by now.
Still, some companies have continued to raise money. For instance, Surface Logix raised $20 million in venture capital and loans in January, and BioVex Inc. of Woburn raised $40 million last month, after canceling its plans for an IPO.
But Dionne said companies that haven’t yet developed a key product to impress investors aren’t having an easy time raising money, forcing some to undertake cost-cutting measures.
For example, Synta Pharmaceuticals Corp. in Lexington eliminated 90 positions last month. And Oscient Pharmaceuticals Corp. in Waltham cut 100 jobs in February.
And it’s likely other companies will have to slash their operations or shut down altogether. Nationwide, about 120 publicly traded biotech companies have less than six months’ cash on hand - nine times the number of firms that had limited reserves in 2007, according to the Biotechnology Industry Organization, a national trade organization.
But Codon’s failure is especially notable because it attracted so many big-name investors, including Alloy Ventures, Flagship Ventures, Highland Capital Partners, and Kleiner Perkins Caufield & Byers. In total, the company raised at least $31 million.