No intro needed for Ponzi scheme king Bernie Madoff. Everyone from Kevin Bacon to large hedge funds were duped. But how is the scam affecting the biotech industry and academic foundations?

Genengnews talked to several people and institutions who are braving the crisis. Let’s take a look:

-Academic medical and bio-related research at Stanford University is causing the school to “tighten their belts,” apparently suffering an undisclosed loss

-The Howard Hughes Medical Institute (HHMI) is not concerned. VP for communications and public affairs Avice Meehan said that the scandal “will have no impact at all on our operations, although it has had consequences on the institutions where our researchers work. At HHMI, we’re assessing the result of the ongoing financial challenge on our endowments and operations. At this point, despite ongoing volatility, we expect to meet our commitment to our grantees, investigators, and Janelia Farm, and are proceeding with new initiatives with some degree of caution.”

-Abi Barrow from the Massachusetts Technology Transfer Center said that the Madoff scandal is “an exaggerated part of the bigger policy picture. The case won’t hit start-ups so much, but will decrease the number of research initiatives universities can undertake. The long-term effects of the current financial contraction may be to refocus research on less risky challenges. “It will take 10 to 20 years to know the outcome.”

Ultimately, the economy is in the crapper, Madoff or not. For many young-mid biotechs, financing continues to be a problem as VC’s and pharma look for better deals:

-Baiju Shah from BioEnterprise said that VC’s are less interested in early-stage development, favoring projects that are ready for Phase I or Phase II trials. He also notes an investment trend toward medical devices and healthcare, which are less risky and less capital intensive. Of course, the payoff is less.

-Dushyant Pathak of VentureEdge states that the Madoff scandal is very localized due to his very tight network of contacts and investors. The end-game is that these investors, many of whom are experiencing notable declines in their net worth, are urging venture funds to slow down.

Conclusion: It looks like the effects of the Madoff scandal didn’t have any severe immediate effects for the biotech and academic communities, however the long term consequences will not manifest for years. Foundations, medical centers and young companies can still benefit from the soon-to-be increased government funding. The real challenge will be getting inventions past its critical valuation inflection point so that it’s “sexy” enough to attract investor funding.

Image from time

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