Forty-four percent of publicly-traded biotech companies had less than a year's worth of operating capital at the beginning of 2009, developers raised 46% less funding than lass year, and traditional sources of investment funds are drying up, according to Ernst & Young's annual review of the biotech industry.

Experts expect more biotech companies worldwide to sell themselves or fold than in past downturns. E&Y's “survival index” shows the number of biotechs short on cash is up dramatically from the 25% reported last year. Companies in the bottom of the funding pile have traditionally been able to move up in subsequent years by tapping funding from several sources, but that upward mobility is grinding to a halt as funding dries up.

"This time around we have a much deeper, more systemic financing crisis," Glen Giovannetti, global biotech leader at Ernst & Young, told Reuters. "The recovery won't come fast enough for some companies."

A number of biotech hedge funds have already folded, and others are currently unable to tap banks for investment loans.

Biotech survivors are likely to prosper, however. Public biotechs had a 12% increase in revenue to $89.7 billion in 2008, and the net loss for biotech companies decreased by about half, from $3 billion in 2007 to $1.4 billion in 2008, ratcheting the industry as a whole into the black for the first time ever.

Big pharma is also still shopping for some biotech acquisitions to fill out drug development pipelines.