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Print“It's certainly better than it has been, but companies aren't saying 'We're turning down money.'”
It used to be that people talked about the IPO window for biotech, but such notions have become less of an issue as companies have found alternative sources of capital and an acquisition-hungry pharmaceutical industry stands ready to provide venture investors an out strategy.
As the BIO Investor Forum kicks off its fourth annual gathering at the Palace Hotel in San Francisco, Alan Eisenberg, executive vice president of emerging companies and business development for the Biotechnology Industry Organization, says times are generally good. More than 200 companies—a little more than half of which are public—will present to investors today and tomorrow to 1,200 registered attendants. It is the largest turnout in the event’s history.
In the first half of this year, a total of 19 biotech companies completed their initial public offerings. That equals the total number of biotech IPOs for all of 2006. These IPOs raised about $1.42 billion, eclipsing the $920 million raised in all of 2006. On the venture capital side, biopharmaceutical companies raised $2.9 billion through the first half of 2007, up from $2.2 billion for the same period a year ago.
The Journal of Life Sciences' Daniel S. Levine recently spoke to BIO’s Eisenberg about the current investment environment, what investors are looking for these days and what clouds may be on the horizon. Edited experts follow:
Q: How’s the environment right now for biotechs raising money?
A: It’s fairly positive. If you look at the statistics—it seems to be on track to be the second-largest year or close to the second-largest year for biotech funding overall. We’re in a pretty good place right now from a market standpoint. The biotech indexes are doing fairly well. There’s a fairly substantial IPO queue and the IPO market for the past 12 months has raised more money than the 12 months a year ago. The IPO environment, while being selective, is nevertheless positive for those companies that are able to get out.
Q: Would you say this is good times for biotech’s raising money?
A: It’s selective times. It’s certainly better than it has been, but companies aren’t saying “we’re turning down money.” Companies still have to go out and demonstrate why they are a good investment. As the industry has matured, as investors have matured with their views on their industry, companies are forced to become more diligent in how they do their presentations.
Q: In the past there have been a number of legislative and regulatory issues that have threatened to dampen the financing environment. What are you concerned about these days?
A: Never say never about what’s going on in Washington. One of our key missions is to make sure that policy areas don’t impact capital markets. There are a few areas that we are working on aggressively. We just got the reauthorization of PDUFA [the user fees FDA collects from drug makers ] done and trying to ensure that onerous changes don’t occur to the approval processes at FDA. Another area we are watching very closely is the patent reform debate. That’s as important as anything right now for us. We’re also looking at follow-on biologics. Those are the big ones that are still outstanding in the current legislative session.
Q: When you hear investors talk, are these issues that are top of mind for them or are they focused more on the science, the clinical studies and the markets for products?
A: They are focused on the clinical studies and so forth. I suspect the patent bill could have a very negative impact on the industry if it made it easy to challenge patents. They’d pay a little more attention, but we hope to ensure that won’t happen. We don’t think it will. There are enough checks on that bill that we are hopeful that any bill that comes out does not harm the industry.
Q: It seems what’s done a lot to drive the strength in the financial markets for biotech has been the appetite of pharma to go out and make acquisitions and pay up for alliances. How important has that been?
A: There’s certainly been an appetite from pharma. Pharma is being squeezed. They have a real strong interest to pay for new innovative platforms at the front end of research, but also they are paying substantial premiums for biotech products that are further along in human clinical testing. As a result, there’s a fairly sizeable appetite out there. They don’t want to lose out on the next great innovation, but because of patent expirations they need to refill their pipelines. M&A has been important.
Q: What do you think investors will be looking at over the next two days at the Investor Forum?
A: They are going to be looking for good science, a good story, and an understanding of where a company is in terms of the development process and what the IP looks like. That’s what investors at the end of the day, at this conference or any conference, are looking for.
