SAN FRANCISCO - Coming a month after a turbulent third quarter - what many have said was the worst quarterly market performance in 20 years - the Biotechnology Industry Organization's annual investor forum closed with a flicker of optimism for the biotech sector as a whole.
There's no doubt that the big picture economy is bleak right now, said George Milstein, of Pacific Growth Equities, who kicked off the discussion with a brief recap of the last few months - consumer spending, housing and building all are down, while the government has allotted billions in massive bailout packages and offered multiple interest rate cuts. Even the biotech industry, which is somewhat insulated from the bigger macroeconomic issues, has suffered its losses, with a substantial number of firms trading below cash and struggling to find adequate financing to advance pipelines forward.
According to figures from BIO, about 38 percent of biotech companies have less than a year's worth of operating capital. Some already have folded, like Atlanta-based AtheroGenics Inc., which filed for bankruptcy earlier this year. (See BioWorld Today, Oct. 8, 2008.)
And venture capital firms are sitting on funds rather than doling them out to thirsty private biotechs while they try to gauge the market's future.
But members of the closing panel Friday agreed that, even in trying times, good companies and good data will win out.
Firms should "focus on the fundamentals," said Rajiv Kaul, of Fidelity Investments. Those backed by good science, with attention on novel targets and areas of unmet medical need, still will be able to attract investments.
Meanwhile, for investors, "a lot of companies just got cheaper," he added. From a long-term perspective, "there are a lot of opportunities in front of us."
Matthew Perry, of Biotechnology Venture Fund, agreed that his firm is "seeing incredible opportunities" but "you've got to cull through a lot."
Bryan Roberts, of Venrock, added that there likely will be a lot less money flowing into biotech, so investors need to "pull a needle from a haystack."
He advised a "hope for the best but prepare for the worst" approach for the biotech industry, with a focus on products and data. "You will, at the end of the day, live or die based on your product," he said.
It's hard to predict when the market might improve. BIO's Alan Eisenberg, executive vice president of emerging companies and business development, said his impression is that "investors are interested, but everyone's just trying to assess where the market is and where it's going before jumping in."
He told BioWorld Today he anticipates that the air will start to clear after this week's election, and then more as the new year approaches and "we leave 2008 behind." By then, hopefully, the industry will "start to see changes" stemming from the government's recent actions, he added.
But it's possible that the tough market actually might be good for the industry, weeding out some of the companies that are barely hanging on with less than stellar products.
There's been a "lack of Darwinian attrition in this industry," Bob More, of Frazier Healthcare Ventures, said during a Thursday panel on exit strategies. "Now we're about to see it."
Also during that panel - and with an appropriate Halloween reference - Transcept Pharmaceuticals Inc.'s CEO Glen Oclassen added that a lot of "zombie companies" just continue to lurch forward - meaning those firms that somehow manage to keep getting just enough funding to stay in operation - will be flushed out by the current environment. "And that's a good thing," he added.