SAN FRANCISCO - With more than 10,000 biotech, pharma and investment execs in town for three investment conferences there is no better time to take the temperature "readout" on the mood of the industry.

Certainly the industry appeared to be in great shape going into this important period for biotech companies. This was mainly due to the stellar stock performances of blue chip biotech companies during 2012 that helped drive the sector. Collectively, those multibillion-dollar market cap companies saw their share prices jump by an average of 53 percent last year. (See BioWorld Insight, Jan. 7, 2012.)

The burning question on people's minds heading to San Francisco seemed to be: Could that performance be maintained going forward?

Robert Hazlett, analyst at Roth Capital Partners, said he was "very bullish on the sector and believed that biotech was on track for several more good years."

He was speaking on a plenary lunch panel, titled "The view from the street: Looking forward," at the Biotech Showcase 2013 meeting running in parallel with the 31st annual J.P. Morgan Healthcare Conference.

The bull run for biotech, which started about 18 months ago, he said was due to a convergence of factors. There has been a significant advancement in biology that has translated into better targets for the intervention of therapeutics. Related to that, there has been modest progress on the regulatory front with the FDA now accepting biomarkers and companion diagnostics that help deliver greater efficiencies in drug development.

Hazlett said given those two factors, the industry's productivity that generated a record number of approvals last year would stay on that pace and produce at least 30 new drugs annually over the course of the next several years. "This bodes well for the public biotech sector as a whole," he added.

Generalists Attracted Back to Sector

From the "buy side" perspective, Evan McCulloch, portfolio manager at Franklin Templeton Investments, noted that the increased valuation of the sector has encouraged generalists to enter the space once again, which signifies an appetite for biotech investment opportunities.

Those investments have mostly benefited the mid-cap biotechs so far, but he expressed the hope that this enthusiasm would have a trickledown effect to small-caps, which have had a difficult time attracting risk capital.

McCulloch said while the initial public offfering (IPO) window for biotech companies remains open, the cost of capital raised in those transactions is expensive.

In that challenging financial environment where capital is hard to raise, Greg Simon, CEO of New York-based Poliwogg, an online crowd-financing source, said there is a whole new group of "30-somethings" who will become passionate investors thanks to the passing into law of the JOBS Act. That legislation is expected to have a significant impact on small biotechs by providing new fundraising options and easing the burden of complying with securities laws.

"While VCs are walking out of the party, there are a whole new set of people who are willing to step up and invest in healthcare companies," Simon said.

Although the JOBS Act must pass scrutiny at the SEC rulemaking process before its provisions can be implemented, once developed, it will provide a five-year on-ramp to the public market, raise the SEC's Regulation A cap to $50 million and open the door to crowdfunding.

The Regulation A pathway previously was capped at $5 million and thus rarely used, but boosting it to $50 million could have a positive effect on mid-stage biotechs that are running out of venture support but aren't big enough for a traditional IPO.

"The beauty of the act is that it now opens up investing to anybody who wants to do it," Simon said.

While that potential new source of funding is certainly good for the sector, the panel expressed concern that companies might have to deal with up to 2,000 new investors, including both accredited and unaccredited shareholders.

Simon said that would be a good thing since it would demonstrate to other major investors that "your company has appeal."

Poliwogg, which plans to focus on opportunities in the health care sector, will act as an introducing broker dealer, noted Simon, allowing matching of investment supply to the demand from companies for funding.

The upbeat mood of the panel was a reflection of where the industry is poised. While there were no major announcements from presenting companies, most continued to enjoy rising stock valuations during the week on the capital markets. And it appears that biotech's momentum is showing no signs that it will slow down anytime soon.

Promising Pipelines

In a research note, Wells Fargo Securities LLC analyst Brian Abrahams said although his firm does "not expect a repeat performance of 2012 for the large caps, recurring in 2013," it believes there is "still value to be captured given many companies' promising pipelines."

The J.P. Morgan event continues to serve as the single most important event of the year for investors, allowing them to "peer under the hood" of biotech companies and rate their current performances and learn firsthand their future plans.

It is obvious that they are continuing to like what they see.

Celgene Corp., helped kick start the week on the right foot with CEO Robert J. Hugin predicting that the company would report 2012 fourth-quarter sales exceeding $1 billion and earnings per share of about $4.90 – a new high water mark for the big biotech. (See BioWorld Today, Jan. 8, 2012.)

By the close of the conference, Celgene's share price (NASDAQ:CELG) had risen more than 16 percent from Monday to close Thursday at $95.48.

Although there was some profit-taking on Thursday with biotech companies seeing their share prices fall back, the majority of those companies presenting at the conference enjoyed significant stock price gains.