CD&D West Coast Editor

SAN FRANCISCO — Strung with white-and-turquoise canvas bags as they made their ways through the packed hallways of the Westin St. Francis hotel here, attendees took in the final full events of the 26th annual JPMorgan Healthcare Conference in early January.

“Every year, I’m blown away by how large it is,” said Dan Janney, managing director of Alta Partners, a venture-capital firm based here, adding that the popular event seemed “extraordinarily crowded” this time around.

“Every single large pharma and large biotech is here, en masse,” Janney said, adding that the likes of Pfizer (New York) and Bristol-Myers Squibb (New York) have 10 to 15 people on hand for what “used to be largely a CEO conference.” Business development and scientific personnel make for “more content-rich meetings,” he said.

The yearly kickoff conference, of course, is known for meetings — mostly behind closed doors — in which many deals are begun. Janney, who joined Alta shortly after its founding in 1996, called the general atmosphere for such deals “anemic, but not awful,” and found the JPMorgan mood upbeat.

Janney expressed optimism for a “whole new class of cardiovascular compounds” needed to replace those that will lose patent protection in the next four or five years.

His firm is involved with Portola Pharmaceuticals (South San Francisco) which in May raised $70 million in a Series C round for its work with a pair of anti-thrombotics: PRT054021, a Factor Xa inhibitor, and PRT060128, an ADP receptor antagonist.

Both drugs, like Portola’s management team, originated with Millennium Pharmaceuticals (Cambridge, Massachusetts)

The same month, Alta provided funding for Arete Therapeutics (Hayward, California), which added $35 million to its Series A financing round, bringing to $51 million the total raised for its new class of drugs targeting hypertension and inflammation.

As an enzyme target, Arete uses soluble epoxide hydrolase, believed to play a role in a third pathway of arachidonic acid metabolism: epoxygenases. (The other two, well-validated pathways are cyclooxygenases and lipoxygenases.)

“You may see a couple of really significant cardiovascular deals,” said Janney, a member of Arete’s board, adding that they would likely be drug specific. “You’ll always have a number of cancer deals going on,” he said.

“People are starting to fund discovery tools again,” Janney said, though Alta is “not heavy into it.” He predicted ever-larger VC deals funding clinical development. “Where companies used to go public, they’re staying private longer and pushing products farther,” he said.

An important trend is for pharma to buy biotech firms, and allow them to keep operating as entities unto themselves, rather than fold them into the parent firm.

“That’s what they should be doing,” Janney said. “If [big pharma companies] are willing to pay a premium for quality people, they should let those organizations stay somewhat autonomous. It’s not just about the molecule.”

“I don’t know whether [times are] actually getting better or people are getting used to the environment they’re in,” he said. “There’s a much larger constituency now that is buying into more mature companies. The weak part of the chain is still the [initial public offering] buyer.”

Regarding 2008, Janney predicted the transaction level will be “about the same we’ve had in the last couple of years. Quality deals will happen, but you’ll see both classes.”

In the IPO market, he predicted about a dozen by firms with market caps north of $300 million will go public, followed by about 30 more IPOs. Mergers and acquisitions will continue apace, he said.