BioWorld International Correspondent

VIENNA, Austria - Investors and company representatives speaking Wednesday on a panel at the Cordia-EuropaBio Convention here agreed that in today's biotechnology industry there are three paths to success: products, products and products.

"The business model we like most is hybrid, including both product and platform elements," said Denis Lucquin, managing partner with Sofinnova Partners in Paris. Asked to clarify the definition of a hybrid business model, he said, "We like technology on which you build a pure product play.

"This is in contrast to a few years ago, when you had something of a confrontation between platform and product companies. You had companies providing services, promising to shorten development or to provide tools," he said. "The contrast was with product companies that had little or no technology in-house." The technology is helpful, he said, but only the products really count.

Dinko Valerio, president and CEO of Crucell NV in Leiden, the Netherlands, agreed, emphasizing his company's orientation toward products. Crucell specializes in vaccinations for infectious diseases, and he cited its work on a vaccine for West Nile virus as an example of its approach. The company expects to have a veterinary license for its vaccine in 2004 and would then move to clinical testing in humans.

Though he did not dispute the basic thesis that products were the one true path to biotech greatness, he said Crucell had benefited from a move unusual among European public companies: a joint Euronext-Nasdaq listing. Crucell's management made the decision to seek a Nasdaq listing, in addition to the local market, to benefit from the depth of the American market. "Thanks to this choice we can be compared to a very large body of peers," he said. "We also benefit from working with a very deep financial community." The company's share volume, approximately 100,000 shares traded daily, was nearly equal in both markets, a signal, Valerio said, that the company was fully accepted in both markets.

Klaus Kremoser came closest to questioning the absolute hold that products have on biotechnology. He is CEO of PheneX Pharmaceuticals AG, of Heidelberg, Germany, a company founded in 2002 as a spinout from LION bioscience AG. The company is pursuing a program of drug discovery, based principally on its technology for selective nuclear receptor modulators (SNuRM). PheneX intends to go down the usual path of venture financing, drug discovery and development, and partnerships with major companies. But PheneX is different from many venture-backed discovery companies in an important aspect. It has been profitable since April.

Kremoser said the company had not found venture funding when it first sought financing. In part, that was a result of a complicated structure in which LION was making a contribution-in-kind in return for equity participation. Last winter, venture capitalists did not want to invest in a company with that structure and background. The company did get as far as a term sheet with one investor, but building a syndicate, as required by the investor, proved impossible. "We let the term sheet expire," Kremoser said.

"We have generated revenue through service deals," he said. "The key was a research collaboration with F. Hoffmann-La Roche on our SNuRM technology." He said the company currently has six collaborations, which have brought it into the black.

Ideally, Kremoser said, the company would find additional investment and pursue its discovery and development program. "If we find blockbuster indications, we would like to outlicense them early. For niche indications, we would like to pursue our own, possibly fast-track development," he said.

In PheneX's experience, allowing product focus to eclipse the revenue potential of services would have meant going out of business. According to Kremoser, pursuing products was well and good, but the realities of doing business mean that the ideal cannot always be attained. Even if products are the only route to large-scale success, a company has to stay in business to reach that goal.

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