SAN FRANCISCO - "The entrepreneur is king," declared Mark Heesen, president of the National Venture Capital Association, speaking in the grand ballroom of the Palace Hotel at the opening session of BIO VentureForum West 2003.
After a period in which the industry has been royally worked over in the financial sphere, things seem to be looking up.
"When you go back to where venture capital was three years ago, we were putting out $110 billion in a year," he said. "We could not continue on that pace, nor should we continue investing $110-plus billion in a year. So we had a dramatic drop off, and we had a lot of companies that suffered. We saw 2001 and 2002 as years of retrenchment and gathering the forces one more time. Most venture capitalists would tell you at this point we've hit bottom and we're making our way out."
That news was of particular interest to attendees of VentureForum West, sponsored by the Washington-based Biotechnology Industry Organization, which launched VentureForum conferences in the summer of 2001.
"The economy was sliding, mainstream investors were on the sidelines, and venture capitalists were retrenching," said Carl Feldbaum, BIO's president, during his opening remarks Wednesday at the conference. "At BIO we were worried - very worried - about the survival prospects for many of our young companies."
Having put together a plan for VentureForum, BIO "pestered every investor in our database" to attend the first one, which took place "right after the Sept. 11 attacks on New York and Washington." Turnout was satisfying despite security concerns, he said. (See BioWorld Today, Oct. 5, 2001.)
About 115 biotechnology firms are taking part in the conference here, Feldbaum said, and those selected to present are among "the world's best private biomedical technology firms," coming from 21 of the United States and three Canadian provinces, as well as the UK and Austria. Sixty firms are from California, five from the state of Washington, and six from British Columbia.
More important than where they hail from, of course, is the science for which many of them need ever more money to pursue, he said, adding that the companies "are seeking capital at a pretty propitious time for the industry."
The Nasdaq Biotechnology Index is up 50 percent this year, but "some firms have actually fared much better," Feldbaum said, noting that 247 industry stocks tracked by the consulting firm Recombinant Capital through September rose 113 percent on average.
"The industry may be headed toward its second-best year, only behind the signal year 2000," he said. What's more, "for the first time since 2000, there's even some buzz about an opening [initial public offering] window."
Heesen agreed about the apparently brighter picture regarding IPOs, but advised caution.
"When you looked at [the numbers] about six weeks ago, it was all sorts of industries in registration," he said. "What we have seen in the last couple of weeks is that virtually every new company that has registered with the SEC is a biotechnology company. Suddenly, there are an awful lot of biotechnology companies who think this is the time to go public." Most, he added, are venture backed.
But "the one that did go out last week, Acusphere, is trading at below its opening price as of this morning," Heesen said. "We'll see if those biotechnology companies that are in registration actually go [public]."
Watertown, Mass.-based Acusphere Inc., which has an ultrasound imaging agent in Phase III trials, raised $52.5 million by pricing its 3.75 million shares at $14, the midpoint of its targeted $13 to $15 range. (See BioWorld Today, Oct. 9, 2003.)
Acusphere's stock (NASDAQ:ACUS) dropped $1.05 Wednesday to close at $11.10.
Other pleasing news has arisen in the area of mergers and acquisitions, Heesen said, pointing to "about the same number of VC-backed M&As in the past three years," adding that "we are finally starting to see, at the end of the day, an acquisition being done where all three parties walk out of the room - the venture capitalist, the acquiring company and the acquirer - and are all happy."
Such has not been the case for several years.
"The only one who was happy, it seemed, was the acquiring company and everyone else was not too thrilled about the process," he said.
In sum, "there is a lot of good news but you have to temper this good news," Heesen said. While venture capitalists are "asking a lot more questions," they also are willing to "work with entrepreneurs a lot harder," he added. "They understand this is a very long process."
The conference listed 424 registrants as of Wednesday morning. It continues through today.