BioWorld International Correspondent

STUTTGART, Germany - The eighth BIO-Europe 2002 International Partnering Conference drew approximately 1,200 representatives from all sectors of the biotechnology industry to Stuttgart to concentrate on partnering and making deals.

"This is definitely the largest single partnering event in Europe, and probably anywhere," Morrie Ruffin, vice president for business development and emerging companies with the Biotechnology Industry Organization, told BioWorld International. "The focus here is on one-on-one meetings that bring pharma together with biotech."

Peter Johann, head of corporate development with Boehringer Ingelheim GmbH, of Ingelheim am Rhein, Germany, was explicit about what major pharmaceutical companies were looking for in the current market. "We want products, preferably already in clinical testing," he told BioWorld International. "Biotech needs to become more realistic about what products it can deliver."

On the positive side, however, Boehringer also is committed to becoming involved with biotech companies earlier in the process. Johann said that the company was very interested in products in Phase I/II testing, and it had the resources to do serious evaluations of companies in that stage of development. Boehringer has a list of areas that it finds interesting, and increasing competition was making it more proactive in seeking partners.

"We've also gotten much faster," Johann said. On key proposals, Boehringer can make a decision within a week.

Presenters and organizers have not shied away from confronting the difficult market conditions facing the industry. "We've seen down cycles before, and we will come through this," Ruffin said.

Scott Morrison, national director of life sciences for Ernst & Young LLP, told BioWorld International, "The current pressure on valuations is bringing renewed emphasis on partnering, and on mergers and acquisitions."

Not all of the conference participants think that tough markets are bad for the industry. "These are actually good times," Robert Blum, senior vice president of finance and corporate development of Cytokinetics Inc., said. "This is time to learn the lessons that weren't learned before. Many biotech companies that went public did that just three or four years from their inception. That is very early in a company's life cycle," particularly for an industry in which products easily take more than twice that time to come to market. A slower march to public financing gives more time to build partnerships and for companies to mature. In the mid-1990s, Blum said, many biotech companies traded at a discount to their IPO price before their stocks took off. That suggests that they were taken public too early.

Mark Cochran, a partner with NeuroVentures Capital LLC in Charlottesville, Va., also saw benefits in a tight capital market. Venture capitalists were not just looking at the short-term advantages in valuation negotiations, they were learning from previous mistakes as well, Cochran said. "These days, VCs are resisting what looks sexy, and they are looking closely at management experience, at technology that has legs and at companies that have what pharmaceutical companies want."

Views also differed on two long-term industry trends: prevention and personalized medicine. Blum, for example, said that policy changes within the U.S. FDA may provide a better environment for preventive treatments. Johann, on the other hand, saw structural barriers in many European countries to paying for preventive medicine in public health care systems. Establishing the effectiveness of prevention also will be difficult, particularly in Europe. "Prevention studies may take 10 years or more. Who will finance them?" Johann asked.

Although personalized medicine has faded as an investment buzzword, some of the underlying concepts remain strong. Johann said that while "segmentation of indications is coming, Boehringer generally is not interested in small-market drugs." Blum saw opportunity in the disinterest of major pharmaceutical companies. "Larger biotech companies may be better poised to take advantage of segmentation, but this trend will take a long time to play out, possibly around 10 years."

Despite the bear market, conference participants say that the industry's global integration will continue. Within this development, Morrison sees a structural advantage for U.S. companies. He said that the global outlook of biotechnology companies meant that, despite all of the practical difficulties in implementation, cross-border mergers were likely not only to continue, but also to increase. Strengthening that trend is the view that "a cross-border transaction is a validation of a company's growth and strategy." American companies, which provide entry into the vital U.S. market, have a particular cachet, and "U.S. companies can command a premium in investments," Morrison said.