By Jim Shrine

ATLANTIC CITY, N.J. ¿ Last year¿s biotechnology financing bonanza was to a large extent a case of well-capitalized companies getting even richer and more secure.

The number of companies with less than a year of cash remains significant, and the financing window is not expected to open up again until the fall ¿ or even fall 2002, said Keith Brownlie, a partner at Ernst & Young LLC in Iselin, N.J.

¿My concern is what will happen to those companies strapped for cash,¿ Brownlie said Monday on the opening day of ¿Biotech 2001: Opportunities in the Nation¿s Pharmaceutical Center,¿ a conference being held at the Atlantic City Convention Center.

The event is a joint effort of the Biotechnology Council of New Jersey and the Pennsylvania Biotechnology Association, whose organizers said it was the largest regional biotechnology conference in the country.

Brownlie said the key for companies facing cash crises is to do whatever is needed to reach their next milestones. ¿Milestones drive valuations,¿ he said.

Conserving cash by reducing burn rates is not the best option, he said, since that will result in delays in reaching those milestones. ¿It¿s worth giving something up to reach the next milestone or until the market opens up again,¿ Brownlie said.

Companies with large cash positions, such as Medarex Inc., of Princeton, N.J., are in good positions now to do partnerships with those close to running out of money, Brownlie said. Pharmaceutical companies, too, are still hot for partnerships, since they have a number of drugs coming off patent in the next four years.

With the difficult financing market came reduced stock prices for biotechnology companies, many of which saw their market valuations cut in half or even two-thirds since last year. That makes it tougher to do deals with equity components, or at least makes those kinds of deals less attractive for the biotech companies, Brownlie said.

¿Valuation is a negotiated animal,¿ he said. ¿Market valuation is nice, but it¿s not a true indicator of the value of a company,¿ since the valuations fluctuate so much and so often.

One reason, he said, is that many investors still don¿t fully understand biotechnology. News from one company might affect another, and the industry still tends to move up and down as a whole. The good news, Brownlie said, is that the industry has proved its sustainability through the generation of products, and the underlying science has a lot of value.

From 40 percent to 60 percent of biotechnology revenue still comes from pharmaceutical partners, meaning biotech companies still have sources for cash in the down market, he said. To put the ¿down¿ start of the year in perspective, it still would be the second highest funding year in biotechnology if the current pace continues. (Biotech companies raised about $2.7 billion through Friday.)

The conference will kick into high gear today, with sessions scheduled all day.

New Jersey and Pennsylvania each have about 120 biotech companies. Last year¿s event in Philadelphia was the first time, other than a trial run in 1996, that they joined for the conference, and they intend to do it again. Organizers said about 550 people registered for the conference and 52 exhibitors signed up. Attendance is expected to increase with walk-up registrations.

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