By Randall Osborne


SAN FRANCISCO As if to ring a big-money starting bell for this year's bellwether biotechnology and health care meeting in San Francisco, Chase Manhattan Corp. and J.P. Morgan Co. finished their $30 billion merger on Dec. 31.

Their sealing of the deal came just in time for what has now been christened the J.P. Morgan H&Q Healthcare Conference, and it came at the end of a year more prosperous than the biotechnology industry has ever seen.

But recent months and the new year brought market slippage, especially in high-tech stocks (led by the downward trend of beleaguered Internet shares), which might dampen the mood of attendees.

"You'll know about the same time I do," said Alex Zisson, managing director of J.P. Morgan Chase & Co., the new company formed by the pairing of the two banks.

The merger creates the largest private banking operation in the U.S. and the second largest in the world, as measured by total client assets $330 billion pro forma, as of Nov. 30, 2000 with about 4,000 employees.

Bankers everywhere have been somewhat chagrined by recent market performance, Zisson acknowledged.

"You'd have to predict [investors] would be a lot less receptive to equity raising than last year," he added last Tuesday.

Next day, however, the market came back with a bang, with biotechnology, high-tech and every other industry reaping the benefits of a federal interest rate cut of one-half percentage point, to 6 percent. Turnaround was dramatic. The Nasdaq Composite Index jumped more than 14 percent, its largest increase ever.

A spokesperson for J.P. Morgan H&Q public relations, called it the "Alan Greenspan reprieve."

But pharmaceutical stocks, such as Merck & Co. and Johnson & Johnson, were among those that fell, and biotechnology stocks are notoriously fickle. This is even more true as the industry gains credibility and separates itself from others and as individual firms distinguish themselves.

Working in favor of an upbeat conference is the stunning performance of biotechnology stocks earlier in 2000, which analysts have said heralds a positive movement more convincing than any before.

"It's the first major conference of the year, and there's some euphoria going on, because biotech has weathered the volatility in the technology stocks," the spokesperson said. "This will move some stocks. We'll see activity in certain sectors."

Zisson said other forces at work promise something of a revival, too.

"It's been traditionally a great time to buy biotech stocks," he said. "Companies put their best foot forward. Everyone has a blank slate and is looking for fresh ideas."

Typically, "60 percent or 70 percent of biotech stocks go up" during the conference, which is in its 19th year. "Obviously, if you're a long-term investor, you don't care, but there tends to be a lot of enthusiasm generated."

Among the headliners is Arthur Levinson, chairman and CEO of Genentech Inc., who will speak at the opening luncheon.

The event, geared to show off for institutional investors those public and private companies deemed most worthy, comprises about 35 percent biotechnology, 25 percent health care services, 25 percent devices and 15 percent pharmaceutical firms, Zisson said.

"We'll generally kick off road shows or the equity-raising process at the conference," Zisson said. "There are so many people there that we can quickly determine how many investors are interested."

J. P. Morgan Chase aims to take three companies public in 2001: CombiMatrix Corp., of Snoqualmie, Wash., which in November filed to raise $100 million in its initial public offering (IPO); Seattle Genetics Inc., which filed for a $75 million IPO the same month; and Select Medical Corp., of Mechanicsburg, Pa., aiming to sell 12.5 million shares at between $11 and $13 per share, which would raise $150 million at the midrange of $12.

Select Medical is an operator of acute-care hospitals. Seattle Genetics is focused on antibody-based anticancer drugs. CombiMatrix intends to make customized biological array processors, semiconductor-based tools for use in identifying and determining the roles of genes, gene mutation and proteins.

"Some [companies] will actually start their road shows at the conference, and we'll have a suite where they can have one-on-ones with institutional investors," Zisson said.

That's not all. As anyone who has attended the conference knows, behind the public, agenda-specific commotion, and behind the post-holiday socializing, deals are being started.

"You see people spotting old friends and catching up," Zisson said, which is a much-liked aspect of the conference, but new "friends" are made, too.

"Every year, we hear back when some merger is announced in April, that it all started at the conference in January," Zisson told BioWorld Financial Watch. "A lot of people don't even go into the meeting rooms, and just hang out in the lobby. They've seen the company presentation a million times, so they try to set up their own private meetings with executives. Many of the drug companies send four or five business development people."

By now, the conference has become such a tradition that many who forsake the myriad other meetings during the year go out of their way to be in San Francisco for this one.

"A lot of people skip most of them, but [this one] is so large and has so much panache that the venture capitalists descend on it," Zisson said, not to mention a mixed contingent of "headhunters, accounts and lawyers."

With about 5,000 attendees, and about 300 companies (245 publicly traded, 50 privately held) represented, and six panels scheduled, the conference is bigger than ever which typically has been the case year to year, with elbow-to-elbow attendees jamming the hallways and almost needing to balance their coffee cups on saucers above their heads in the break rooms.

Next time, a new venue?

"We've thought about it," Zisson said. "Every year, we think we've reached the limit, and we're going to test the premise again. Our sense is, the next step up would be the [Moscone Convention Center]," but no decision has been made, he said. *