Biotechnology companies that have been unable -- or chose not-- to enter the cold public offering market since last April aredevising alternative strategies for enticing capital frominvestors who appear to be tightly gripping their wallets.

"This year's been a little more work in raising money than inthe past," said David Robison, Calypte Biomedical Corp.'spresident and chief executive. The company is looking for up to$10 million in a third-round private-placement funding. ButRobison believes that with a good story to tell and a strongproduct to back him up, Calypte's placement is attractinginterest and the funding should be completed within 60 days.

Calypte has filed a licensing application with the FDA for itsurine test for the HIV antibody and is relatively close tobooking product revenues. "Unlike most start-ups, there is verylittle technical risk involved in this project," Robison said.

Other companies are scratching harder for cash. There are no"easy sources of money," said Jonathan Fleming of MVPVentures in Boston. He suggested that young, technology-rich,but cash-poor companies look for opportunities to team upwith top-tier, cash-rich, but technology-poor companies.

One emerging trend is that companies are drawing on privateplacements for large cash reserves -- $20 million to $40million -- before attempting an initial public offering (IPO).

Among the satisfied and the seeking are Ariad PharmaceuticalsInc. of Cambridge, Mass., which raised more than $40 million ina private placement last March, and Pathogenesis Corp. ofSeattle, which aims to raise about $40 million in a privateplacement.

"There's money out there," said David Stone, an analyst withCowen & Co. in Boston. The market is "just valuation-sensitiveand looking for more mature companies to invest in, as opposedto start-ups that are not quite IPO candidates."

He predicted that the biotechnology investment market willwarm up sometime after the November elections, probably inthe first quarter of 1993.

Stelios Papadopoulos, a managing director at PaineWebber inNew York, expects increased use of private placements andcorporate partnerships as alternative financing strategies.

A few companies that can are working both private and publicmarkets for funds. Genta Inc. of San Diego raised $25 millionfrom its IPO last December, but also has harvested funds fromcollaborative agreements with the Wyeth-Ayerst LaboratoriesDivision of American Home Products Corp., Proctor & Gambleand Chugai Pharmaceuticals of Japan.

Genta seeks to collaborate with companies that haveestablished sales forces in markets targeted by Genta'sproduct development. "This philosophy will stand, no matterhow much money we have in the bank," said William Bliss,Genta's president. Still in a depressed market, neither optionis easy to accomplish or attractive from the point of view ofcompany valuations.

And the several IPOs pulled by sponsoring companies in today'scold market will not necessarily fade away forever. "Itdepends on the quality of the company and its ability to becreative about doing the offering," said Brook Byers of theventure capital firm of Kleiner Perkins Caufield & Byers in SanFrancisco.

In a tough market, a company's management, opportunities,technology and quality of corporate partnerships come undergreater scrutiny from investors.

"How the public offering is marketed and presented, positionedand sold to those who buy the stock is important," Byers said.He predicted that some creative mechanisms to facilitatebiotechnology financing will appear this fall.

David Blech of D.A. Blech & Associates in New York, who hasbuilt a reputation for financing both biotechnology companystart-ups and turnarounds, says that a good company can stillsucceed in today's public offering market.

"We have taken companies public this year, such as Envirogen,"a New Jersey-based environmental biotechnology company thatwent public this summer, Blech said. "If a company is goodenough and if they price their deals right, they'll get throughan IPO." said Blech, who thinks that in any event the market isturning around.

-- Michelle Slade and Jennifer Van Brunt

(c) 1997 American Health Consultants. All rights reserved.