Coming off some difficult years, venture capitalists are lookingforward to this year's prospects.
The success of biotech initial public offerings, which raised $1.1billion last year and $470 million so far this year, should makeit easier for venture funds to raise money this year and forprivate companies, in turn, to raise venture capital.
"Nineteen ninety-two is going to be a year like no other; 1992is going to be fun," said Brook Byers, general partner at Kleiner,Perkins, Caufield & Byers.
There are no firm figures on how much money the venturecommunity raised last year. Alan Walton of Oxford Partnersand Sam Colella of Institutional Venture Partners put theamount between $1 billion and $1.2 billion. In comparison,Walton estimated that venture funds raised about $1.8 billionin 1990.
"With some caveats, I think the prospects for raising venturecapital in 1992 are somewhat improved," said Walton. Fundsdid well in the IPO market last year, making them moreattractive to investors, he said. "So I think we're pretty much atthe bottom of the cycle."
Ken Lee, national director of Ernst & Young's Life SciencesIndustry Service, said the prospects for raising venture moneyare good. "A lot of life sciences funds aren't having any troubleraising their next funds," said Lee.
Figures for the amount of venture money disbursed to biotechcompanies in 1991 range from Walton's guess of $145 millionto Lee's estimate of $200 million. Between $300 million and$500 million went to life sciences in general, said Colella.
Less money will be available for biotech companies this year --Walton estimated $100 million to $150 million, but said it couldbe as low as $80 million or $90 million.
But with the big cash burners going public, biotech companieswon't be needing as much money this year. "There will befewer late-round private financings than in 1991 and 1990because the IPO market took care of a lot of that," Byers said.
"Our own portfolio is surprisingly well-off in terms offinancings," said Colella. Institutional Venture Partners has 20life science companies in its portfolio, of which about half arebiotech. "Most of our companies are financed at least through'92," he said.
There probably will be more start-ups this year than last,according to both Byers and Colella, but these take less moneythan later-stage financings.
Lee's estimate is for about 10 to 20 biotech start-ups this year,and between $100 million and $200 million in venture moneyinvested in initial rounds or follow-on rounds.
Oxford is looking to invest in companies targeting ribozymes,free radical pharmaceuticals and gene senescence, said Walton,provided that it successfully raises a $50 million fund withFairfield Venture Partners. If the fund isn't raised, they'll doonly one deal, in gene senescence.
Cellular senescence is also a target for Kleiner, Perkins, saidByers. He anticipates funding a start-up focused oncardiovascular, immune system and dermatology applications."We've found two technologies from two academic researchgroups, and we're putting the pieces together," Byers said.
Another hot topic this year will be transcription factors, whichgovern the internal workings of cells, he said. LigandPharmaceuticals, which has funding from Kleiner, Perkins, isalready working in this area, and the fund probably will start anew company this year. Mayfield Fund in January announcedthe formation of Tularik Inc., also focused on transcriptionfactors, and Oncogene Science Inc. and American HomeProducts Corp. have formed a four-year collaboration based onthe factors.
-- Karen Bernstein BioWorld Staff
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