Biotech companies looking, to survive from early stages through the conclusion of clinical trials will find it harder am ever to secure venture capital over the next several months, speakers agreedat a recent industry conference.

Keith L. Brownlie, leader of the metro New York life sciences practice for Ernst & Young L.L.P., said investors have shifted their focus to later-stage ventures because the weak stock market has all but dried up hope for companies contemplating initial public offerings.

Not a single biotech company has completed an IPO since the second quarter of last year. “There’s no sign, as far as I know, of anything going to happen this quarter or the next,” he said.

Even worse, he added, both the number of biotech companies seeking financing and the amount of money raised nationwide have declined last year compared to 2001 – to 213 deals totaling $2.8 billion.

This year does not look to be much better. A continued dull economy, he said, would touch off a long-awaited consolidation of smaller biotech companies by pharmaceutical giants and other larger acquirers.

“It’s very tough for early stage companies these days. You’ve got to manage your cash as best as you can and you’ve got to be able to stretch the case that you have,” Brownlie said.

He was among seven panelists to discuss financing at a forum,

“Life Science: From Early Stage to Venture Capital,” on April

15. The Westchester Venture Group presented the forum at

New York Medical College in Valhalla.

Brownlie noted that while large sums of capital are available, only a few early stage biotech companies win big amounts. Two local firm receiving large sums are:

* Aton Pharma Inc-, a Tarrytown developer of therapies for cancer and other diseases, won $22 million during the first quarter of 2002, and $13.7 million during the fourth quarter of last year.

The latest round came from an investor group that included Perseus-Soros Biopharmaceutical Fund and The Wellcome Trust as well as investors for Aton’s previous round led by Healthcare Ventures.

* Aureon Biosclences Corp. of Yonkers, which won $15 million from a group led by Sprout Group and Atlas Venture.

Aureon develops tests intended to predict the response of individuals to treatments for breast cancer and prostate cancer as well as the course of both diseases in individual patients.

ANOTHER DEAL BREWING

Within weeks, one panelist told the audience of more than 100, his company will join that list. Dr. Ron Cohen, founder and chief executive officer of Acorda Therapeutics Inc., said Acorda was close to closing a deal expected to exceed $50 million.

Hawthorne-based Acorda, which develops therapies for spinal cord injuries and related conditions, has raised $70 million over the past seven years.

Cohen attributed Acorda’s latest success to 108 presentations made over the past nine months seeking money.

“It comes down to patience, perseverance and prayer,” Cohen said. “The last one to two years have been about the ugliest we have ever experienced in this industry.”

Echoing that sentiment was Dr. M. Timothy Cooke, chief executive officer of Mojave Therapeutics Inc., a Hawthorne developer of drug- delivery technologies that help the body’s immune system fight cancer and infectious diseases.

Cooke said his company made “80 to 90” presentations to investors over the past seven months.

“It’s very difficult out there right now,” Cooke said.

If biotech companies find the going as rough as predicted, it would be bad news for the county. Local business leaders and officials as well as for the biotech companies have been looking to build the nascent industry into a major player within Westchester’s economy – arid thus multiply the industry’s job base. Currently, the industry accounts for 8,000 local jobs, according to the county.

CAPITAL AND PLANNING

Allan R. Goldberg, co-founder and managing partner of The Channel Group, said biotech ventures seeking capital should pursue grants from government agencies and private groups, such as the Bill and Melinda Gates Foundation. “Its dear there are opportunities to move science forward,” he said.

Among government agency programs:

* SBIR -The Small Business Innovation Research program gives up to $850,000 for early stage research to companies or entrepreneurs;

* STM – The Small Business Technology Transfer program offers up to $600,000 to small companies working with researchers at universities and other institutions.

Viro Dynamics Corp., a Hawthorne biotech working to develop a flu vaccine, has received more than $100,000 through STTR and more than a $500,000 through SBIR. Dr. Doris Bucher, Viro’s president, said her company partnered with a drug company, Pocono Rabbit Farm & Laboratory Inc. of Canadensis, Pa.

Biotech companies may improve their chances of fund-raising success by crafting a short-yet-informative business plan, said Melissa Krinzman, CEO of Venture Architects, a New York City firm that prepares business plans and financial projections for companies seeking money.

Krinzman said entrepreneurs should avoid common mistakes, such as giving too much scientific data and lacking a candor.

“Be honest,” Krinzman said. “We tell our clients that if there are challenges and risks, to put them up front.”

Dr. Lawrence Kunstadt, managing director-investment banking with Connecticut Capital Markets of Greenwich, Conn., advised companies not to present sky-high estimates of revenues and profits.

One early stage business, he said, predicted its sales would multiply from $4 million this year to $451 million in 2006 – and that its bottom line would turn around just as dramatically from a $4 million loss this year to a $154 million profit in five years.

‘This never happens. Maybe it happens once in a decade or two decades,” he said. “Please don’t give us numbers like these. It’s pie in the sky. It’s just not going to happen.”

Kunstadt also urged biotech business owners to drink of their investors’ bottom lines as much as their own.

“We invest to make money,” he maintained. “You have to answer not how your product is better than anyone else’s, but how are we going to make money.”

Copyright Westfair Communications Apr 28, 2003