Financing Trend Expands for Young Biotechs in 2013

There were around 1,600 attendees this year at Biotech Showcase 2013 held at the Parc 55 Hotel in San Francisco.  One of the luncheons I attended was a panel discussion.  The topic was “The View from the Street: Looking Forward.” Here is some of what was discussed by the panel. Each of the panelists gave their view of this topic.

Robert Hazlett, Senior Research Analyst at Roth Capital said that he is “bullish for the biotech and pharma industry.”  He also predicts 38 drug approvals a year.  Hazlett said there has been beneficial advancement in biology and he is enthusiastic about advancements in oncology.  He thinks there has been modest progress on the regulatory side.

Evan McCullough, Portfolio Manager at Franklin Templeton, gave his perspective as a buy side guy.  He said Gilead started a rally by buying Pharmacet.  McCullough said that the IPO window is open, payers are tough, high deductible plans are coming so think about how that effects reimbursement of drugs.  He is also frustrated that there isn’t more M&As.  If a company wants to go IPO, they need proof of concept and solid Phase 2 data, McCullough added.  He said that for companies that want to have an IPO, there are ways to do it.  Companies spend too much time on the lead compound.  They need other compounds in case the lead compound fails.

Evonne Sepsis, Managing Director at ESC Advisors said, “Companies are looking for $2 million initially and that’s difficult.”  Private companies need a great management team, great technology, and safety is becoming very important, she added.  Also important are pricing, reimbursement, and commercialization.

Also on the panel was Greg Simon, CEO at Poliwogg.com.  Poliwogg is an internet-based broker/dealer/crowd funding portal/asset manager.  Simon pointed out that there are lots of people going into there 30’s.  They will be investing.  With crowd funding, a non-accredited investor can invest $1 million in a company.  Accredited investors can invest over $1 million.  The new JOBS Act law lets people like Simon for example invest only $100,000 in a company.  He said,  “You can now get a crowd of people to invest in you.”  The JOBS Act lowers the threshold of investment.  People typically start investing at age 35.  VC’s are making room for a whole new crowd to move in.

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Maria Bartiromo and J.P. Morgan’s Jamie Dimon On Business in 2012 at SF Healthcare Meeting

On Monday January 9, 2012, I attended the J.P.Morgan Healthcare Conference luncheon at the Westin St. Francis Hotel in San Francisco.  During the luncheon, Maria Bartiromo, journalist and news anchor at CNBC, interviewed Jamie Dimon, Chairman, President and CEO of J.P. Morgan Chase about a number of issues facing his company, the U.S. economy and Europe in 2012.

I compiled a list of some of the answers to questions from Bartiromo and Dimon’s answers to those questions.  Bartiromo asked Dimon about the financial health of J.P. Morgan Chase.  The stock is lower, but the company is better with record earnings, Dimon said.  When asked about the U.S. economy, Dimon’s answer was that the U.S. economy is in a mild recovery.  He sees small business in better shape.  He does not see a huge formation of small businesses, however.  It is not access to capital that is the problem, but demand for their products.  There are also IPO backlogs.

He said that early indicators for the recovery include: housing improving and near bottom and shadow inventory is getting better.  He also believes that more people working, the better it is for the economy.  He is not nervous about the capital markets.  However, he did say that geo-politics is always the wild card.   When asked about the European debt crisis, he said that it has to be fixed for the health of the world.  He said that “countries have to be responsible.  They need to change their fiscal policies.”  J.P. Morgan has cut back exposure, but still is investing in Europe.

Bartiromo also asked Dimon about the “Basel Stress Test”.  He said he is in favor of a good  stress test.  Dimon said that J.P. Morgan will be fine with worst case scenario.  He added that J.P. Morgan never lost money in a quarter after the greatest stress test, which was the “Financial Crisis” in 2008.  He wants fairness around the world for derivatives.   He also commented on the Fed’s “Volcker Rule.”  “The Feds do not want us to take any risks,” Dimon said.  He wishes that people “writing these government rules were business people.” However, he is not opposed completely to regulation.

When asked about ObamaCare, he said he wants healthcare for everyone, but he believes that “ObamaCare just added to the mess.”  Bartiromo asked him about Fannie and Freddie.  He said they should have a hybrid or eliminate them.

When a member of the audience said he should run for President, there were huge laughs.  However, he said he has no plans to do so.

Biotech Drugs Navigate Tricky Path to Fight ‘SuperBugs’

On October 26, 2011, I attended the BIO Investor Forum in San Francisco.  The Therapeutic Workshop about Infectious Disease, titled “Resistance is Futile—SuperDrugs for SuperBugs.”  Moderator Susan Schaeffer, Sr. Editor at BioCentury Publications said that the economics are unique in this category.  Antibiotics can get developed and approved, but then they sit on a shelf.  The problem is real, but it has to be resolved through price, which is tricky, Schaeffer said.

Urgent Need for Antibiotics

According to David Perry, CEO at Anacor Pharma, Inc. there is an urgent need for antiobiotics to fight certain gram-negative bacteria.  Mark Leuchtenberger, President at Rib-X Pharma. Inc. told a sad story about a man with a congenital heart defect who was in the hospital and the MRSA he contracted mutated 35 times before he died.  Jeffrey Stein, President and CEO at Trius Therapeutics, Inc. said they have a gram-negative program just started.  They also have gram-positive program.  He believes that the gram-negative market is underserved.  He also said that anti-infective companies are tapping into government contracts.  The government is partnering with VCs.  They are looking for dual-use compounds (anthrax).

Antibiotics Are Big In China

According to Stein, there is a rise of MRSA in China. Unlike the U.S., antibiotics are the largest growing class in China.  China is big into IV treatment for infections.  They are big on IV treatments for a lot of things.  Perry said that for some reason money is not flowing into antibiotics.  He gave some reasons such as the time lag is so long and regulatory hurdles.  He said there is only 5 percent resistance now.

New FDA Guidance Adds Clarity

Stein told a story about FDA’s new guidance right before the company went on its roadshow, which delayed their IPO.  They had to adjust their protocols according to the new guidance.  The FDA has finally given clarity and it has pretty strict outcome priorities.  One of them is fever.  However, Stein believes that the FDA probably will remove this as a criteria outcome.  He said he is looking for rational thinking from the FDA.  The FDA actions have been unexpected in past, said Stein.  The Generating Antibiotic Incentives Now (GAIN) Act is a bill that has been introduced to provide incentives for the development of new antibiotics needed to treat new and emerging resistant bugs.

2010 BIO Investor Forum in San Francisco

On October 5th and 6th 2010, the BIO Investor Forum was held in San Francisco at the Palace Hotel.  There were around 700 attendees at this year’s event with over 140 companies presenting and more than 2000 one-on-one partnering meetings.

On day one, the topic of the opening plenary luncheon on Tuesday was “A Look Back at 2010: State of the Industry & the Art of Deal Making.”   John Craighead, Managing Director, Investor Relations & Business Development at BIO, began the presentation with an overview of the “State of the Industry.”  He said that there are 150 fewer biotech companies and 131 companies only have a year of cash left.  Biotech’s are closing fewer deals. There has been a lack of public IPO’s and a shift to deals instead.  He also said that it is an extremely competitive landscape right now.

Craighead closed his presentation with some take home messages.  He said there are 25 percent fewer U.S. public companies since three years ago.  However, the remaining companies have more cash and are stronger.  Finally, the 2010 IPO window is uncertain.

Following Craighead’s presentation, “The Art of Deal Making,” panelists discussed details of Celgene’s acquisition of Gloucester Pharmaceuticals.  George Golumbeski, Sr. VP of Business Development at Celgene said this would be the first in a series of acquisitions for the company.  Celgene’s deal with Gloucester included $340 million cash up front and $300 million in future regulatory milestone payments.  The main reason behind the acquisition of Gloucester was its only product, ISTODAX (a treatment for both cutaneous T-cell lymphoma and peripheral T-cell lymphoma), which received FDA approval in November 2009.

BIO Investor Forum, Day 2, “Alternative Financing”

On day two, the BIO Investor Forum business roundtable discussed, “Alternative Financing: Got Cash? Building the Balance Sheet through Innovative Financing Options.”

Moderator Jon McGarity, Executive VP at Campbell Alliance said that because money is hard to get, a number of small and mid-stage biotech companies are turning to alternative financing such as ATMs (At-the-market offerings) and PIPEs (Private Investment in Public Equity) among others.

According to panelist Brian Culley, CEO at Adventrx, the company almost went out of business, but managed to get money at the last minute through alternative financing.

Panelist Michael Margolis, Managing Director at Healthcare Investment Banking, when asked by McGarity if there has been an increase in alternative financing, Margolis responded that he has seen subtle changes.

Panelist Evan Myrianthopoulos, Sr. VP & CFO at Soligenix, Inc., said that the company has survived through PIPEs over the years.  He also said that it is good to have existing investors as well with alternative funding.

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