Biotech investors may be hard to find in '03
By Paul Elias
Associated Press
SAN FRANCISCO — It was here last year at an annual investors conference that Samuel Waksal, then the chief executive of ImClone Systems Inc., famously understated: "We screwed up."
And it's here, at the 21st annual J.P. Morgan H&Q Healthcare Conference this week, where investors, executives and analysts gauge the prevailing mood for the industry's coming year — a sort of biotechnology Groundhog Day that lasts all week.
The prognosis is not good.
"The publicly traded biotech companies got creamed in 2002, sustaining one major blow after another," said G. Steven Burrill of investment bank Burrill & Co.
As ImClone crashed, coming under fire last year for botching its Food and Drug Administration application to market its cancer-fighting drug Erbitux, so too did biotechnology in general. Waksal pleaded guilty in October to bank and securities fraud related to his sale of ImClone shares.
Publicly traded biotechnology companies as a group have lost more than 40 percent of their value in the past year, while privately held companies are having trouble attracting venture capital investment. While venture capital investment in biotechnology increased to $3.2 billion in 2002 from $3 billion the previous year, such investment sank to $1.3 billion since June, said Ken Andersen, editor of VentureWire.
Much of the disillusionment with biotechnology occurred because of high-profile flops such as ImClone.
The FDA approved just 16 new drugs last year, compared with 24 in 2001.
It takes some 15 years and $650 million to bring a single drug to market, spooking many investors who are looking for short-term gains and tangible products from their investments, casting an even longer shadow over this year's conference.
"I think it's going to be a very skeptical audience," said Brian Atwood, managing director of venture capital firm Versant Ventures.
It's amid this climate that some 250 biotechnology companies will stagger into this year's conference, one of the biggest gatherings of its kind. The executives face the daunting task of convincing investors, large and small, to loosen their purse strings in 2003. Most biotechnology companies lose money and need constant cash infusions to pay for expensive drug experiments.
"Biotech depends heavily on the capital markets, which were very tough in 2002," Burrill said. "This had a devastating effect on just about everybody."
Stock market delistings, layoffs and bankruptcy filings swept through the sector in 2002.
Because of what happened at ImClone, analysts and biotechnology executives said large pharmaceutical companies are wary of making similar investments in small biotechnology firms.
Bristol-Myers Squibb Co. invested $2 billion in ImClone in September 2001, losing much of that investment after ImClone's stock tanked a year ago. ImClone's stock has crashed from a high of $70 a share to about $11 now.
