Medical Device Link.

Medical Device & Diagnostic Industry Magazine
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Originally Published March 2000

EDITOR'S PAGE

JOINING THE PARTY

Boom Times in the Biomedical Industry?

What do installation production orders, instantaneous power outputs, and intellectual property owners have in common? They are all semantic has-beens, outmoded claimants to an acronym throne now ruled by the one-and-only IPO—the almighty initial public offering.

As everyone from grade-schoolers on up is well aware, an IPO is something that, once let loose, immediately begins growing and splitting, like a cell undergoing mitosis. Nothing can stop this inevitable swelling, not even the disappearance of whatever is being initially offered to the public. On the same day of its IPO, for example, the on-line retailer Buy.com was shut down for several hours by hackers. This is like stealing a debutante's gown with the dance partners lined up outside the door, or rather, kidnapping the debutante herself. No matter—the band played on, and the IPO accomplished its requisite doubling by the end of the afternoon.

For many start-up or development-stage biomedical companies, the promise of a successful IPO is the light at the end of the tunnel, the glow at the tip of the pipette. The allure of recent blockbuster biotech IPOs was certainly in the air at the "Biomedical Investment and Strategic Partnering Opportunities" conference, held February 7 in Pasadena, CA and sponsored by the Southern California Biomedical Council (http://www.socalbio.org). A total of 21 companies—some with products on the market, some with devices in clinical trials, and some with concepts not long off the drawing board—made their pitch to an audience of potential partners, acquirers, and investors.

The technologies being presented, were they to be realized, would be nothing short of miraculous. There is work under progress to make the blind see and the lame walk, vaccines for cancer, stem-cell therapies hoping to target Parkinson's, Alzheimer's, and epilepsy. Fascinating systems are being prepared to process and analyze the coming explosion of genomic and gene-expression data expected over the next five years or so. Internet delivery systems under development promise to ameliorate everything from x-ray image transmission to one of medicine's most intractable problems—doctors' illegible handwriting.

Although it's possible that some details of the science might have been slightly beyond the interests of the assembled investment bankers and venture capitalists, they could certainly relate to the several-times-repeated assertion that a particular company intended to be "the Microsoft or Intel" of whatever technology it was designing. Such grandiose claims perhaps sounded a bit more plausible following the keynote speech by Frederick Frank, vice chairman and director of Lehman Brothers and one of the most respected names in financing and merger-and-acquisition transactions for the pharmaceutical, biotechnology, and medical device industries.

According to Frank, the last six months of 1999 witnessed a "remarkable" turnaround in the performance of the medical technology sector, powered especially by the stock-price action of bioinformatics, monoclonal antibody, and genomics companies. Frank characterized the state of capital-seeking biomedical firms as having shifted from "a sentiment of near despair" to "a fever pitch of activity." During a single week near the end of the year, for example, four biomedical IPOs raised $925 million—a phenomenon Frank called "unprecedented both in terms of valuation and in terms of the amount of money raised."

Frank is experienced enough to know that, sooner or later, the pendulum will swing back, as it always does. In the meantime, though, he advises young companies to follow one of his "fundamental principles": to "raise as much money as possible when it is available." In other words, get it while the gettin' is good.

Jon Katz
jon.katz@cancom.com