Originally Published MDDI March 2001
Editor's Page
The Meet Market: Biomedical Firms on the Make for Funding
For emerging companies making their pitch to venture capitalists and other potential backers, beauty is in the pocketbook of the beholder.
One of the problems with beauty pageants is that all the contestants look alike. The strategies for winning—hair, gait, profession of love for one's fellow human beings—have been refined so mercilessly that the competition becomes an exercise in minute adherence to a vapid but unyielding formula. To judge a winner from the indistinguishable parade, you have the distinguished panel: the one-ride astronaut, the retired football player, the veteran of stage and screen—arbiters as arbitrary and incongruous as they are unaffected by the results of their decision.
Imagine, if you will, a different contest, one in which each participant is required to possess an allure so unique as to be patentable, and where the expert judges are required to wed themselves to the winners. Such were the ground rules at the Southern California Biomedical Council's third annual "Investment and Strategic Partnering Opportunities Conference," held recently in Los Angeles on the campus of UCLA. The conference presented a number of highly informative discussions and workshops on topics such as trends in venture funding, finance strategies for startups, capitalization through corporate alliances, and mergers and acquisitions as liquidity events. But the real purpose of the gathering was to provide a forum for some two dozen local companies seeking sources of capital or potential partners.
Each firm was given just 13 minutes to present its case—one shot, from evening gown to personality. Far from being encouraged to adopt an "I support world peace" position, the companies were enjoined to be as precise as possible regarding the specifics of their technologies and patent portfolios. As one attorney familiar with the proclivities of VCs put it, "Rule number one is the quality of the management team; rules number two, three, four, and five are the intellectual property position." The charms on display ranged from neural implants to femtosecond lasers, from human antibodies in crop plants to functional genomics platforms, from nuclear medicine detectors and cameras to software for reducing medical errors.
Perhaps to encourage the suppliants and backers alike, the keynote speaker symbolized what may be the ultimate Cinderella story. Gordon Binder, former CEO and chairman of Amgen, reminded the audience that when Amgen solicited the $19 million that constituted its first round of financing, the company had "one employee, no technology, no intellectual property, and no business plan." The enormous success that followed is a tribute, said Binder, to both the brilliance of the company's initial concept and the courage of the first investors.
Binder also acknowledged, however, that times have changed. Whereas in the 1980s an aspiring biotech enterprise could initiate itself with a scientist, several assistants, a few feet of lab space, and some recombinant DNA, it now takes multimillion-dollar equipment, high-throughput screening, 50-person teams, and at least $100 million to develop a new drug. Much of the tab results from the big-time expense of regulatory compliance: for example, preparing documentation like the 500,000-page application that Amgen submitted recently to FDA in support of a new product.
It appears that, for the present, matching up with true beauty requires very deep pockets. In closing, Binder, who is poised to launch his own venture capital firm this year, recounted the lament of the pharmaceutical executive that reveals how far we still are from an ideal world of cause-and-effect commerce: "If only mice had money!"
Jon Katz
jon.katz@cancom.com
Copyright ©2001 Medical Device & Diagnostic Industry
