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Biotech / Medical : Pharmos (PARS) -- Ignore unavailable to you. Want to Upgrade?

To: David Israel-Rosen who wrote (433)	2/2/1999 11:11:00 PM
From: Ariella	Read Replies (1) \| Respond to of 1386

Maybe we should take a lesson from the venture capitalists? <<February 2, 1999 : The Wall Street Journal Interactive Edition ------------------------------------------------------------------------ Venture Capitalists Purchase Stakes In Publicly Traded Biotech Firms By JOSHUA HARRIS PRAGER Staff Reporter of THE WALL STREET JOURNAL Biotech is hot again for venture-capital firms, but there's a catch: Instead of investing in closely held upstarts, venture firms increasingly are buying up the stocks of biotechnology companies that are already public. Driving the trend, which biotech analysts estimate is about six months old, is the thought that the sector is so undervalued that public companies have the investment potential of private, early-stage companies. And since such companies already are public, they pose less risk for investors. "We're seeing publicly traded companies that have market valuations close to what we're used to seeing on the private side," says Sigrid Van Bladel, a partner at New Enterprise Associates, a venture capital fund based in Menlo Park, Calif., and Baltimore. Many are "diamonds in the rough," she adds. According to the National Biotech Register, an industry directory, there are about 3,000 biotechnology companies in the U.S. In recent years, with the exception of such biotech giants as Genentech Inc. and Amgen Inc., most have swooned in value. Cash is so tight for many public and private biotech companies, "there may not be enough money to go around this year," says Dennis N. Berman, a partner at the New York law firm Sonnenschein Nath & Rosenthal that represents several biotech companies. So, "there will be consolidation among biotech companies and a bunch of companies will become larger. For the investors, in terms of opportunities, they're there." And so, some venture-capital firms are looking to biotechnology for bargains. Dr. Van Bladel says that in October, her firm decided to put at least 5% of its $550 million portfolio into public biotechnology companies. "We said, 'Look, there's this unique opportunity. Let's put some extra money aside.' " Not surprisingly, the losers are biotech start-ups, struggling to shore up venture-capital funding. "We've approached all the premier firms with no success," says Anthony E. Maida III, chief executive of Genner Biotherapies Inc., a closely held San Ramon, Calif., company. While Genner has completed several clinical-phase trials in developing immunotherapies for cancer, its outside funding so far has come from a lone investor. "Here's a company that's very mature and spends its money very efficiently," says Mr. Maida. "But [venture-capital firms] ... are looking at the public market. They'll step over the opportunity." With the cash flowing into the public markets, some experts wonder whether venture-fund investors might balk at how their capital is being used. Some might ask, "Gee, aren't venture-capital managers getting paid a lot to do what amounts to fund management?" asks Mark Edwards, managing director of Recombinant Capital, a biotechnology consulting firm in San Francisco. But returns can fix that. Dr. Van Bladel says last month NEA invested $5 million in Connetics Corp., a public company that develops dermatology products and products to treat rheumatoid arthritis. The stock has jumped 80% since then.>>