Despite the closed IPO market, VCs say biotech startups with the right ingredients will get funded.

The signals the market has been sending the biotech industry aren’t good ones: 10 percent of public biotech companies are currently trading at levels below cash value. Life sciences IPO activity has been down 14 percent so far in 2002. And since the second half of 2000, 30 private companies have withdrawn their SEC S-1 registration filing statements for public offering.

by Patty Enrado Upside Magazine

Still, life sciences VCs at the BIO VentureForum 2002, say that the purse strings will open up for emerging biotech companies that generate value for Wall Street, partners, and acquirers.

“Even a robust market can’t accommodate IPO demand for the volume of companies out there,” said George Milstein, senior managing director for Pacific Growth Equities, who recommended that biotech startups should look for M&A opportunities.

Rodney Ferguson, managing director of JPMorgan Partners, said that investors in any market will be attracted to biotech startups with experienced management, strong intellectual property, great science, clinical data on hand, and a business focus on large market opportunities.

Chris Ehrlich, senior associate with InterWest Partners, said that his firm is taking a renewed interest in drug-discovery opportunities where companies have the capability to discover and develop new therapies, have access to research and knowledge in both biology and chemistry, and can validate their platforms in humans and with partners. Ehrlich noted that the most important lesson that came out of the tech bubble and bust for biotech companies is that they must “return to the fundamentals of developing therapeutic products, return to their customer base, and return to the unmet need that’s out there.”

Patty Enrado is an associate editor at UPSIDE magazine.

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