Biotech Financing Boom Is Expected

Despite the recent weak performance of new biotechnology stocks, the industry is poised for one of its best fundraising years ever, a leading prognosticator said Thursday.

G. Steven Burrill of San Francisco-based merchant bank Burrill & Co. said the industry was undervalued by historical standards. That, combined with growing investor optimism, would attract fresh financing to the sector, he said.

Burrill predicted that 2004 would rank among the biggest ever for biotech initial public stock offerings, with 30 new issues, compared with eight so far this year.

Venture funding should become more available, though in that case, financiers hold the upper hand in negotiating terms, Burrill said. There is a plethora of start-ups to choose from, he said.

“The power is on my side of the table,” he told biotech entrepreneurs attending a Caltech luncheon sponsored by Pasadena Entretec, a group that supports development of technology businesses.

Burrill said drug development partnerships between small biotechs and established drug firms would be a key source of financing in 2004. By mid-August this year, 238 such deals had been announced, exceeding the total for all of 1999, during the last bull stock market. There were 411 such pacts in 2002.

The deals allow big drug companies to stock their product development pipelines and are cheaper and more efficient than company acquisitions, Burrill said.

“They won’t buy a company, because they don’t need to,” he said.