Published April 2003

Biotechs make pitch
to wary investors

By Eric Fetters
Herald Business Writer

There’s no lack of ideas brewing among local biotechnology companies, just shortages of cash.

More than 60 biotech and medical device companies, including nearly a dozen based in Snohomish County, gave their best pitches to venture capitalists and investors at the Invest Northwest conference in March.

While there was no noticeable drop in attendance at the Seattle event, many of the presenting companies don’t expect a rush of investors in the conference’s wake. That’s because 2002 was a dismal time for biotech firms to seek more cash, and this year is worse so far.

As Donald Elmer, managing general partner with Seattle-based Pacific Horizon Ventures, put it: “Investors have collectively hit the pause button.”

According to the annual MoneyTree survey, venture capital investing in the Northwest fell below $776 million in 2002. That level, compared with more than $1.3 billion in 2001 and $3.5 billion in 2000, was the lowest since 1997.

“Before any investor is comfortable making long-term investments, there has to be an underlying sense of stability and optimism,” Elmer said. While he and others are bullish about biotech, that sense of stability is missing.

After three years of heavy losses in the markets, corporate scandals and the new uncertainty about a potential war, many investors are standing on the sidelines until they feel confident again.

“I don’t think the market has turned around yet,” agreed Michael Martino, chief executive officer of Bothell-based Sonus Pharmaceuticals. “You don’t see a lot of people writing a lot of large checks.”

Sonus is in a solid position: It’s a 12-year-old public company with several drugs in clinical trials and more than $16 million in the bank.

Bothell’s Ceptyr Inc. was typical of the smaller, privately held firms trying to woo investors at the conference. While Ceptyr has been around for eight years, it is still in the early stages of drug research and development.

Paul Abrams, the company’s CEO, explained to investors about the company’s work on protein tyrosine phosphatases — compounds that could create drugs targeting diabetes, obesity, cancer and other diseases.

There’s no doubt in Abrams’ mind about the state of the investment market.

“Even tougher than it was last year,” he said.

Ceptyr has enough cash to operate for the next 20 months or so without more, Abrams said. He told the conference that the company hopes to get a partner on its lead compound early in the drug development process in order to spread the costs.

Martino did mention one sign of hope. Interest among investors in what biotech companies are doing seems to be growing again, and he finds it easier to get meetings with investors.

For those reasons, he said he is optimistic that once the stock markets and economy improve, investors will return to biotech.

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