Panel: How to understand the long biotech boom?

Print 09 December 2014
Stacy Lawrence, FierceBiotech

Fundamental scientific and patient advances, as well as the investors who embrace them, have transformed biotech in just the last few years. As this has coincided with a broader resurgence in the stock market, industry valuations have skyrocketed. Suddenly, big cap biotechs Gilead Sciences ($GILD) and Amgen ($AMGN) are larger than all but four of their pharma peers as measured by market cap.

Already in 2014, we have had 100 healthcare IPOs, mostly for biotech startups, that raised a total of $8.7 billion, according to data from Renaissance Capital. That's more than double the number of technology IPOs so far this year and almost twice the number of healthcare IPOs in 2013. Even the average return for these IPOs is pretty impressive--about 21% by early December.

All of this has driven the Nasdaq Biotechnology Index up by more than one-third this year. That's on top of a gain of two-thirds last year and almost one-third in 2012.

Understanding what this huge influx of cash means to an industry, which until recently has been half-starved for it, remains a challenge. Insiders wonder if these changes represent the emergence of a new normal or if valuations stand to be deflated deeply when the market takes its next swan dive.

To help think through the vagaries of biotech valuations, FierceBiotech has invited a stellar panel of biotech financiers, with deep experience investing in and working with public as well as private biotechs, to speak at a breakfast event on Tuesday, Jan. 13, during the annual J.P. Morgan Healthcare Conference.

A recent addition to the panel is Kurt von Emster, who will start in January as a partner at venture firm Abingworth, which closed a $375 million fund in February. There, he will guide investment in public and private biotechs. Prior to that, he was a managing partner at venBio, a firm that he helped found that invests venture funds on behalf of biotechs such as Amgen and Baxter ($BAX) as well as trades in smaller cap public biotechs. Before that, he managed public biotech funds for MPM Capital and Franklin Templeton. Abingworth has about $1.3 billion under management.

We've got a couple of other buy-siders on the panel who straddle investment in both public and private biotechs: Dennis Aisling who founded Aisling Capital and Rajeev Shah, a portfolio manager at RA Capital. Both of these firms invest exclusively in public and private life sciences companies. Aisling has $1.6 billion under management, while RA Capital has about $1 billion.

Ken Drazan, the head of Johnson & Johnson Innovation in California, also can offer dual perspectives on valuations--as a venture investor and as part of a major, active strategic acquirer. Rising public valuations have resulted in some strain on biotech acquirers--since it's no longer assumed that attractive assets will get the best deal with a takeout rather than an IPO.

Finally, Rahul Chaudhary, a managing director and head of capital markets at Leerink, a healthcare-focused investment bank that has worked on almost 50 follow-ons and IPOs this year.

Leerink has catapulted into working on bigger deals in recent years; it has pulled many of its bankers from what was then the bulge bracket bank Merrill Lynch, as well as its later iteration Bank of America Merrill Lynch. This helps give Leerink the knowledge and familiarity with the industry and it players of a healthcare specialty bank, combined with some of the reach of a larger bulge bracket.

It's a great group, and we look forward to asking them all our tough questions in an effort to shed more light on this extraordinary period in biotech. We'll be asking this unique assemblage about everything from their expectations for a cooling off in 2015 to the best corporate strategies for maximizing deal valuations.

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