The buy-side view

Since December, at least 21 biotech companies have filed for public offerings, and everyone knows there are more coming. Just how fund managers wade through those competing demands for money will play an important role in determining over the next few years which biotech companies will have adequate capital to develop their products and which will not.

BioCentury talked to fund managers and analysts, ranging from healthcare and smallcap funds to private money managers. We asked them how they cope with the onslaught of offerings and what kinds of screens they use to narrow their choices and make investment picks.

Some back-of-the-envelope calculations of the industry's capital needs give a feel for the size of the challenge facing investors.

$10 billion to $30 billion

Cheryl Alexander, who manages the Putnam Health Sciences Trust, figures $250 million for each of the 60 or so companies that went public in 1991-92, plus an additional $150 million each for another 60 public companies, for a total of $24 billion.

Stelios Papadopoulos, managing director of investment banking at PaineWebber Inc., estimates that each of the Class of 1991-92 needs to raise $200 million to $500 million to reach break even over the next five to 10 years. That yields $10 billion to $32 billion for the newly public companies alone.

A third calculation by Garo Armen of Armen Partners assumes that 150 biotech companies each have two or three lead compounds, which will cost $50 million

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