Ebb & Flow

While hot life science technologies come and go, VCs are reminding themselves that patience, combined with fundamental investment strategies like targeting big markets, sound management and a solid business plan never go out of style. That was the takeaway message from a venture capital panel at the Lehman Brothers' Healthcare 2001 conference in Orlando, Fla., last week. The panel also offered up opinions on where the hot spaces are, and how they are coaching their portfolio companies to deal with the turbulent public market.

The group - Farah Champsi of Alta Partners; Jonathan Leff of Warburg Pincus; Thomas Liston of Humana Ventures; Barbara Lubash of Versant Ventures; and Michael Meyers of Global Bio Medical Partners - all had a bent towards product companies.

Most of the panelists underscored the need to have a product company that addresses big markets. Lubash said most companies turned down by her fund "fail on the market size test." Versant looks for $1 billion market potential for drugs and $500 million for devices.

While the days of the quick buck may be gone for the moment, Lubash predicted exits will appear and returns will remain robust for life science VCs. "Invest early in companies with stable business plans and you will be able to exit if you're patient and manage cash carefully," she said.

"In this market we're telling our companies to focus on the most attractive net present value programs," added Meyers. "We want them to take a rational and commercial view of R&D programs."

Meyers predicted that valuations for private companies will continue to come down, as buysiders go back to "looking at revenues,

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