19 Nov Biotech Family Reunion Meets in Illinois
CHICAGO – Last Wednesday and Thursday, a biotech family reunion took place at Navy Pier in Chicago when IBIO, otherwise known as the Illinois Biotechnology Industry Organization, celebrated its fifth-annual event. The gathering was called iBIOMarketplace.
This event originally started in 1999 as the annual meeting of IBIO’s predecessor organization, the Chicago Biotech Network Association (CBN), which was the first biotech organization in Illinois. CBN’s first BIOMarketplace took place five years ago at the University of Illinois at Chicago. It drew between 100 and 150 people.
CBN took BIOMarketplace in 2000 out to Motorola’s headquarters in Schaumburg, Ill., the site of beautiful conferencing facilities. The attendance grew and reached between 200 and 250 people. Motorola had made a big commitment to the industry with its biochip division, which has now disappeared.
In 2001 (year three of this annual event), it was felt by the organization that biotech needed to be celebrated in the heart of the city. Navy Pier symbolized that feeling. Attendance reached more than 400 people and there was a feeling that biotech was really gathering momentum in Illinois.
The new and fortified IBIO decided in 2002 that, in preparation for BIO coming to Chicago with its annual event in 2006 (with an expectation that the expected 25,000 attendees would put Chicago and the Midwest on the biotech map), the meeting would now become iBIOMarketplace and shift toward McCormick Place.
There, the Hyatt gave the look and feel that this was becoming a major event. The meeting team planned for about 600 attendees. For the first time, the meeting had the look of a well-run professional trade show.
As we all know, though, 2002 was a very tough year for biotech and Chicago’s economy, and even though the meeting looked like a biotech circus with three rings operating at the same time, attendance fell below expectations. It barely reached the 400 level. It was solid but still quite disappointing.
In retrospect, McCormick and the Hyatt were great for large groups of people coming from out of town, but for a local meeting, this site proved off the beaten path. For 2003, the iBIOMarketplace organizers made three important decisions:
1) Scale down attendance expectations to the 300- or 400-person range.
2) Bring the event back downtown at a site that people like (Navy Pier).
3)Cut down the three-ring circus to a two-ring “big top” so as not to confuse people (simplicity is always better).
Another lesson learned from 2002 is the importance of bringing to the meeting big-name individuals for keynote presentations so our local biotech audience would get the 30,000-feet view of the biotech (and financing) universe.
In 2002, iBIOMarketplace attracted and featured the president and CEO at Monsanto, the executive director at BIO, the chief scientific officer at Baxter and David Miller, IBIO’s newly recruited president.
This formula was followed and improved upon in 2003 with presentations from the chairman and CEO of Baxter (Harry Kraemer), the managing principal of GTCR Golder Rauner (which has recently been shifting more into pharma investments) and Steve Burrill, the chairman and CEO of the large life science merchant bank known as Burrill and Co.
David Miller, by this time no longer a “biotech novice,” was able to articulate for the audience the achievements of IBIO during 2003 including its first legislative lobbying activities as well as a pathway to biotech growth in the region for the future. IBIO’s chairman of the board for the year, James L. Tyree (a senior executive from Abbott Labs), also demonstrated the significant support by this company to biotech in Illinois.
I was very much swayed by Bruce Rauner’s powerful message of how GTCR’s $6 billion in funds help build companies all over the U.S. and GTCR’s unique style for assembling and managing its management teams. It was mesmerizing. You could almost reach out and touch the money that Rauner said was in abundant supply.
It only dawned on me afterward that GTCR’s model is heavily tilted toward positive cash-flow companies and has little (if any) patience for companies that not only operate in the red for the first couple of years but many years. Therefore, that excludes most of the biotech audience that was in the room (as promising and alluring as it sounded).
Still, Rauner was a lot more upbeat and uplifting than much of the life science VC community.
Steve Burrill’s presentation clearly enunciated his role as one of biotech’s national cheerleaders. His far-ranging presentation on both human and agricultural biotech highlighted the key industry trends in the U.S. and particularly the impact that new FDA Commissioner Mark McClellan was having and will continue to have.
After all, according to Burrill, McClellan is unique in that he is the first FDA commissioner who has actually met and knows the president of the U.S.
Burrill also indicated that M&A activity in the biotech sector was up 10 percent for the first half of 2003 with deal values of $11.3 billion versus $10.3 billion in 2002. He also insisted that biotech is big business around the globe as the industry’s 3,800 companies in the U.S., Canada and Europe had revenues of $57.6 billion in 2002, R&D expenditures of $19.6 billion and 146,000 employees.
The industry also sported a market cap of $258 billion, which isn’t too far from the combined value of Pfizer and Merck (Big Pharma’s largest companies). He also stated that the biotech industry has 130 drugs on the market and 350 drugs either awaiting FDA approval or in human clinical trials. He noted another trend: the appearance of the first biotech generics (large-molecule drugs versus the typical small-molecule drugs produced by Big Pharma).
Ten biotech drugs with annual sales of more than $15 billion will have expiring patents in the next few years. Biotech drugs, however, are not easy or cheap to produce (except perhaps in India), so generic competition may not be quite as ferocious as with small-molecule drugs. Nevertheless, it will prove interesting to monitor.
Harry Kraemer’s presentation was quite frankly disappointing and seemed to symbolize the struggles his company is going through. I had hoped that this young and energetic CEO might paint a near-term future that would prove inspiring.
Last year’s presentation by Norbert Riedel, Baxter’s chief scientific officer, displayed a lot of the new R&D activities that Baxter is involved in (particularly biotech related) and clearly positioned the company as making a heavy investment in biotech. Kramer’s presentation was flat and uninspiring.
I didn’t come away with a strong idea of what Baxter is about and what it is trying to do. Kraemer said that Baxter is one of biotech’s biggest companies and they have made significant investments in biotech vaccines and oncology over the last 24 months. A good part of Baxter, though, is still the routine hospital supply commodity products.
He mentioned that Baxter’s biotech efforts had just completed its 50th anniversary along with its operations in southern California. Everyone knows that biotech really started about 20 or 25 years ago (not 50). I would hardly call the Baxter corporate culture a biotech culture. Still, this is one of Illinois’s largest health-care companies and I watch their moves assiduously.
iBIOMarketplace also featured presentations by about 20 biotech companies (public and private) mostly from the Midwest (one did come all the way from the Bay area and another came from India). These presentations were not only well attended; they were much more exciting and articulate than last year and demonstrated that we are getting better.
At the iBIOMarketplace social events, the environment was that of a large family reunion with “biotech buzz” in the air where everyone was delighted to be connecting and enjoying themselves. Even usually crusty gossiper Ron May seemed to be enjoying himself this year.
The utilization of Navy Pier’s large ballroom at the end of the pier (a dauntingly huge room) was pretty much filled to capacity for the breakfast and lunch sessions on Thursday. This represented a step up from the last time the event was held at Navy Pier. Moreover, the event ran well and was professionally orchestrated.
While the event wasn’t heavy with life science VC attendance, there was a good sprinkling of both VCs and private investors. The new life science angel investor group, BioAngels, launched itself at this forum with an exhibit.
IBIO and David Miller should be congratulated for pulling together the region’s biotech community in a solid event that demonstrates the progress of this industry in Illinois.
The Financing of Biotech
The bottom line for our industry continues to be financing. According to BioCentury, which tracks biotech financing weekly, things seem to picking up, which was also confirmed by Burrill.
It is evident from the above that the IPO window seems to finally be opening wider. Last year’s IPO market was virtually shut through most of this year. Burrill anticipated that at least 50 IPOs would take place in the first part of 2004, which will hopefully provide an opportunity for VC money to exit long-held investments and renew their portfolios with new investments.
Seven biotech companies went public during the month between Oct. 8 and Nov. 6 raising $268 million, according to BioCentury. Most of the pricing of these IPOs was on the low end of the pricing range, which shows that the IPO market is still weak. The average size of these IPOs was about $63 million with stock prices ranging from $9 per share to $14.
The problem is that the IPO drought has existed for so long that there are many more companies looking to go public that just may not make the window for next year. All other types of financing seem strong this year except for venture capital, which has dropped 14 percent versus last year.
With a month and half left in the year and realistically less than a month left for completing any financing this year (given the holidays), it will be interesting to see what happens with the biotech IPO market. It was an interesting week last week. See you next week!
Michael S. Rosen is the vice chairman of human health at the Illinois Biotechnology Industry Organization (IBIO). He can be reached at email@example.com. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters. They can be found at www.eprairie.com.
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