Week in Review: Biotech Firms Continue as Focus of the Venture MarketJust what does it take these days to draw the attention and backing of a venture capital firm? Looking at some of the venture news in the biotech industry last week, it looks like investors are still looking for good ideas, thorough business plans, an accessible customer base and steady revenue. So why are so many of those investors turning to the biotech sector, and what makes one company a winner and another a loser in that industry?

Compared to the IT industry, biotech firms have weathered the economic storm better, particularly in the area of raising capital. According to Scott Albert of Aurora Funds in Durham, the potential for a high return is better in the biotech sector than in the information technology sector, because few companies are buying software or telecom equipment right now.

“You have to wait for the next big change in IT that will create the need for new products,” he says. “That’s when the returns will improve and investors will be interested again.”

But while the business world is content to make due with the technology it has previously invested in, the world-at-large is always receptive to the newest discoveries in the medical world. People can forgo the latest edition of Windows, but no one is going to miss the chance to cure cancer.

Pittsboro, N.C.-based Biolex, which produces plant proteins for human use, announced its first major collaboration last week-a deal with the Swiss firm Debiopharm, in which Biolex will give the company cost-effective versions of several crucial proteins in its therapeutic pipeline, speeding development while maintaining high safety levels. The agreement is a money deal of undisclosed value, but it is the first of several the company plans to announce in the next few weeks. These deals will prove attractive to drug manufacturers because they significantly cut development and manufacturing time, saving millions of dollars. This kind of cost-effectiveness and time-to-market efficiency will draw the eyes of investors; in fact, it already has, as Biolex expects to soon close its latest round of funding targeted at $20 million.

One of last week’s big announcements was StemCo’s plan to launch a series of cell-graft products in December, entering a $1 billion market. Raising a combination of grant money and venture backing, the company has drawn $8 million in funds to date, but is looking to make this round of funding reach $10 to $12 million. The company’s products, which will directly affect stem-cell research, are partially funded by a $180,000 Florida High Tech Corridor grant, which has no doubt lent legitimacy to the company in drumming up additional investors.

Not all biotech firms in the area are on easy street. Durham-based Artecel Sciences, which holds several patents on its processes for transforming so-called adult stem cells from a person’s own
fat into other types of tissue, is struggling for a cash infusion and may be acquired in the near future. The company, which had 17 employees at itsheight, is down to the chief executive officer and the chief science officer.

But biotech continues to be a strong focus for local venture capital firms. When Local Tech Wire picked its top 12 VC firms to watch for 2002, all but one targeted the biotech industry for potential venture deals.

QUOTES OF THE WEEK:

“The climate has completely changed, it’s not the big buffalo driving the economy any longer, it’s substantial growth in small businesses.” – Mark Owens, AdvantageWest director of communications and research

“It’s hard to tell when we’ll see the bottom of this. I would think that it has just got to get better soon … (but) I’ve thought that before.” – Jeff Barber, who heads the Carolinas technology practice for PricewaterhouseCoopers in Raleigh, on the venture capital front

“Anyone who is more than cautiously optimistic about the future these days needs to have his head examined.” – Max Wallace, president and chief executive of Cogent Neuroscience

TELECOM & NETWORKING:

September 13: Bell & Howell Group in Durham Wins Another Email
Contract
www.localtechwire.com/article.cfm?u=1921&k=16&l=04

September 12: The List: 14 Hardware, Telecom Focused Firms To Watch in 2002 www.localtechwire.com/article.cfm?u=1908&k=15&l=03

September 12: Chip, High-Speed Router, Networking Firms Could Lead
Comeback for Region’s Hard-Hit Telecom Firms
www.localtechwire.com/article.cfm?u=1909&k=15&l=03

September 12: A Disaster Can Be Moment of Truth for Companies Relying on IT www.localtechwire.com/article.cfm?u=1910&k=15&l=03

September 12: When Disaster or Terror Strikes, Will Your Company Be Prepared? www.localtechwire.com/article.cfm?u=1911&k=12&l=03

September 9: e-NC Grants Include Support for Big Down East Fiber
Network
www.localtechwire.com/article.cfm?u=1856&k=12&l=30

LIFE SCIENCE & BIOTECH:

September 13: StemCo Expects To Launch New Product in December www.localtechwire.com/article.cfm?u=1922&k=16&l=04

September 13: Biolex Announces First Deal – and Several More Are in Works www.localtechwire.com/article.cfm?u=1923&k=16&l=04

September 13: NCSU Emerging Issues Forum Report Says Biotech ‘Poised for Explosive Growth’ in NC www.localtechwire.com/article.cfm?u=1924&k=16&l=04

September 12: Artecel, Down to CEO and Science Officer, May be
Acquired
www.localtechwire.com/article.cfm?u=1915

September 11: Alabama Firm To Locate New Lab at BD Incubator www.localtechwire.com/article.cfm?u=1889&k=14&l=02

September 9: Gentris Strikes Development Deal With Wisconsin Firm www.localtechwire.com/article.cfm?u=1882

ON THE VENTURE FRONT:

September 13: Atlanta Firm Focused on ‘Checkless’Bank Accounts Raises $12M www.localtechwire.com/article.cfm?u=1931&k=18&l=06

September 12: Fed Up with Medicine, UNC Neurosurgeon Becomes a Venture Capitalist www.localtechwire.com/article.cfm?u=1907&k=15&l=03

September 11: Triangle Software Firm Lands $5M Funding Round Despite Executive Shuffle www.localtechwire.com/article.cfm?u=1897&k=14&l=02

September 10: The List: Top 12 Venture Capital Firms To Watch in 2002 www.localtechwire.com/article.cfm?u=1885&k=13&l=01

September 10: On the VC Front: In Investment Circles These Days, What Is Ventured Is Carefully Done www.localtechwire.com/article.cfm?u=1886&k=13&l=01

September 9: Atlanta Software Firm Focused on Transportation Closes on $10M www.localtechwire.com/article.cfm?u=1884

September 9: Founder of Charlotte’s First Round.org To Head Mountain Council for Entrepreneurial Development www.localtechwire.com/article.cfm?u=1868&k=12&l=30

MERGERS, ACQUISITIONS, CORPORATE ACTIONS:

September 9: David vs. Goliath 2? Raleigh Startup Sues National
Semiconductor
www.localtechwire.com/article.cfm?u=1883

SOFTWARE & HARDWARE:

September 11: The List: Top 15 Software Firms To Watch in 2002 www.localtechwire.com/article.cfm?u=1898&k=14&l=02

September 11: Cutting-Edge Software: Regional Firms Create New
Possibilities, Revive Old Systems
www.localtechwire.com/article.cfm?u=1899&k=14&l=02

September 9: Tech Trends: Tablet PCs Offer Pen and Paper with the Power of a Laptop www.localtechwire.com/article.cfm?u=1867&k=12&l=30

OTHER NEWS:

September 11: What’s in a Name? Addison Whitney Helps Tech Firms Find the Answer www.localtechwire.com/article.cfm?u=1896&k=14&l=02

September 9: LendingTree Revises Earnings Upward; Stock Price Soars www.localtechwire.com/article.cfm?u=1876

September 9: Execs To Watch: The 17 Men, Women on Cutting Edge of
Triangle Tech
www.localtechwire.com/article.cfm?u=1870&k=09&l=30