Subject: Private Investors Give Biotechnology Firms Glad Hand 
Date: Published: 9/10/92 (80 lines)
Source: Wall Street Journal. Copyright Dow Jones & Co. Inc.

    Enterprise -- Financing Small Business:
    Private Investors Give Biotechnology Firms Glad Hand
    ----
    By Udayan Gupta
    Staff Reporter of The Wall Street Journal

    Biotechnology companies, facing depressed prices in the public
 market, are turning to the private sector and getting a warm
 reception.
    These companies are seeking capital to cover high research costs,
 says Roger Longman, editor of In Vivo, a Norwalk, Conn.,
 health-care-industry monthly.  Though many "appear to be in
 relatively comfortable cash positions, they are spending more and
 more on product research and development," he says.  "They need to
 finance ongoing research and avert the inevitable cash crisis."
    Several firms that recently went public have received help from
 private investors, mostly venture capitalists and large
 institutional investors.  Cephalon Inc., which went public in 1991,
 last month raised $45 million privately to develop and test its
 Myotrophin drug for amyotrophic lateral sclerosis, commonly known as
 Lou Gehrig's disease.  Isis Pharmaceuticals Inc. plans to close soon
 on a $14 million private offering that will finance development of a
 technology to identify drugs that combat disease-causing proteins.
    Other young public companies that plan to tap the private spigot
 include Magainin Pharmaceuticals Inc., Cistron Biotechnology Inc. 
 and Lidak Pharmaceuticals.
    If the stock market has turned cool toward biotechnology
 companies, just what is turning on private investors?  Analysts have
 a simple explanation:  Bargain hunting.  "Public companies that are
 selling stock privately are extremely attractive now because they
 are selling at well below their initial-offering price," says Mark
 Simon, a biotechnology-industry analyst with Robertson & Stephens,
 San Francisco.
    Many of these companies are further along on their business
 development than when they went public.  "If they were attractive
 then, they're even more attractive now," says Mr. Simon.
    Closely held companies that already have a product and need
 capital for additional tests and marketing also are getting a
 receptive hearing, says venture capitalist Jonathan Fleming, a
 partner with MVP Ventures, Boston.  They are selling their shares
 well below comparable market prices, thus offering investors an
 opportunity for high returns, he adds.
    Calypte Biomedical Corp., which plans to market a urine-based
 test for HIV-1, a virus that leads to acquired immune deficiency
 syndrome, expects to close on a $12 million private transaction.  The
 Berkeley, Calif., company raised $8 million in two previous
 financings.  And Hem Pharmaceuticals Corp., Philadelphia, which
 currently is testing two drugs for AIDS and chronic-fatigue
 syndrome, expects to raise as much as $12 million in a new private
 offering.  Previously, Hem raised $30 million.
    Investors are drawn to small biotechnology companies with
 products on the market by their potential for catching the interest
 of pharmaceutical giants, says Nigel Webb, president of Hem.  "Having
 patents and products ready to go confers credibility on young
 companies," he says.
    But even if its products remain in the planning stage, companies
 with the right credentials can still stir investor interest.
 Pathogenesis Corp. of Seattle is planning to raise almost $40
 million for the diagnosis and treatment of chronic viral infections
 such as chlamydia and chronic-fatigue syndrome.  Pathogenesis hasn't
 any product or sales and is barely a few months old, but it has put
 together an impressive team of senior health-care executives and top
 scientists.
    Another start-up, Cell Therapeutics Inc., plans to raise $30
 million to develop compounds that replace synthetic chemical
 anti-inflammatory and anti-cancer agents.
    Having exhausted traditional financing sources, some small
 companies are wooing investors by reorganizing their activities to
 give them more focus, says In Vivo's Mr. Longman.  Immulogic
 Pharmaceuticals Inc., Cambridge, Mass., for example, created two
 units for its allergy-vaccine development programs, one to handle
 early-stage research and the other more developed products.

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