In his Life Sci VC blog, Bruce Booth recently wrote “Biotech is back with a vengeance in this IPO window.” It’s an accurate snapshot of the market, but the good times he describes accrue to money and sweat equity already long in the ground. In a business with a 10- to 15-year product development cycle, today’s investors and managers need to focus on the strategic implications of the market. So is this a flash-in-the-pan or a fundamental change in the life-sciences landscape?
In his post, “What’s Behind The Booming Biotech IPO Market,” Booth identified four factors that are influencing the market: The return of the generalist investor; the performance of recent offerings; large amounts of capital pumped into a small sector by pharma acquisitions (what he refers to as ‘recycle scarcity); and the positive effects of the JOBS act.
Though correct as far as his analysis goes, Bruce misses the heart of matter. The first two factors he cites are the result of the market window, rather than the cause. The third is a manifestation of a larger liquidity phenomenon that I will discuss below. The JOBS Act, while helpful, is not driving the burst of prosperity that we see in the market today.
Biotech “windows” generally correlate with expansions in the money supply. The last three windows—in 1991, 1996, and 2000—occurred in periods of expansive monetary policy, not surprisingly in sync with presidential election years. (Does anyone really believe that the Fed is apolitical?)
Today Ben Bernanke is printing money at the rate of a trillion dollars a year. It has to go somewhere. First it goes to
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Author: Standish Fleming
Standish Fleming is a 29-year veteran of early stage life sciences investing. He has helped raise and manage six venture capital funds totaling more than $500 million, and has served on the boards of 19 venture-backed companies, including Nereus Pharmaceuticals, Ambit Biosciences, Triangle Pharmaceuticals (acquired by Gilead Sciences) and Actigen/Corixa (now part of GSK).
He has extensive experience in all aspects of venture management and finance, including fund-raising, investor relations, operations and portfolio development. He has made investments, managed portfolio companies, raised funds, pursued business development, taken companies public and successfully exited investments through public-market sales and buyouts. In 1993, Mr. Fleming co-founded San Diego's Forward Ventures. He has made investments in almost every segment of the health-care industry, including pharmaceuticals, biologics, diagnostics, devices, services, and software. He has managed both platform and product companies, portfolio investments, and led or participated in financings at all levels, from pre-startup to PIPES in public companies, in both debt and equity. He has helped start more than 15 companies and served as founding CEO of eight. Fleming serves as a director of CONNECT, San Diego's support organization for the early-stage community, and is a past president of the Biotechnology Venture Investors Group. Before establishing Forward Ventures, He served as the chairman, president and CEO of GeneSys Therapeutics, (merged with Somatix and acquired by Cell GeneSys [NASDAQ:CEGE]). Fleming began his venture career with Ventana Growth Funds in San Diego in 1986. He earned his B.A. from Amherst College and his M.B.A. from the UCLA Graduate School of Management.
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