Biotechnology: The Rules Of The Financing Game

The need for equity financing in the biotechnology industry has created something of a funding crisis for a large number of biotechnology companies and there is a pressing need to address these issues if the companies which make up the industry are to survive, said Fred Dorney, president of the Bay Area Bioscience Center, speaking at the Financial Times Conference Biotechnology - A Revolution In The Making, held in London last week.

Equity financing can be equated to a hunt for dollars for biotechnology companies, he said, and the sources of available equity dollars can be put into three different categories.

The first two categories, which comprise institutional and retail investors, are virtually extinct, he said. This has arisen because a lot of institutional investors bought biotechnology stock during the initial public offerings and now see these shares at 50% or even 30% of their issued price. Retail investors have much the same complaints, and are even more wary as they are using their own money, he noted. The approaches needed to capture the investors' interest are focus on private placements, wealthy individuals and specialty funds.