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Biotechs Expect Boom Cycle to Continue Into New Year

Industry analysts predict another strong year for biotechnology, an industry they say will remain robust through private investment backings and opportunities for firms with promising product pipelines to attract the attention of Big Pharma.

Biotech activity in the New Year is likely to resemble that of 2007, according to Ivor Royston, a managing partner with local venture capital firm Forward Ventures and founding father of the San Diego biotechnology community.

“A lot of money has been raised by venture capital firms this past year and there’s plenty of new money available,” he said.

According to data released by Ernst & Young, venture capitalists invested $811 million in 41 life sciences deals locally as of the third quarter this year. Forward Ventures invested $34 million this year in biotechnology, pharmaceutical and medical device companies.

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Although San Diego remains behind the big hubs for venture capital dollars , namely the East Coast and San Francisco Bay Area , the region has been successful in luring investors with its promising pipelines, according to Joe Panetta, president and chief executive of the local biotech trade group Biocom.

“We had record investment last year and think we’re going to continue to see that this year,” he said.

Judging from the turnout at this year’s Biocom Investor Conference, which attracted 450 people from across the country, Panetta predicted that San Diego will continue to experience increased interest from the investment community. It was the second time the November event was held at the San Diego Marriott Del Mar.

Besides private investment, analysts also said they were encouraged by the interest demonstrated by Big Pharma this past year.

In September, privately-held NovaCardia sold itself to pharmaceutical giant Merck & Co. for $366.4 million. Although analysts said a deal that large is rare, they said increased competition between Big Pharma firms could push big deals in the coming year.

And with some blockbuster drugs coming off nearly expired patents in the coming year, Big Pharma could continue to look to the biotechnology industry for promising new drugs to help it fill lackluster pipelines.

“Everybody’s looking for the next big buyout,” said Matt Berry, an associate analyst at the Berkeley-based Medical Technology Stock Letter.

Analysts pointed to financial struggles facing early-stage biotechs as the only cause for concern.

“As venture capitalists move away from very early-stage opportunities, and the NIH (National Institutes of Health) doesn’t fund those, the question is, ‘How do you fund great discoveries still years away from going into the clinic?’ ” Royston said. “It’s a big issue that faces all of us.”


Stock Stability

Berry predicted biotech stocks could hold up despite volatility in the marketplace.

Whether it’s a slowdown in the economy or a recession, Berry said the biotechnology sector could remain somewhat immune and fare well in the long term.

“It’s going to be one of the places to be,” he said. “Good economy, bad economy, patients are still going to need to take the cancer drugs.”

Among the local companies Berry said hold promise are Amylin Pharmaceuticals Inc. of San Diego and Isis Pharmaceuticals Inc. of Carlsbad.

Amylin reported positive data in recent months regarding its once-weekly, long-acting release version of diabetes drug Byetta. The investigational drug showed statistically significant improvements in lowering glucose levels and in helping patients lose weight. Amylin said it expects to submit the drug as a stand-alone treatment to the FDA by the first half of 2008.

Isis Pharmaceuticals also is likely to garner additional investor interest. The company, which counts 18 drugs in development, reported positive results for mipomersen, a second-generation antisense drug shown to reduce a protein critical to the synthesis and transport of high cholesterol.

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