Investors continue to funnel money into biotechnology

Science and Patents

Investors continue to funnel money into biotechnology because it has innovative science and long-term patents that large drugmakers need, Neff said on a Jan. 18 conference call with reporters. Pharmaceutical companies have cash, development and marketing expertise that the smaller companies don't, making them natural partners and acquirers, he said.

``We've been saying it for a while, but now it's playing out in dramatic ways,'' said Ashley Dombkowski, a general partner with MPM Capital in South San Francisco, California, in a telephone interview. MPM has $2.5 billion under management in biotechnology and medical device companies.

Pfizer, for instance, said on Dec. 18 it will buy closely held CovX for an undisclosed amount to acquire experimental drugs for cancer and diabetes. CovX, a La Jolla, California- based biotechnology company, has one diabetes drug and two cancer drugs in early stages of development, Pfizer said.

Acquisitions

The acquisition of Pharmion Corp. by Celgene Corp. of Summit, New Jersey, for $2.9 billion and Tokyo-based Eisai Co.'s $3.9 billion purchase of MGI Pharma Inc. are other examples of the desire for large drugmakers to acquire smaller innovators, Dombkowski said.

Still, there are reasons for concern among biotechnology and medical device investors, Neff said. The budget of the U.S. National Institutes of Health, which produces many basic discoveries for biotechnology companies to develop further, is under pressure, Neff said.

Patent law changes could undermine biotechnology companies, and legislative efforts to control high drug prices could also harm the industry, he said.

Not all types of biotechnology companies are flush with cash, Neff said. Cancer drug developers are having a hard time raising new venture capital. So many companies are pursuing the same opportunities that it's becoming difficult to enroll patients in new clinical trials, he said.

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