More on the Shelf

More on the Shelf

In my last post, I wrote about shelf registration filings among small cap biotech companies. I defined a small cap biotech company as one engaged in drug development with a market capitalization of less than $1 billion. Often referred to by their SEC form designation, S-3, shelf registrations are prospectuses that allow companies to issue securities at any time within three years of the date of filing. Data from the past four years, specifically second quarter of 2010 to second quarter 2012, revealed that approximately 1/3 of US small cap biotechs use S-3 shelf registrations. Of those, however, around 80% of shelf-filing companies subsequently employ them, i.e., sell securities and raise additional capital, though the timing and the size of the first financing varies considerably. Thus, a company’s decision to put a shelf in place does indeed foreshadow a likely future financing, usually within six months.  Read more

The S-3 Barometer

The S-3 Barometer

Access to capital is essential for development-stage biotechs, yet the capital markets for public and private biotech companies are notoriously fragile. For private companies, venture investing in the life sciences has recovered from a rough patch in the ’08-’09 span to the robust financing environment in last year and a half. In the public markets, IPOs haven’t fully rebounded to historical levels, but follow-on financings and debt deals have been brisk as the biotech sector has performed extraordinarily well in 2012. Indeed, the NASDQ biotech index is up ~35% YTD at the end of the third quarter.  Read more

Death row for drug development costs estimates?

Death row for drug development costs estimates?

Last week, FDA Director of CDER, Janet Woodcock, lectured to a full house at the Mission Bay campus of the University of California – San Francisco.  She spoke on ways academic research centers could play a larger role in the development of new medical technologies.  I very much enjoyed the talk, the slides for which are available here.  Read more

The Moneyball VCs

The Moneyball VCs

What makes a great venture capitalist? Conventional wisdom says it’s the experience, expertise, Rolodex, and the visionary eye for spotting the Next Big Thing. But what if this were wrong? What if the important variables in the statistical game of hitting one or two “grand slams” in a VC portfolio, which then make up for the dead or dying companies, could be identified and replicated? Why can’t there be a Moneyball moment for the VC industry? Enter Correlation Ventures and Ulu Ventures, two new firms with heavy emphases on ‘quant’ approaches. Launched in stealth mode in 2010 with limited partners  … Read more

Fast start, not short course

Fast start, not short course

Social networking website LinkedIn went public in May and the share price more than doubled on the first day of trading. By all accounts, it was a very successful IPO: LinkedIn raised over $350M in an offering that valued the company around $3B, and the existing and IPO investors could book a substantial, immediate return. In contrast to the hope of a mere resuscitation of IPOs in biotech sector, murmurs of another tech bubble ensued after the LinkedIn offering. Other tech IPOs in 2011, namely Zillow and Qihoo 360 Technology, also enjoyed extraordinary first trading days, appreciating 79% and 134%, respectively.  Read more

The Entrepreneur’s Bookshelf

The Entrepreneur's Bookshelf

Joyce’s Ulysses. Huxley’s Brave New World. Faulkner’s The Sound and the Fury. Some of the most important books ever published in the English language. Or so I’ve heard. I’ve never read them. Of course, I want to read them. I suspect most of us have a reading list we apparently only manage to add to. Well, here a few more candidates. I took note of the titles and authors of every book that came up during presentations or discussions over two years in the Kauffman Fellows Program, which I’m proud to say I recently completed. Somewhere between a mini-MBA course,  … Read more

Pharma as Shareholder

Pharma as Shareholder

A funny thing happened in the stock market last week. Signals for what eventually became an acquisition of a small cap biotech company Icagen (ICGN) were disclosed in an SEC filing because the acquirer, Pfizer (PFE), was a large shareholder. The events struck me as unusual because, a) it’s rare to see pharma publicly tipping their hand regarding business development activities, and b) it seems as though there are very few instances in which a pharma takes an equity position in a public company.  Read more

Would Graham and Dodd have avoided small cap biotech?

Would Graham and Dodd have avoided small cap biotech?

Benjamin Graham and David Dodd are synonymous with an investing strategy called “value investing.” As outlined in their classic 1934 book Security Analysis, value investing involves investing only in securities that the stock market has significantly undervalued. Warren Buffett is the most famous practitioner of this approach, and millions of other investors apply aspects of value investing to their own portfolios. Graham died in 1976, the year Genentech was founded. Would he have applied his methodology to the biotech industry? I doubt it. In essence, value investing asks two fundamental questions: How much does it cost? And what is it  … Read more

Who Cares About the IPO Market?

Who Cares About the IPO Market?

No doubt you’ve heard that the IPO market for biotech companies has been especially weak the last two years. Few companies went public in 2008 and 2009, and those that did raised less money than expected, at lower prices, and with significant insider participation or other sweeteners. But the IPO environment seems to be thawing, with more companies expected to go public in the coming months, which leads to the question: Is this really such a good thing? Holding aside the numerous macroeconomic reasons in support of a favorable IPO environment, IPOs in the biotech industry have particularly important place  … Read more