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Biomedical Firms See Flow of Funds Slow to a Trickle

Speakers at a conference in Los Angeles say the picture for venture financing is grim.

March 13, 2003|Denise Gellene | Times Staff Writer

The funding outlook for biomedical companies is miserable, venture capitalists and local biotech executives said Wednesday at a conference in Los Angeles.

Samuel D. Colella, managing director of Versant Ventures of Menlo Park, Calif., said that although venture firms nationally have $70 billion in uncommitted cash, many investment firms are likely to "sit on the sidelines and wait for better times."

The amount that trickled to biomedical firms in Southern California in 2002 was comparatively small, in keeping with recent years. Of the $5.2 billion in venture financing that flowed into health-care firms nationally, just 8%, or about $416 million, went to companies in Southern California. Northern California biomedical companies captured 29%, or $1.5 billion, Colella said.

Traditionally, Los Angeles biomedical firms turned to wealthy individuals for financing. But that source of so-called angel investment also is drying up, Colella said, making the funding climate for biomedical firms is all the more challenging.

One example is Protein Pathways, a Woodland Hills-based UCLA spinoff headed by seasoned former executives of Amgen Inc., the world's largest biotechnology firm. For nearly a year, Protein Pathways has been trying to raise $20 million to fund early-stage animal tests of drugs to treat inflammatory diseases, osteoporosis and cancer.

J. Christopher Giffen, head of business development for Protein Pathways, said the company has had discussions with possible investors and pharmaceutical partners, but is not close to a deal. Investors are looking for companies with experimental drugs that already are in human tests and close to reaching market, Giffen said.

"I don't think anyone in our position can be optimistic in this climate," he said.

Ahmed Enany, president of the Southern California Biomedical Council, which sponsored the two-day conference that showcased 15 firms, called venture financing "the missing piece."

"We need to attract those relationships," he said.

Venture capitalists have their own complaints. Despite the wealth of academic talent in Los Angeles, the area has created relatively few investment opportunities and no companies have been spun off by Amgen.

In addition, UCLA, USC and Caltech have not fostered many biomedical and biotech companies, venture capitalists said, but that is changing slowly.

Gordon Binder, Amgen's former chairman and chief executive, attended the conference. "You won't get any spinoffs from Amgen," he said, because the company is too stable.

However, Binder now has his own venture capital firm, CoastView Capital, and it has recently invested in new biotech firms in Boston and San Diego.

Asked about possible Los Angeles investment candidates, he said, "We're looking."

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