Start-up biotech firms can seek funding overseas Domestic venture capital sources drying up, analysts say at World Trade Center seminar.

October 11, 1991|By Liz Atwood | Liz Atwood,Evening Sun Staff

Fledgling biotechnology companies struggling to get money at home might have better luck overseas if they know how to work out a partnership with a foreign firm.

Industry specialists, speaking at a World Trade Center Institute seminar yesterday, said the foreign market presents some pitfalls to new companies, but can be a source of capital to get a new company started.

G. Steven Burrill, international director for manufacturing and high technology industry services with Ernst & Young, said domestic sources of venture capital have started to dry up and private sources of capital have always been skimpy. "It's a bad-news story from this part of the world," Burrill said.

Increasingly, companies are turning to public stock offerings to raise cash, but this option is usually limited to companies with wide appeal and products close to marketability.

"The financial markets are enormously fluctuating," Burrill said.

In the 1980s, when biotechnology industry was just getting starting, more money was available. But, since the stock market crash in 1987, it has become increasingly difficult for companies to get money.

Burrill said companies might want to consider forming partnerships with other companies in order to get products to market. Often, these companies might be foreign-owned.

"Most of the world is looking at biotechnology to build or rebuild their economies," he said.

In some cases, even getting overseas financing isn't as easy as it once was, said F. Scott Reding, vice president of Nomura Securities International Inc., a New York firm which seeks Japanese investors. Reding said that a few years ago the tTC Japanese eagerly invested in any biotechnology company that came their way, whether or not the company fit into their own investment strategy.

"The new word now among Japanese investors is 'selectivity,' " Reding said.

The reason for the change is that Japanese who doled out cash a few years ago were disappointed when products didn't live up to expectation. They also have more companies from which to choose now.

"They are swamped with U.S. biotechnology companies making the pilgrimage to the East for capital," Reding said.

Despite the development of the European Common Market, companies in Europe are still interested in forming partnerships with American biotechnology companies, several speakers said. Although such deals with foreign companies can provide the cash a biotechnology company needs to launch its product, there are risks.

Peter A. Sears, president of S.R. One Limited, a Radnor, Pa., venture capital fund, said biotechnology companies seeking overseas partners must be aware of patent stealers, currency convertibility problems, and foreign protectionism.

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