VANCOUVER - "It's always darkest just before the dawn."

Those words - spoken by Rob Wilson, managing director, investment banker and head of health care at RBC Capital Markets - are meant in general to apply hope to the worst of scenarios and, in this case, to biotechnology's future.

Because these are dark times for the biotechnology sector, as an RBC report pointed out. The North American economy is sending mixed economic signals, the indices are seeking a bottom and financing is difficult, at best.

"It is what it is," Wilson said here at the first BioPartnering North America conference, meaning that no amount of glossing over or digging through numbers can soften the truth.

That said, Wilson looked ahead. He estimated the future holds "a more normalized market, like seen in '93 and '95" - one that would offer up 20 quality initial public offerings per year, and 15 to 20 secondary offerings. In other words, a market unlike the one the industry suffered through in 2002, in which there were five equity IPOs, and even the companies that wiggled through "didn't perform that well," once on the other side, he said.

However, Wilson provided rays of light that might conjure up images of daybreak for a suffering industry.

Antigenics Inc., of New York, closed a public offering in January worth about $62 million, notable because the company was able to raise the amount of shares it sold and increase its take, he said. Also in January, Atlanta-based AtheroGenics Inc. raised $45 million publicly through the sale of 7.2 million shares. Both companies have late-stage products, something "you need to have in the U.S. markets," Wilson said. (See BioWorld Today, Jan. 24, 2003, and Jan. 30, 2003.)

As further reason for hope, Wilson pointed to Amylin Pharmaceuticals Inc., of San Diego, and its deal potentially worth more than $435 million with Eli Lilly and Co., of Indianapolis, centered on a late-stage diabetes product, and Amylin's $152.7 million public offering in January. (See BioWorld Today, Sept. 23, 2002, and Jan. 21, 2003.)

Wilson acknowledged that the value of private rounds is down and investor discussions might take twice as long, but said, "there are good rounds out there," noting South San Francisco-based Raven Biotechnologies Inc.'s $40 million financing in January. (See BioWorld Today, Jan. 6, 2003.)

Mentioning Monday morning's announcement that Johnson & Johnson, of New Brunswick, N.J., was buying Scios Inc., of Sunnyvale, Calif., for $2.4 billion, Wilson suggested there might be more of the same, as companies "combine pipelines and conserve cash."

Collectively, the rays of light are enough for Wilson to believe better thing are ahead. MPM Capital recently closed a $900 million fund, he noted, and there are huge sums of cash on the sidelines, earning next to nothing from petty interest rates. So when the economy does turn, it should turn hard, he said.

"I gotta feel that things are going to get better," he said.

Salvation Could Come From Partnering

But as Robert Kilpatrick, partner, Technology Vision Group LLC, pointed out, "This is a partnering conference, however." The event features presentations from 52 biotechnology companies and oral presentations by 16 emerging companies, giving them a chance to be seen by the pharmaceutical company representatives.

Mark Edwards, managing director of Recombinant Capital, in a partnership panel pointed out that when looking at the top 20 pharmaceutical companies, they have formed, on average, 175 deals per year for the past 15 years. He mentioned that genomics and screening technologies are the top technologies in which partnerships are formed around, while cancer and inflammation/autoimmune diseases are the indications focused on most.

But, although it is late-stage product deals that grab headlines and boast lucrative figures, he said 61 percent of deals between big pharma and biotech are early stage. In fact, he said, "two-thirds to 70 percent of [biotechnology] revenues earned are [from] platform deals."

And while in 2002, there were fewer deals announced than in 2001, he sees a steel will emerging in the sector.

"I think people are back in business," he said.

Panel member Barbara Yanni, chief licensing officer at Merck & Co. Inc. in Whitehouse Station, N.J., explained how Merck determines its partners. She said the company has 20 committees that review Merck's business proposals and make decisions based on science, a similarity in thinking between itself and potential partners, and whether or not Merck feels it can collaborate with them.

Clifford Stocks, vice president, business development at Bothell, Wash.-based ICOS Corp., said his company is at a crossroads, having gotten its product, Cialis, approved in Europe and awaiting approval in the U.S. Cialis was developed with Eli Lilly and Co., and is designed to treat erectile dysfunction. But ICOS also deals with biotechnology companies, having signed with Biogen Inc. to develop an early stage product to treat inflammatory indications, and Stocks said ICOS's partnering strategy depends on several things.

"We're vulgar, like anyone, and look at money," he joked. "We try to get a lot up front, a lot in the middle, and keep a lot on the back end."

Mostly, he said, what brokers a deal is something other than finances. In the instance of Biogen, the Cambridge, Mass-based company had a wealth of clinical experience from its development of its psoriasis product, Amevive, and that made Biogen attractive as a partner.

Stocks also spoke of tricks that can help make a deal more secure, such as building in an "escalation ladder" for dispute resolution, and an "out" for both sides if one partner undergoes a change of control. Yanni agreed.

"A system of bumping things up has worked well for us in the past," she said. "You don't want to go to senior management and say, We can't agree.'"

The conference runs through today.