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A VentureForum Profile: Inhibitex Prevails in a Changing Market
With BIO VentureForum 2002 coming up in October in San Francisco, BIO News thought it would be a good time to check back with the companies that succeeded in raising capital after attending last year's inaugural VentureForum in Washington, D.C. One of those companies was Alpharetta, Georgia-based Inhibitex, which closed a $45 million Series D round earlier this year - a sizable sum in a challenging climate for fundraising.
"The BIO VentureForum last year was the first event of that type that we presented at," said Russ Plumb, chief financial officer at Inhibitex. "A number of the investors we were targeting were there. It was also a great opportunity to assess how we stacked up against other private biotechnology companies."
"We came out of the event feeling pretty good about our prospects and our ability to communicate the essence of our story in a concise, intelligible way," Plumb said. "BIO had screened the presenters, so we felt like were among the cream of the crop in terms of privately held biotechs. That conference turned out to be quite helpful in getting our lead investors interested in Inhibitex."
Inhibitex is a biopharmaceutical company developing and commercializing antibody-based products for treating and preventing serious bacterial and fungal infections. So far, the company has targeted its development efforts on hospital-acquired infections, such as antibiotic-resistant Staphylococcus, and its lead product candidate, Veronateä, is intended for low-birthweight infants who are particularly susceptible to such infections.
Asked if he could draw any lessons from Inhibitex's experience for other biotech companies on the fundraising trail, Plumb said that venture capitalists today are intensely focused on what he called "financing risk." "Given the condition of the equity markets and the recent dearth of life science IPOs, it became obvious to us that investors were very concerned about companies at our stage of development not having enough funding to achieve a considerable value step before having to raise more capital," he said. "They clearly wanted to avoid the specter of us trying to raise money in 2003 in this type of market without a significant, value-creating milestone under our belt. Based largely on these concerns, we raised more money than we had originally planned."
Risk factors also played into the reasons investors were attracted to Inhibitex. "We believe we were able to communicate that we don't have as high a degree of risk as many other biotech companies at a similar stage of development," Plumb said. "We have a strong management team, a proprietary platform technology, and most importantly, we're developing products in which we have retained worldwide rights -- where there are no direct competitors in advanced stages of development or in the market. We don't have to knock anyone off the top of the hill to be successful."
Plumb said the biotechnology business models that have become attractive to investors are ones in which a company is product-directed and can get to market without out-licensing a significant component of their upside. "We had been in advanced discussions with a potential partner to develop and commercialize Veronateä worldwide; we had assumed that investors would look favorably upon such a partnership," he said. "But as we began meeting with investors in the fall, we consistently heard, 'You don't want to partner that! Keep the rights and develop this one yourself.' It meant that we needed to raise more money, but we had the opportunity to create significantly more value for our shareholders, and, in our case, that combination proved very attractive to the investment community."
Inhibitex was pleased to have secured funding at what is usually a difficult period in a biotech's life cycle. "From what we've seen, unless you're in very late-stage clinical trials or beyond, which we are not, it's a very, very tough time to be raising money and valuations are harsh," Plumb said. "Fortunately, we were able to make a strong case."
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fact box:
Inhibitex
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For questions on this text please contact:
Will Heyniger
SheaHedges Group
wheyniger@sheahedges.com
(703) 287-7809
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