San Diego Daily Transcript           
Wednesday, October 13, 1999 - front page

New Venture Cap Firm Walks Where Others Fear to Tread  by Dan Galligher

Some say the biotechnology industry is due for a rebound, and a new local venture capital  firm wants to be in position to make the score.

After spending more than a year raising the necessary funding, IngleWood Ventures is ready to do business with the region's biotechnology and health care businesses.  The firm ha more than $35 million available to invest in early-stage companies developing new technology and products that, with any luck, could revolutionize health care and provide a big payoff in the process.

Of course, that road has been traveled before, and more than a few players have already taken the off ramp.  Tired of spending 10 years bleeding money only to face a 50/50 chance of being struck down  by federal regulators, investors have by and large abandoned biotechnology opportunities in favor of the quick rewards of Internet stock.

On Wall Street, biotech firms have not fared so well in the past  year, although there have been recent signs of improvement.  According to Burrill & Co., a San Francisco investment bank that specializes in biotechnology and health care offerings, biotech companies  raised $106 million through initial public offerings in the second quarter of 1999 - a 38 percent drop from $161 million raised during the same period the previous year.  In secondary public offerings, biotechs  raised about $76 million, down 43 percent from $133 million raised in the same period the previous year.

Dan Wood, general partner with IngleWood, admits that the sector has been in rough waters as of  late.  But since the demand for new and better drugs and health care services will only continue to grow, Wood said the business has a very attractive growth potential over the long term.

"It's called  buy low and sell high," Wood said in a recent interview.  "The need for improved drugs and medical services is not going to go away.  These things just tend to go in cycles."

Some signs are  already pointing up.  According to figures from Burrill & Co., venture capital firms invested $360 million into biotechnology firms during the second quarter of this year.  This represents an 85 percent  gain over the same period the previous year and a sharp increase from $118 million raised during the first three months of the year.

In San Diego, biotechnology and health care investment remains a large  draw for venture capital firms.  According to a quarterly survey by PricewaterhouseCoopers, venture capitalists poured $103 million into the local health sciences industry, which includes medical device,  biotechnology and health care businesses, during the second quarter - nearly identical to $102.5 million raised in the same period the previous year.  In contrast with the rest of the nation, biotechnology and  health care firms in San Diego drew more venture capital funding that other industries, including Internet and telecommunication firms, during the same period.

While a few local biotech stocks have fared  well on Wall Street, many have lost value during the past year.  Of 35 biotechnology companies on the San Diego Stock Exchange, 17 lost value during the year while another 18 posted moderate gains.  One local  drug maker, Idec Pharmaceuticals, has seen its share price gain more than 360 percent during the past 12 months.

Steven Burrill, CEO of Burrill & Co., said the market will tend to favor large,  established biotech companies and those who have products available rather than those who promise a "blockbuster" drug several years down the road.

"It's a mixed bag," Burrill said.  "Some public  equities are doing very well and others are not.  Investors are going to be more earnings-driven than in the past."

Drawing heavy from local executives, many of whom have extensive experience in the  industry, IngleWood is looking to make relatively small investments (between $500,000 and $1.5 million) in early-stage companies in San Diego and throughout Southern California.  The company has raised $10.7  million from private investors and has been granted a credit line of $26.7 million from the Small Business Administration.

The company also boasts a well-connected list of executives on its advisory  committee.  From the industry, IngleWood has recruited several top-level executives including James Glavin, chairman of Carlsbad-based Immune Response Corp., and Henry Nordhoff, CEO of Gen-Probe, a  local unit of Japan-based Chugai Pharmaceuticals.  Harvey White, former president of  Qualcomm, Inc. and CEO of spin-off Leap Wireless International, and Georges Daou, founder of Daou Systems, Inc., were also recruited for the board.

Wood said local real estate magnate Malin Burnham was also a key investor and advisor.  Wood and Blake Ingle, an experienced biotech executive  who also serves as chairman of the Burnham Institute, run the day-to-day operations for the fund.

The company has already committed about $2.5 million in funding to two local companies.   Although Wood declined to name the firms, he said one is developing a cancer drug and the other is working on a wireless cardiac-monitoring device.