We attended the R&R Conference in NYC this week and here is a brief summary:
- Over 5000 people were registered with hundreds of companies presenting in healthcare, metals and mining,energy and China.
- Chinese companies were a significant presence for the first time this year.A major report (175 pages) was issued by Rodman and Renshaw,” The Chinese Pharmaceutical Industry:A Driving Force in an Emerging Market”. The Chinese Pharmaceutical industry is estimated to achieve $180B in sales in 2010. China has established a $124B healthcare stimulus budget for 2009-2011 which mainly focuses on health insurance coverage ,rural clinic and public health services, as well as hospital reform. Drugs sold in China are mainly generic versions of branded products. Many Chinese Life Science companies are looking to go public in the U.S. through reverse mergers. This could create public vehicles that would participate in specific growth stories e.g. Mindray (MR) a Chinese medTech Company that went public in 2006.
- DealFlow Media, Inc. (www.dealflow.com) publishes the monthly The Reverse Merger Report that provides news and information on “Alternative Public Offerings”. Their data shows reverse merger deals with Chinese companies going from 46 in 2009 to 57 YTD a growing appetite. However one key issue that comes up is corporate governance and a focus on audits as the Public Company Accounting Oversight Board (PCAOB) published a warning in mid-July.
- Many excellent small cap and micro cap U.S. companies that presented were at historically low, venture capital valuations due to the overall weak economy, lack of retail and institutional interest in equities and difficulties in raising capital especially for “pre-revenue companies”. In a discussion with a top tier investment banker and hedge fund manager, he commented that raising money money for a small cap equity fund was not possible in this environment. On the plus side if many of the small cap biotech and life science companies outperform the market in Q4, money should move from the sidelines.(more on this topic in Part 2)
- We look to Q4 and especially the IPO market to see if emerging growth equities can get financing.An interesting model for development stage financing is that of Safeguard Scientifics (SFE) whereby a Public Holding Company with strong financial resources “incubates” and drives milestones of its portfolio companies.
- We will provide comments on some of the companies presenting in Part 2: Adeon Pharmaceuticals (AEN) ,Dendreon, (DNDN) Exact Sciences (EXAS), Rosetta Genomics (ROSG), Response Genetics (RGDX), Safeguard Scientifics (SFE), Sequenom (SQNM)and Supergen (SUPG).