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Volatile Economy / Fundraising Challenges Encourage Business Combinations Among Biotech Companies According to New Survey from CPA Firm Rothstein Kass
Date:2/3/2009

'Plumbing the Depths' White Paper Reports More Than 75% of Biotech Firms Expect to Establish or Enhance a Corporate Partnership in Next Three Years

NEW YORK, Feb. 3 /PRNewswire/ -- More biotechnology companies will be compelled to explore business partnerships and strategic alliances in a more restrictive lending environment, according to "Plumbing the Depths," a new white paper report published today by CPA firm Rothstein Kass (www.rkco.com). Results were based on the findings of two successive research studies designed to shed light on the difficulties and opportunities facing small and mid-sized biotechnology firms. Survey results from November 2008 were contrasted with data compiled in early September 2008 to reveal how attitudes and perceptions have been altered by continuing market volatility. In November, nearly 77 percent survey respondents suggested that they plan to establish or enhance a corporate partnership in the next three years, up from just below 68 percent in September.

"'Plumbing the Depths' combines extensive empirical data with the insight and experience of our Commercial Services Group principals to deliver unbiased analysis of the issues impacting biotechnology industry capitalization," said Steven Kass, co-managing principal at Rothstein Kass. "As trusted audit and tax principals to a growing range of vertical industry segments, we recognize short-term challenges businesses are facing and are committed to helping these organizations refine their operations in volatile market conditions."

"In part because of their lengthy product development cycles, biotech firms are largely dependent on ready access to affordable capital. During periods of economic growth, industry innovation has been fueled by a wide range of investors willing to make speculative allocations to the sector in pursuit of outsized returns," said Tom Angell, principal-in-charge of Rothstein Kass' national commercial services practice. "The sudden and pronounced shift in the global economy has caused many investors to favor wealth preservation over aggressive wealth creation. In this environment, biotech companies are much more likely to seek out business combinations that can streamline operations while reducing overhead. The sector is also likely to attract increased interest from larger pharmaceutical companies looking for bargains among depressed valuations."

"Plumbing the Depths" is based on interviews with over 700 firms across a broad cross-section of the biotechnology industry, including companies focused on medical, agricultural, industrial and environmental purposes. Participants were required to have at least $5 million in seed capital, operations spanning three years or more, and be actively seeking additional funding for their businesses. Firms were segmented by both length of operations and available capital. The report was co-authored by Russ Alan Prince, a leading authority and counselor on private wealth, and Hannah Shaw Grove, a widely recognized expert on behaviors and finances of high-net-worth individuals. Notable findings include:

  • Biotechnology companies are almost universally in accord that current economic conditions will make it harder to raise money. Nearly 99 percent of November participants agreed, compared with just under 90 percent in September
  • In both the September and November surveys, roughly three-quarters of respondents predicted that there would be fewer biotechnology start-ups in 2009
  • Over 90 percent of firms in September and above 96 percent of November participants indicated that government sources of funding to the industry will diminish

"The need for biotech firms to pursue strategic alliances will be heightened by continuing weakness in U.S. IPO markets. For many private equity and venture capital investors, taking a portfolio company public has been the optimal exit strategy. However, given current conditions, even special purpose acquisition companies (SPACs) created expressly for this purpose are proceeding with an abundance of caution. Many are electing to dissolve rather than risk investment in assets that could continue to decline in value over the short-term," said Mr. Angell.

About Rothstein Kass:

Rothstein Kass is a premier public accounting firm that has served privately held and publicly traded companies, individuals, and families for nearly 50 years. Beyond audit and tax services, the firm provides a full array of integrated services, including strategic business counseling, regulatory compliance and SEC advisory services, insurance and risk management consulting and family office services.

Rothstein Kass was recently ranked as the top accounting firm to the alternative investment industry by Alpha Magazine. The Rothstein Kass Financial Services Group provides services to many high-profile and respected clients including hedge funds, fund of funds, broker-dealers and registered investment advisors. Our Commercial Services Group provides organizations, including private equity funds, as well as individuals and families with essential and complementary professional services.

Rothstein Kass has offices in California, Colorado, New Jersey, New York, Texas and the Cayman Islands, each of which has received recognition as a Best Place to Work.

About the Authors:

Russ Alan Prince is the world's leading authority on private wealth, the author of 40 books on the topic, and a highly-sought counselor to families with significant global resources, and their advisors. He is co-author of Fortune's Fortress: A Primer on Wealth Preservation for Hedge Fund Professionals.

www.RussAlanPrince.com

Hannah Shaw Grove is a widely recognized author, columnist, speaker and an expert on the mindset, behaviors, concerns, preferences and finances of high-net-worth individuals. She is co-author of Inside the Family Office: Managing the Fortunes of the Exceptionally Wealthy.

www.HSGrove.com


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