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Biotech industry expected to feel capital shortage


The biotechnology industry is likely to see a squeeze on venture capital as the appetite of small companies grows faster than the money available, according to Stelios Papadopoulos, a leading biotechnology investment banker.

"There will be long-term competition for scarce capital," Mr. Papadopoulos, head of Paine Webber's life sciences investment banking group, told a group of lawyers, executives and educators at the Center Club in Baltimore yesterday.

But he added that "the technological forces behind the industry are so strong that one way or the other we are going to solve those problems."

Competition for venture capital comes just after investment in biotechnology peaked because a number of factors combined to encourage the high-risk investment. Investors turned to biotechnology, Mr. Papadopoulos said, as an alternative to cyclical stocks, which do less well during a recession, and

because mutual funds investing in biotech stocks have had a good long-term record.

In the past year, the number of maturing biotechnology companies able to raise cash through secondary offerings grew tremendously, as did the number of companies that made their first stock offerings.

In January alone, $347 million was raised in initial public offerings, the highest one-month total since 1981, he said.

But, in their haste to invest, some investors made decisions with little information about the companies, he said. "It was a time of irresponsibility. It was a time of wealth of riches. It was an exciting time," Mr. Papadopoulos said.

With 53 companies having gone public this year, analysts have been scurrying to keep up with investors' desire for information, he said. "This is a time of crisis of information on Wall Street."

Biotechnology stocks have declined significantly in the past several months, however. "It is tougher to do deals now than a month ago," Mr. Papadopoulos said.

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