Seattle Times

January 13, 2004

Boomers' Ills Help Health-Care Investors Feel Better

By Luke Timmerman

The JP Morgan Healthcare Conference sometimes gets lost in the intrigue over IPOs or the daily winds of Wall Street, but there are reasons 5,500 people jammed into an opulent downtown hotel yesterday.

They came to the annual meeting at the Westin St. Francis to entice investors, sign business deals, check out competitors or make a good impression on the CEO.

This year, the health-care capitalists converged because millions of baby boomers are getting older and beginning to get all sorts of diseases, and biotech and pharmaceutical companies want to make big money off of them.

The companies are entering a golden age of opportunity, a "longevity revolution," Ken Dychtwald, a consultant on aging to Fortune 500 companies, said in his keynote luncheon speech. Two-thirds of the people who have lived past age 65 in world history are alive today, and many are living well, changing what it means to be old.

A century ago, before antibiotics and sanitation, the life expectancy was 47, but Americans now have a life expectancy of 77.

Today's newborns are expected to live into their 90s or beyond, and they will invariably develop diseases like diabetes, arthritis and Alzheimer's in growing numbers, Dychtwald said.

The health-care market will be lucrative because baby boomers expect control over their bodies and well being and will go to great lengths to extend the quality of their lives.

Forward-thinking entrepreneurs, Dychtwald said, have capitalized on boomers with Band Aids, processed baby food, acne medication and fast food.

Treatments such as Viagra and Botox are the next bountiful markets for boomers, he said.

In a film clip during Dychtwald's speech, one character said, "This generation dropped acid to escape reality, and now they're dropping antacid to cope with it."

One of the companies at the conference aiming at the aging population was Seattle-based Dendreon. Yesterday, it reported its treatment was able to prolong lives of patients with terminal prostate cancer men usually in their 70s and 80s by a median of 8.4 months with far fewer side effects than chemotherapy. Its stock rose 25 percent on the news.

But it's not the potential market that matters most. It's the research progress and investors' appetites to risk bankrolling it. Last year's conference was grim after numerous companies failed to live up to their promises.

This year, participants feel differently because 17 drugs were approved by the Food and Drug Administration in 2003. Hundreds more are moving through stages of development.

The market appetite for new biotech IPOs has been tepid at best, but a few are angling. People walking the halls at the conference say some investors have regained their swagger.

"Last year, everybody was complaining about the market, and this year people are talking about what they're going to do with their money," said Bruce Montgomery, chief executive of Seattle biotech Corus Pharma. "This is more of a business meeting than a therapy session."

Christopher Henney, executive chairman of Dendreon, said a couple of money managers looking to invest asked him first thing in the morning which companies he likes.

Scott Halsted, general partner with Morgan Stanley Venture Partners in Menlo Park, Calif., said there is no "flavor of the month." Medical-device companies that have $40 million a year in revenue have a chance to go public, Halsted said, but he believes there will be few initial public offerings.

He's curious to see whether Eyetech Pharmaceuticals, a New York biotech working on macular degeneration, has a chance to go public. The disease causes vision loss, especially in the elderly.

"People are optimistic about health-care markets," Halsted said. "The question is where to put your money.

"Medical devices had their run. Biotechs had their run. Health-care services had their run. A lot of people are wondering how much room to run is left."