RALEIGH—Investors expressed starkly different opinions on the amount of capital available to healthcare, biotech, and food and agriculture companies at the “What are investors thinking” panel at the CED Life Sciences Conference in Raleigh, Tuesday.

Ron Meeusen, Ph.D , managing director of Cultivian Sandbox and co-founder and managing partner of Cultivian Ventures, which invests in seed through late stage food and agriculture companies, said, “unlike many sectors in venture capital,” there are hundreds of potential food and ag deals for every investor.”

So, he said, “Valuations have not been bid up. In a typical healthcare deal in Silicon Valley a company has a choice of six term sheets. In ten years and 23 investments, we only lost one to a competing term sheet. We go in, figure the valuation we think is right, and put it on the table. It’s a buyer’s market right now.”

Ron Meeusen

Cultivian prefers to lead new investments with syndicate partners and typically invests from $5 million to $15 million in its portfolio companies over the lifetime of the investment. Locally, it has invested in Advanced Animal Diagnostics.

“In the alternate world I live in,” Meeusen said, “There is too little capital and too many deals. It’s not a traditional investing area. Venture capitalists tell me, ‘We understand IT, medical technology and novel materials but food and agriculture is not an area we have any experience in.”

That is not all bad, since he noted, “We have a log of 60 venture funds that have reached out to us who say they do not have the expertise in the area to lead an investment but to call if we are looking for capital to round out a deal.” So, from Cultivian’s first fund, he said, “For every dollar we invested, we brought in $6 from co-investors.”

Too much capital in biotech?

On the other hand, Andrew ElBardissi, M.D., principal of the private transactions team with Dearfield Management said, “I would argue there is too much capital in biotech. It has gone up by an order of magnitude.”

Andrew ElBardissi, MD, investor with Deerfield Mangement.

ElBardissi added, “There is a tremendous amount of capital in biotech even given the risk level and it’s driving misbehavior. I don’t think we need any more capital and we think we see a correction coming.”

By misbehavior, he explained, “Newer investors see a shiny new toy they think will change the world. It may be a compelling investment, but may also be going in a completely incorrect direction. There is a lot of competition and valuations are up. That has driven companies in the wrong direction as they pursue strategic paths that are not efficient.”

Jorge Ramirez, vice president at H.I.G. BioHealth Partners, which has a $270 million fund, focuses on development stage and growth investments in the healthcare sector. It primarily invests in therapeutics, diagnostics, and medical devices and tends to invest from $10 million to $20 million in later stage companies.

Jorge Ramirez

Manufacturing returning to the U.S.

Ramirez said that when H.I.G. BioHealth looks at an opportunity, “We are intrigued if a big pharma fund has put in a couple of million dollars. It is a double-edged sword. Why is the strategic investor not interested in the asset? But on balance, we’re always happy to see an opportunity where big pharma put some money behind it because they were interested in tracking the technology.”

Ramirez said he sees opportunities in pharmaceutical-related services such as contract manufacturing. While ten years ago, many firms outsourced their manufacturing to India or China, the FDA is cracking down on those and there is renewed interest in U.S.-based manufacturing. “We’re seeing an opportunity where U.S. firms are willing to pay a little more for access to experienced manufacturers and developers.”

That could be important to North Carolina, which in 2012 was the second largest pharmaceutical manufacturer in the nation and has seen ongoing expansion of its pharma manufacturing sector.

The investors disagreed on the importance of management vs. the technology in a startup. Meeusen said, “I’m a scientist, and when I started ten years ago, I ranked the technology first. But I’ve learned to do the opposite. An A team with a B technology will win every time over a B team with an A technology.”

ElBardissi said, “I’m the other way. A lot of products with A-teams run into headwinds. For me there has to be a compelling technology, something that will transform healthcare in a meaningful way.”

Ramirez noted, “We slant heavily toward Andrew (ElBardissi).

All agreed on one thing, however. What they look for is a technology that drives efficiency and reduces costs.

 Fred Eshelman of Eshelman Ventures moderated the panel and stimulated the responses with his questions.