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TRENDSPOTTER: The World Has Not Ended, It Has Just Changed

The terrorist attacks on the United States on Sept. 11 have changed a lot of things and exacerbated others. For one, they have changed us as a nation. Our beautiful home has been savagely attacked. For those of us in the New York City area we all know someone who perished or know someone who knows someone … it’s only one degree of separation.  

For the rest of the nation the impact was psychological, the mood manifested in last week’s market performance. This week offered a bit of a bounce, but that is to be expected. Time will tell if the upward momentum can be sustained.

The attacks that toppled the twin towers of the World Trade Center and severely damaged the Pentagon, together with a plane that was hijacked and crashed outside Pittsburgh, Penn., have brought genomics into the limelight in a macabre way. As you read this, authorities in New York continue to search for remains of victims, analyzing whatever tissue fragments they find against genetic samples provided by relatives. Twenty-first century science and technology will bring closure and some comfort to their families.

How do these recent events affect companies in our space?  These tragedies affect us in many ways. Before Sept. 11, most Americans were worried about the economy. Signs of a weakening financial outlook were beginning to manifest themselves in many ways, including financial markets that were becoming increasingly skittish.

After the attacks the markets were forced to take a bit of a vacation. When they reopened almost a week later the avalanche of selling led to the worst sell-off in more than 70 years.  

If you were contemplating an initial public offering or a follow-on financing in the next six months, plan to shelve those goals if you haven’t already. The IPO and secondary markets were buried deep by last week’s mass selling.

Many investors are suffering from shock. First they were given weak economic numbers, then came the attacks followed by the semi-anticipated 14 percent sell-off.

But some of us are poking our heads out of the bunker and some of what we see we like:  healthy companies with reset valuations. If in the past you have been approached by funds that have expressed an interest in investing in your company, call them. Many of those funds will probably like you better at today’s price.

And talking of price, don’t let that deter you.  If you need cash and it is being offered to you, take it. Don’t wait for your stock price to recover because it may not see past price levels for some time.  

Be creative about structure and think out of the box. As I have said previously, cash is your biggest and most important asset.

If you are not a public company the picture may not be as pretty. Public valuations help set private valuations. With the IPO market closed for the foreseeable future, raising funds will be more difficult.

If you need cash, go back to your existing investors. Their participation in a new round is critical. Be sensible about valuations; you do not want to scare off new investors. Be prepared for a “down round”--that is, a financing round that is priced below your last round.

All companies should watch their expenses. Stay focused and scale back or suspend projects that drain cash away from programs that are mission-critical to executing your business plan and building a business.

Sept. 11 was not the end of the world. It is just a marker in time that is forcing us to view the world differently.

Ira Leiderman is managing director of the Palladin Group, a New Jersey-based investment management firm. He was previously a senior healthcare banker at Gerard Klauer Mattison. You can e-mail him at [email protected] .

TrendSpotter is a weekly column that focuses on how trends in politics, patent law, and the US and European markets affect the genomics industry. The column appears every Friday. Next week, Robert Goldberg, a senior fellow at the National Center for Policy Analysis and a senior research fellow at the Ethics and Public Policy Center, will write about how recent trends in politics are affecting the genomics sector.

To access previous columns just enter the word "Trendspotter" in the archive search window on the homepage.

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