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Bill Young of ViroLogic Inc. was not a man in a rush. When it came to bringing his 5-year-old biotechnology company public, he patiently waited until he thought market conditions were right. Then he put in a call to San Francisco-based law firm Cooley Godward. “The offering calendar was very crowded, and [Cooley] was very busy,” Young recalled. Young wasn’t alone. When biotechs are looking for legal representation, they very often seek out Cooley Godward, which has one of the most powerful life sciences groups around. Cooley helps these often immature startups do everything from protecting their intellectual property to working out issues with their venture backers to advising on initial public offerings. Three weeks after Young’s meeting with Cooley, an S-1 registration statement was filed for ViroLogic with the Securities and Exchange Commission. ViroLogic was just one of 15 biotech companies that Cooley Godward helped bring to market last year, helping them raise some $1.2 billion. ViroLogic’s principal products are tests which determine whether the HIV virus can reproduce in the presence of various drugs. Since its May 1, 1999, IPO, ViroLogic shares went from $7 to a high of $26.75, then, like so many other IPOs, subsequently shed its gains. But even with the recent IPO drought, especially among high-tech companies, Cooley, with its emphasis on biotech, has found a part of the market that is faring better than others. According to CommScan, a Newark, N.J.-based market research firm, biotech-related offerings soared from seven in 1999 to 54 in 2000. At the end of December, the Nasdaq biotech index sat at 1,024.04, up only 125 points since the beginning of 2000. Still, that was better than the Nasdaq composite index at the time, which had hit an 18-month low. Like the broader Nasdaq, the biotech index hit its high in March, at 1,596.5, fueled mainly by the publicity surrounding the elucidation of the human genome. “I think genomics is hot because the genome sequencing is near completion, and people see the same potential promise that they saw in the Internet. It’s a fundamental technological advancement,” said Fred Muto, a Cooley partner. The market downturn, particularly in the last two quarters, has hit the IPO market. Still, biotech issues more consistently got their deals to market, bringing robust business to issuer’s law firms. Despite the rocky public markets, “biotech had a great year,” said Jean-Francois Formela, head of Atlas Ventures. “It’s weaker now. But I would say it’s not as bad as the environment we’ve known in 1993 and 1994,” he said. “Compared to the other sectors, it’s better, but not good.” “Cooley is the first place people go for life science representation,” said Glen Sato, chief financial officer and vice president of corporate affairs for another client, Exelixis Inc. of South San Francisco. Sato was a corporate/securities associate at Cooley from 1988 to 1990. Known for its genetic research on simple organisms such as fruit flies and worms, Exelixis is on Cooley’s roster of IPO clients. Exelixis brought its $117 million offering to the public market April 11, trading more than 9 million shares at $13. The first day of trading saw the stock price rise by more than $2 to $15.19. But the shares recently dropped back to $13. Exelixis has a market capitalization of approximately $529 million. Exelixis and Cooley have also worked together negotiating and structuring deals with Bayer AG, Pharmacia Corp. and Bristol-Myers Squibb Co., which have awarded the company research contracts worth more than $180 million. Exelixis didn’t always use the law firm, Formela said. But when its CEO decided to relocate the company from Boston to California, Exelixis was in the market for a law firm that knew the high-tech startup landscape of San Francisco. The representation began shortly after Exelixis moved there in 1997. The company, Formela said, “picked Cooley because they were great. You run into them in the marketplace all the time.” Biotech has been good to Cooley, which, like many law firms representing emerging companies, often participates in a young client’s first round of investment. “There is so much opportunity out there that if we offer our services as lawyers, we ask for an opportunity to invest as a condition of the representation,” said Muto. Although Cooley ranked ninth by dollar volume on Thomson Financial Corp.’s Issuer’s Counsel list for 2000, the law firm came in second in number of deals in which it acted as issuer’s counsel, right behind Silicon Valley powerhouse firm Wilson Sonsini Goodrich & Rosati. Cooley had 23 deals, compared to 41 for Wilson. The firm’s expertise extends to the myriad partnering agreements between nascent biotech enterprises and large drug companies. That’s the case with Mountain View, Calif.-based Aviron. A Cooley client from the start, Aviron develops vaccines against the flu, herpes and other viruses. “We are small, and we don’t have revenues yet,” said Carol Olsen, head of corporate development. “Our capital comes from signing agreements that provide for milestone payments.” This is a common biotech strategy. Instead of relying strictly on capricious equity markets, biotechs have sought out corporate support to survive. Cooley partner Barbara Kosacz noted that emerging biotechs often need the marketing and distribution infrastructure of the big pharmaceutical companies to sell products. Earlier this year, Olsen and Kosacz closed a licensing deal with Madison, N.J.-based American Home Products Corp. in which the intellectual property rights of its live-virus flu vaccine return to Aviron at the end of the term. “It was a fixed-term deal, so we are not bound forever,” Olsen said. “It’s not common to get product rights back.” Not every biotech has — or wants — partnering deals under its belt. “It all depends upon what standards the IPO market is looking for,” said Robert Jones, the partner who heads Cooley’s life sciences department. “In a tough market, you might need a couple of partnerships, but if you don’t, and have no advanced products or revenue, then no IPO.” Another Cooley client, Mountain View, Calif.-based IntraBiotics Pharmaceuticals Inc., had its IPO in late March. “They [IntraBiotics] did do a corporate partnering deal with Pharmacia Corp. three years ago, but later Pharmacia decided to drop the project,” said Jones, who was happy the companies pulled apart without litigation. IPO investors are less enthusiastic about a company encumbered by litigation. Another Cooley biotech-related client that recently made its debut was Genomica Corp. The maker of software products for pharmaceutical and biotech researchers filed for a $117 million IPO in March. The Boulder, Colo.-based company counts AstraZeneca Pharmaceuticals LP, GlaxoWellcome PLC, Parke-Davis Pharmaceutical Research and the National Cancer Institute among its clients. Genomica didn’t come to market until September, after increasing its price range once and twice decreasing the number of shares offered. When it finally began trading –floating about 30 percent of the company — it closed barely above the $19 per share price, reaching a market capitalization of nearly $402 million. Now, like so many other new issues it’s trading below its issue price, at $6.13, down from its 52-week high of $23.38. Operating a life sciences group like Cooley requires a certain insight into the underlying science. Today more than 10 of Cooley’s licensing and patent attorneys have advanced life sciences degrees. The firm’s reputation in life sciences has even lured associates from other firms, such as David Urso, 36, a former Wilson Sonsini associate. Urso brought his undergraduate degree in molecular biology and post-graduate experience studying the molecular pathogenesis of autoimmune diseases such as lupus and scleroderma to Cooley. He now works for DNA Sciences Inc., one of the firm’s clients. “There’s just a larger critical mass of people excited about biotechnology [at Cooley],” said Urso. “Even during the industry’s lean years, when venture capitalists and other tech law firms abandoned biotech, Cooley remained committed to the industry,” he said. The partners are proud that the firm was at the heart of biotech’s birth in the late 1970s, guiding genetic engineering pioneers Genentech Inc. and Amgen Inc. through their earliest stages. “Genentech and Amgen really came out of the firm’s traditional venture capital law practice,” said Jones, a 21-year Cooley veteran. “That had the effect of pulling the firm into the emerging new technology of the time. The younger private companies frequently want more direction on how to structure deals. That’s where we play a more active role.” In fact, it was on hiking trips up Mt. Tamalpais (near San Francisco) that Genentech co-founder Robert Swanson and Lee Benton, then a 29-year-old Cooley attorney nurtured their friendship that had begun when they worked together resolving a dispute between a failed tech company and its investors. “That sort of bonded us from a professional point of view, and then we became friends as well,” said Benton. “When Bob decided to try and start the new biotech company, he called Lee, who helped him put the company together, and went along on presentations [to investors],” said Cooley’s Bob Jones. The original venture financing was provided by Kleiner, Perkins, Caufield & Byers, “so it was helpful for us that Frank Caufield and Brook Byers had each worked with Lee on deals,” said Jones. Kleiner Perkins was willing to entertain Swanson’s idea of investing in biotech, a risky proposition, given that until then most research and development was done at the university level. “It was hard to describe the new concept because … hardly anybody had even thought of commercializing, what became biotechnology,” said Benton. Today, Benton is Cooley’s managing partner. Copyright (c)2001 TDD, LLC. All rights reserved.

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