Although there is guarded optimism all around, Mr. Butler believes that we can expect any shock to the system to cause major trauma. “Perhaps if ee get through the next several months we will do okay,” he says. “There are a lot of IPO discussions ongoing among some really good-quality companies. If they are priced right, they should perform well and enable other companies to possibly do the same.”

Right now, liquidity remains the No. 1 issue. Poor liquidity is forcing short-term actions that otherwise would not occur, according to Mr. Butler. “We cannot fault that, as firms need to preserve and make difficult decisions even though good companies and technologies will get squeezed out of existence,” he says. “Long term, I would say most believe we come through in good shape but leaner. The industry will employ fewer as fewer companies are started.”

The conference saw quite a bit of offshore presence, and according to Mr. Butler, there seems to be money looking to invest in U.S. technology and expertise. He speculates that this may help fill part of the liquidity void.

“All in all it was a solid, well-attended event and the best harbinger of the current state of the industry,” Mr. Butler reports.

In his previous update, Mr. Butler reported good spirits among the attendees. However, there seems to be an East Coast/West Coast divide.

“The West Coast people seem much less upbeat while the East Coast is acting more positive,” Mr. Butler says. “One East Coaster called the attitude ‘cautiously optimistic’ while a few Westerners said things are slow. My bet is that the advantage of having big companies out East is an edge that will be exploited.”

Meanwhile, the Midwest companies seem strongest of all. Mr. Butler speculates that it’s their conservative style playing to their advantage.

Additionally, Mr. Butler has seen signs of hiring among companies such as Cardinal Health, Covidien, and even some smaller players. “It’s not a lot, but it’s like Spring with the first sign of good weather returning after winter,” he says.

Mr. Butler has spoken with a few deal makers who admitted they have had one of their best years in 2009. “That means deals were done,” Mr. Butler reports. “These weren’t ‘junk’ deals either, and they confided they are still busy.”

Upon arriving yesterday, January 11, Mr. Butler reported that the event was in full swing with a good crowd as expected. Many deal makers are in attendance and seem in good spirits.

“Morale is pretty high,” Mr. Butler says. “Many need money, but either they are less worried or they have come to accept events.”

Last night the conference gave way to the usual parties and receptions. Spirits remained high with the money guys.

“If they are sincere, we should see a slew of financing announcements in the coming weeks or months,” Mr. Butler reports. “If not, it will be a sure signal that all is not well. And these were game faces.”

Back on the conference floor this morning, Mr. Butler reports that while companies are still looking for money, a number are getting traction with big pharma. Whether that results in funding remains to be seen.

“I sense there has finally been some solid thinking about the future, dealing with healthcare reform and lack of pipelines, such that the themes discussed are different and better focused,” Mr. Butler says. “Cardinal’s CEO is presenting some thoughts on their new paradigm. Also, the genetic diagnostics sector is gaining momentum and a ‘legitamacy’ I don’t think they’ve had in the past.”

Venture continues to look for less risk without surrendering their upside. Mr. Butler wonders whether the venture model will go through a major change. “They may need to since their old approach may not enable them to deliver expected returns in today’s world,” he says.

Stay tuned for additional updates as the event progresses.