Biotechs: Show Me the Money

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Money makes the biotech world go around. However, quicker circulation of that cash is driving both trends in new investment in start-ups and the approach of investors to exits. Increasingly, to get funded, new companies need to demonstrate a fast track approach that will allow the company to hit key milestone events swiftly, and those milestones may well be revenue generation events or even

profitability. Existing companies are increasingly taking advantage of the concern found in larger pharmaceutical companies that their development pipelines are not sufficiently advanced to replace products that will lose patent protection. M&A and licensing deals between big pharma and biotechs have taken off and the competition for those deals has allowed investors and companies

increasingly to bang the table and ask big pharma companies to “show me the money.”

New Deals

Who is investing? The answer in the US and the UK is that for pure drug research and development plays, fewer venture capital (VC) houses are interested. For example, Apax Partners has made its intention clear that it will not look at new research & development (R&D)-focused life science

companies. They are not alone. The sums required to be invested cannot command the desired rate of return and the payback period can be too long. Certain funds are increasingly focused on more classic private equity plays in the healthcare sector, chasing classes of assets that can support a leveraged structure.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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