The Drug Delivery Valuation Dilemma
This article was originally published in Start Up
In comparing the increase or decrease in a company's valuation pre and post deal signing, we discovered that drug delivery companies seem to have hit a kind of valuation wall.
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Start-Up decided to see how bioceh licensers fared in receiving premium equity investments from their pharmaceutical counterparts four-months post deal signing.
Contrary to assumptions, public biotech companies can actually sell their equity privately at premiums to their 3-month average trading price. As for illiquidity, the bane of the biotech investor: it may actually help some companies increase their offering prices.
This month, we compared valuations for those biotech companies which had both gone public in '95 or '96 and had, in 1998, completed a round of private financing. As the amounts of private money raised got larger, so too did market cap valuations. One major reason: the larger the valuation, the more investors are willing to invest.