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The Trouble with Spin-Offs

This article was originally published in Start Up

Executive Summary

Drug firms have created relatively few venture-financed spin-offs. The central reason--the valuation impasse between VC and pharma--is as much pscyhologically rooted as financially.

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Cerenis: Aspiring to Esperion?

When Esperion's ex-VP chemistry and technologies Jean-Louis Dasseux, PhD co-founded Cerenis Therapeutics in March 2005, he was doubtless inspired partly by Esperion's $1.25 billion sale to Pfizer in December 2003. So were a handful of top-notch VCs including Sofinnova Partners and HealthCap (a previous investor in Esperion), who poured in €25 million ($30.5 million) in August 2005.

Cerenis: Aspiring to Esperion?

When Esperion's ex-VP chemistry and technologies Jean-Louis Dasseux, PhD co-founded Cerenis Therapeutics in March 2005, he was doubtless inspired partly by Esperion's $1.25 billion sale to Pfizer in December 2003. So were a handful of top-notch VCs including Sofinnova Partners and HealthCap (a previous investor in Esperion), who poured in €25 million ($30.5 million) in August 2005.

What VCs Won't Let You Give Up to Pharma

A VC will only object to deal structures which cap the upside for investors--a specific limited price, for example, in return for successfully developing an asset. If the deal leaves a residual element of upside, it could be just fine, even if it seems to take rights to an entire pipeline.

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