Investing in French Biotech--When It's Not Too French
This article was originally published in Start Up
Neuro 3d's €31.5 million third round late in 2004 was one of France's largest private biotech financings for years. But none of the investors are looking to France to provide the exit opportunities, which are more likely to be found in M&A, or in Switzerland.
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Sonus' proposed acquisition of Synt:em answers the French biotech's call for a financeable owner with upside, preferably in the US. For many European biotech firms, M&A may be their only way out of a financing hold. The Synt:em deal-granted its approved early next year--shows that it's still possible to call favorable deal terms, however.
Sanofi-Aventis stands apart from most other Big Pharma mergers. Granted, it shares many of the same drivers as previous tie-ups: looming patent expiries and hunger for size. But the unashamed political intervention, which helped turn one of the most vocal bidding wars from bitterly hostile to friendly overnight, was quite extraordinary. It points to the still delicate balance in France between commercial freedom and nationalistic pride; more importantly though, its effects may hamper Sanofi-Aventis' success on the global stage.
A handful of private European biotechs have raised money, but the process takes time, and the sums aren't great. Since VCs can invest in late-stage companies at the same prices they used to pay for newer ventures, early and mid-stage biotechs are being forced to broaden their search for funds, and meet growing demands for cost cutting and detailed spending plans. Both VCs and biotechs may emerge stronger from the squeeze, however.