Step-Ups in Convergence Plays
This article was originally published in Start Up
The rationale for drug-device convergence companies-combining the device sector's speed to market and relative lack of clinical risk with the biopharma sector's margins-may be gaining some traction as of late. Half of the eight device IPOs to close so far this year, in fact, are arguably convergence plays.
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A handful of recent biotech-device company deals have highlighted the potential of drug-device convergence as natural extensions of the ever-popular repurposing and drug delivery models espoused by investors aiming to reduce the risks associated with drug discovery. Venture capitalists are eager to get in on the game, but drug and device hybrid business models are few and far between. True convergence start-ups remain thin on the ground, a fact VCs say reflects the additive nature of drug risk and device risk.
While START-UP first noted an industry-wide tendency to overestimate the prices IPO investors were willing to pay in early 2005, IPOs have regularly fallen short of the anticipated price ever since, with few exceptions.