Validating the Validating Deal
This article was originally published in Start Up
With M&A exits on the minds of venture investors and management alike, the idea that a strategic alliance on an important project or platform application might dilute downstream acquisition value is a serious consideration for biotech firms. Yet an analysis of private biotech acquisitions from January 2005 through early September 2008 suggests that those firms that strike a strategic alliance prior to acquisition actually do much better, exit-wise, for their backers.
You may also be interested in...
Biotechs in recent years are more likely to fetch a higher acquisition price – practically the only way for investors to exit these days – if the company has previously signed a major alliance. But the partners aren't necessarily the ones buying.
In a still-frozen IPO market, acquisition has become the go-to exit for biotech VCs, but an analysis of the past four years' deals suggests the market may have peaked. Of more than 180 private biotech acquisitions since 2005, fewer than half in each year resulted in a reliable exit for investors, and those numbers are trending downward. Although the most active acquirers amounted to a list of the usual suspects, the bulk of acquisitions were conducted by a diverse set of smaller public and still-private firms. We also review the characteristics of those companies that have had success in terms of good exits for investors.
Recent excitement around exosomes underscores their potential to solve drug delivery challenges that have limited the power and applicability of the biopharma industry’s growing arsenal of therapeutic modalities.