Do biopharmas that win backing from corporate venture arms run by big drugmakers have a better chance at striking licensing deals, selling the business to acquirers or completing an initial public offering? A new analysis suggests that the answer is, indeed, yes. How so? Presumably, the strategists at big pharma venture funds have better insight into what makes a compound and a company more attractive to prospective partners and investors.
That is the conclusion, anyway, in a new report from Burrill & Company, the life sciences financial services firm, which looked at all biopharma venture investments made between January 1, 2000 and December 31, 2011, in the S&P Capital IQ database. A total of 2,907 companies received - and disclosed - venture capital funding through 5,100 financing rounds and 9.9 percent, or 286 companies, received funding, in part, from a corporate venture fund.
Of those with corporate venture funding, 24.5 percent, or 70 companies, were acquired compared to 14.4 percent, or 380 companies, for those without corporate venture funding. As for licensing, 48.4 percent, or 139 companies, that received corporate venture backing entered into at least one agreement, compared with 29.9 percent, or 782 companies, without corporate venture backing. When it came to IPOs, 12.2 percent, or 35 corporate venture-backed companies successfully completed an IPO, compared with 7.8 percent, or 205 companies, that did not receive corporate venture backing.
As Burrill sees it, backing from a big pharma venture fund helps validate the game plan and is also more likely to provide an exit for investors. Of course, one might also assume such venture investments may yield financial and strategic dividends for the big drugmakers involved, but that did not always play out. In fact, only 8.6 percent, or six of the companies with corporate venture backing were acquired by the parent of that corporate venture fund.
One further nugget: there was no significant difference between the two groups in terms of the time from first venture funding to an acquisition or IPO. The companies backed with corporate venture capital achieved exits, on average, at four years, compared with four years and three months for those without big pharma corporate venture money. As to which group fared better, well, that is unknown (here is the report).
benjamins thx to amagill on flickr