Can Big Pharma Save Biotech Investors?
Executive SummaryAll the biotech stock indices are down; record numbers of companies are selling at lower-than-cash valuations. Investors want Pharma to step up and buy, removing inventory from the market, and spreading limited investment dollars over a smaller set of opportunities. While buyers say they aren't going to radically change their strategies simply to take advantage of cheap prices, it's clear that more deals will get signed - mostly because more sellers will accept terms they once would have rejected. . In short, a hotter dealmaking climate will keep biotech healthy enough to survive as an industry, albeit a smaller one, and, perhaps, with a slightly lower ceiling on returns.
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Corporate venture groups are poised to become one of the main sources of funding for early-stage biotechs thanks to the current economic climate. Even if corporate venture groups invest at the same levels as previous years, some industry veterans believe they could play a role in up to half of the early-stage financings this year, largely because the traditional sources of financing--the public market and venture capital groups flush with cash--have disappeared. And the new vigor of corporate venture offers big benefits to both small biotechs and Big Pharma.