February 9, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
A panel of financial experts who closely follow the trendier aspects of all things biotech investing said today in New York that while deal making was strong in 2014, they expect to see more deals in 2014, though deal size may be smaller.
The group made the comments as part of a panel at the 17th Annual BIO CEO and Investor Conference at the Waldorf-Astoria in New York City. Last year, the conference had more than 1,400 attendees from 26 different countries, as well as at least 750 investors and around 1,820 partnering meetings scheduled, according to event organizers.
The members of the panel “Emerging Trends in Deal Structures” were Bruce Booth, partner, Atlas Venture; John Gustofson, senior director for ventures and early stage collaborations for AbbVie; C. Randall Mills, president and CEO, California Institute of Regenerative Medicine; Adelene Perkins, CEO, Infinity Pharmaceuticals; and closely watched biotech analyst Mark Schoenebaum, managing director, Evercore ISI. It was moderated by Effie Toshav, partner, Fenwick & West.
They spent close to an hour parsing recent approaches to designing performance milestones and structuring earn-outs in mergers and acquisitions, plus the rising trend of swaps of therapeutic assets to realign product portfolios. They also covered other trends including non-dilutive public-private funding, an increasingly popular option for investors interested in the white-hot biotech sector.
Among the hottest targets in 2015, the panel said new therapies that treat Alzheimer’s, plaque attackers, cancer targeting and the recently hot CAR-T all remain frontrunners for investor interest. They also said that the microbiome, eye drugs, regenerative medicine and preclinical models remain “key areas” to monitor. Of course, each panelist had their own pet favorite for what will be big in 2015.
“We think that the next big trend in drug discovery with be protein folding,” said Gustofson, senior director for ventures and early stage collaborations for AbbVie.
Overall, 2014 saw a record number of deals, with 364 done in 2014, worth $215 billion. That was sharp spike up from $120 billion year the year before, but of those done in 2014, only 28 percent had earn-outs. Earn-outs, a pricing structure in mergers and acquisitions where the sellers must “earn” part of the purchase price based on the performance of the business following the acquisition, have remained tricky for many biotech companies, because of the mercurial nature of clinical drugs and wobbly pipeline performance.
Still, panelists remained upbeat about how involved large companies were in deal-making in 2014. “Pharma came back to the table,” said Toshav, “with funds readied for disruptive ideas anywhere in the world.’”
“The capital markets are open wide. If you’re a company who needs money, what are you waiting for?” said Schoenebaum.
But the panel advised investors that while 2015 will likely have more deals, the overall deal value will probably be lower, because 2014 was such a watershed event. They cautioned investors to reach for better returns by pulling out at milestone failures.
“Don’t fall in love” with funded programs, warned Booth. “What investors want to see is data, data, data. Focus on the best product. We always want risk lowering through clinical targeting.”
Within those deals, things like contingent value rights are possible, but only for great deals. “2014 was ‘The Year of the One Timers,’” said Schoenebaum, referring to popular deal terms like tax inversions and asset swaps.
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Who Do You Think Will Be Sanofi’s New CEO? French drugmaker Sanofi said Thursday that it will name a new chief executive in mere weeks, as it attempted to put to rest rumors that the company could not find any executives willing to take the reins after it unceremoniously ousted its previous CEO last fall. Who do you think will soon be crowned king? BioSpace wants your opinion!
