Life science companies, particularly biotechs, are difficult to fund. In part, this is due to a mismatch between their funding needs and the main financial sources. Private equity and venture capital funds (VCs) must typically place and recoup investment in five to seven years, whereas the cost of getting a drug to market can run to $800m (£427m) and take 10 or more years.
Companies therefore often turn to other sources of finance, typically from the pharmaceutical industry through licensing or other ‘partnering’ deals. We are now seeing deals where equity investments have the characteristics of a partnering deal and vice-versa. Some venture and private equity investments – even M&A deals – can be structured to follow the development of technology. This can change the risk profiles between the parties and therefore stimulate deal flow.
