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Beyond the biotech IPO: a brave new world
Bruce L Booth
After a decade of significant challenges, biotechs long-term sustainability depends on making fundamental changes to its traditional business model.
commonly held perception in the biotech industry is that the sector is currently going through an acute painful malaise: no initial public offerings (IPOs) since late 2007, tough funding environment and more corporate biotech failures than ever before. In reality, however, these grave symptoms are not the manifestation of a singularly acute condition: the sector has been suffering from a chronic deterioriation in the viability of the public capital markets for the past decade. To return to health and vitality, the biotech sector needs to start, build and achieve liquidity with new investments by focusing on three central strategies: first, create companies with leaner, more focused business models; second, fund more innovative and less incremental therapies; and third, capture value over the long term by engaging larger firms as collaborative risk-sharing partners earlier in the corporate life cycle.
IPO: sorrow or success?
Commentary about the dearth of life science IPOs has been a common refrain over the past 18 months, and this recent crisis in biotech financing certainly appears worse than the post-genomic bubble nuclear winter of 2002. Forecasters trying to predict the return of the IPO market speculate about 2010, and many management teams have hunkered down waiting for the reopening of the public capital markets. Although optimism is certainly a requirement for a career in biotech, if one reflects on the past decade in the biotech public capital markets, a much less sanguine view is warranted and certainly necessitates a new mind-set on the part of investors and managers alike.
The most recent period or window for biotech IPOs began in late 2003 with Accuspheres
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2009 Nature America, Inc. All rights reserved.
20
18
16
Number of biopharma
IPOs closed
14
12
10
8
6
4
2
1990
1998
1997
1996
1995
1994
1993
1992
01991
2003
2002
2001
2000
1999
Year (quarterly data)
2006
2005
2004
2007
2008
Step-up on private capital invested
10
9876543210 Jan 91Oct 94 Mar 00Mar 01
Jun 95Jun 98 Oct 03Nov 07
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Top quartile
Median step-up