Big Pharma Outbids Public Investors: Step-Ups in Biopharma Exits

Lately, it seems the only private biopharma investors with much to cheer about are those whose concerns have been targeted for acquisition by Big Pharma: Merck & Co. Inc. paid $480 million in May to acquire GlycoFi Inc. and Abmaxis Inc. at an average of 10 times what private investors had paid in [See Deal][See Deal], while, in April, Pfizer Inc. paid a similar multiple to acquire Rinat Neuroscience Corp. : $500 million, for a firm that had raised $57.5 million in its history. [See Deal]While multiples of acquired biotechs have been significantly higher than those of biotechs exiting via IPO, average valuations haven’t been. In Exhibit 1 below, we compared average valuations and multiples of private biopharma exits by type of exit:

those that exited via Big Pharma acquisition over the past three years; those that exited via IPO over the past two years and had done one or more significant outlicensing deal prior to the IPO; those that hadn’t; and specialty pharmas (who usually don’t seek commercialization partners). While the Big Pharma buyout frenzy has occasioned speculation that licensing compounds out to partners without selling the company outright is effectively giving away the store, public markets haven’t seen it that way. Indeed, the IPO with the highest valuation was that of Coley Pharmaceutical Group Inc