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Jazz Pharmaceuticals' IPO: Taking Stock of VC Dilution

 
• By Chris Morrison

The stockholder breakdown in Jazz Pharmaceuticals demonstrates how the company's founding VCs were significantly diluted by that company's massive Series B in 2004. As the company prepares for IPO it's worth considering how Ikaria Holdings' backers last month pulled in private equity support and managed to maintain their stakes in the company.

When Jazz Pharmaceuticals Inc. took in $250 million in Series B money back in 2004, it set itself up nicely to in-license the products and technology it needed to build its business. [See Deal] The fundraising was the biggest Series B round ever and represented the debut of Kohlberg Kravis Roberts & Co.—best known for mega-leveraged-buy-outs (LBOs)--in the very un-leveraged world of biopharmaceuticals. (See "Jazz Pharmaceuticals: The Concept Bet, at a Whole New Level," START-UP, April 2004 Also see "Jazz Pharmaceuticals: The Concept Bet, at a Whole New Level" - Scrip, 1 April, 2004..)

But mostly lost in all the musical puns and superlatives was the impact private equity dollars had on Jazz’s VCs....

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