I spent some time perusing a few materials I picked up at the JP Morgan 32nd Annual Healthcare Conference last month in San Francisco. Understanding the life science sector is not high on my priorities list. Checking out hot single women, for example, is a much higher priority. I noted a few things unique to deal flow in the sector that deserve a mention.
Some investment banks present a range of possible deal structures to a corporate client looking to sell. My impression of contingent price purchase payments that are tied to specific milestones is that they reflect events that drive share prices higher. FDA approvals for medical devices and successful drug trials spring to mind.
I listen to plenty of investor relations pitches from small-cap drug companies trying to get through Phase 2 trials. I now suspect a lot of them would be better off if a Big Pharma player came along and gathered them into rollup transactions. This would achieve economies of scale in capex for research even if the acquired targets outsourced a lot to CROs. The single-drug small caps that don't get acquired have very slim chances of succeeding on their own. If they don't make it, some kind of distressed acquisition or Section 363 sale probably awaits if they're lucky enough to get DIP financing.
Plenty of law firms have published white papers on freedom-to-operate (FTO) studies they perform as part of a client's IP strategy. I still think these kinds of tactics are little more than full employment programs for attorneys. Life science startups can do their own patent searches cheaply. I think startups should search the World Intellectual Property Organization (WIPO) before hiring a potentially expensive attorney for an IP strategy. Free research at the start can save money by forgoing unneeded expenses.
If my career had taken a different turn after graduate school, I may very well have become fluent in these kinds of investment banking transactions. It was not meant to be, as investment banks would not consider my resume because of my non-elite background. The investment bankers I've met personally just sneer at me and tell me to get lost. I'm not an investment banker or attorney, so don't ask me how to structure any transactions. I don't handle mergers, spinoffs, divestitures, distressed sales, or any other such deals. I am a mere spectator to corporate finance action in life sciences. Any arbitrage opportunities from announced transactions in publicly traded firms are always available to every other retail investor watching this sector. I buy and sell things that are right for me.
Some investment banks present a range of possible deal structures to a corporate client looking to sell. My impression of contingent price purchase payments that are tied to specific milestones is that they reflect events that drive share prices higher. FDA approvals for medical devices and successful drug trials spring to mind.
I listen to plenty of investor relations pitches from small-cap drug companies trying to get through Phase 2 trials. I now suspect a lot of them would be better off if a Big Pharma player came along and gathered them into rollup transactions. This would achieve economies of scale in capex for research even if the acquired targets outsourced a lot to CROs. The single-drug small caps that don't get acquired have very slim chances of succeeding on their own. If they don't make it, some kind of distressed acquisition or Section 363 sale probably awaits if they're lucky enough to get DIP financing.
Plenty of law firms have published white papers on freedom-to-operate (FTO) studies they perform as part of a client's IP strategy. I still think these kinds of tactics are little more than full employment programs for attorneys. Life science startups can do their own patent searches cheaply. I think startups should search the World Intellectual Property Organization (WIPO) before hiring a potentially expensive attorney for an IP strategy. Free research at the start can save money by forgoing unneeded expenses.
If my career had taken a different turn after graduate school, I may very well have become fluent in these kinds of investment banking transactions. It was not meant to be, as investment banks would not consider my resume because of my non-elite background. The investment bankers I've met personally just sneer at me and tell me to get lost. I'm not an investment banker or attorney, so don't ask me how to structure any transactions. I don't handle mergers, spinoffs, divestitures, distressed sales, or any other such deals. I am a mere spectator to corporate finance action in life sciences. Any arbitrage opportunities from announced transactions in publicly traded firms are always available to every other retail investor watching this sector. I buy and sell things that are right for me.
