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2006 Financings: IPOs and Pharmas Acquisitions of Private (IPO-less) Companies


Description: Private start-up life sciences companies use at least two different financing strategies: sell the whole company to a larger pharmaceutical company or sell shares of the company on a public market.

While these young companies may feel they are too young to die from an early acquisition, big pharma and private investors have a quite different perspective.

Get the Answers You Need to Shape Your Strategy

The market for acquiring private (IPO-less) companies is dynamic; on average, whole-company buyouts raise much more money than would an IPO. Pharma companies are cherry-picking the best product and company opportunities at an earlier and earlier stage of development.

Does the private company benefit from being bought out by a big pharma company? What are the benefits for big pharma?

Start-up life sciences companies dream of living long and prospering by developing new and improved medicines for the benefit of humankind, yet the IPO market is less than robust. Many private companies will be consumed by larger companies sooner than they might like.

Why is it so difficult for start-up companies to raise the funds they need to remain independent? Are there any options other than surrendering to a buyout?

Investments from 2006 public markets have not been all that satisfactory as financing vehicles for private companies or their investors. What deals took place so far in 2006 and how did the companies fare? Does the current state of the IPO market mean trouble for financing deals in the near future?

Investor exit strategies: overview of whole-company (IPO-less) buyout and IPO financing strategies.

Whole-company buyout strategy: benefi ts for large pharma companies and disadvantages for private companies.

IPO strategy: benefits for private companies and the current IPO market.

Select companies that completed IPOs in 2006: Acorda, Altus, BioMimetic, Cleveland BioLabs, Novacea, Omrix, Osiris, Vanda, Warner Chilcott.

Spectrum Expert Commentary: the view from an internationally known pharmaceutical consultant.

Outlook: overview of future financing opportunities for start-up companies.


Contents: Executive Summary 3
Strategic Considerations 3
Stakeholder Implications 3
I’m Too Young to Die! 4
Evolving Investor Exit Strategies 4
IPO-Less Buyouts of Private Companies 6
Spectrum Expert Commentary: Big Pharma Fuels the Market for Private Company Buyouts 8
John Ansell, M.A. 8
U.S. Initial Public Offerings 11
Top Performers 12
Less-Than-Robust IPO Market 15
International Initial Public Offerings 16

Select Companies That Completed a 2006 IPO 19
Acorda Therapeutics 22
Altus Pharmaceuticals 23
BioMimetic Therapeutics . 24
Cleveland BioLabs 24
Novacea 25
Omrix Biopharmaceuticals 26
Osiris Therapeutics 27
Vanda Pharmaceuticals 27
Warner Chilcott 28

Outlook 28

Tables
1. Acorda Therapeutics’ Financing History, 2001-2006 5
2. Select Acquisitions of Private Companies, 2005-2006 10
3. Select Life Sciences Companies Completing a U.S. Initial Public Offering (first 9 months of 2006) 14
4. Initial Public Offerings—Withdrawn, Postponed, or Long-Pending, 2006 17
5. International Initial Public Offerings (first 9 months of 2006) 18
6. Underwriters and Major Shareholders Invested in Select IPO Companies (first 9 months of 2006) 21
7. Recently Completed U.S. Initial Public Offerings, Q4 2006 30

Figures
1. Financing the U.S. Biotechnology Industry—Partnering vs. Public/Private Financings, 1999-2005 7
2. Exit Strategies Through Mergers and Acquisitions, 2005-2006 12
3. Worldwide Initial Public Offerings in the Life Sciences Industry (2004 through the first 9 months of 2006) 13
4. Post-IPO Gains and Losses in Stock Prices for Select 2006 IPOs 15
5. Market Capitalization of Companies Completing an Initial Public Offering (first 9 months of 2006) 20

Figure A: Financing the U.S. Biotechnology Industry, 2005 9


Companies Mentioned Abmaxis Achillion Pharmaceuticals Acorda Therapeutics ActivBiotics Affymax Alexza Pharmaceuticals Altus Pharmaceuticals Amicus Therapeutics Artes Medical Arthro Kinetics Asthmatx AstraZeneca BioMimetic Therapeutics BioVex Cadence Pharmaceuticals Caprion Pharmaceuticals Cardica Catalyst Pharmaceutical Partners Cephalon Cleveland BioLabs Corus Dynal Emergent BioSolutions Genomic Health Gilead Glycart GlycoFi Glycotex Hansen Medical Home Diagnostics Idun ImaRx Therapeutics Intercytex Invitrogen Iomai Johnson & Johnson KuDOS Pharmaceuticals LAB Research Lipoxen Luna Innovations Medicago Merck & Co. Mindray Medical NeuroMedix Northstar Neuroscience Novacea Obagi Medical Products Omrix OncoMethylome Sciences Osiris Therapeutics Peninsula Pharmaceuticals Pfi zer Pharmasset Phynova PowderMed PTC Therapeutics PuriCore QuatRx Pharmaceuticals Renovo Replidyne Restore Medical Rinat Roche Rosetta Genomics Salmedix SGX Pharma St. Francis Medical Sucampo Pharmaceuticals Syrrx Takeda Targacept Thermage Trubion Valeant Valera Pharmaceuticals Vanda Pharmaceuticals Volcano Warner Chilcott Xcel


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