Strategy First, Execution Second: Why Life Science Entrepreneurs Should Adopt a Top-Down Mindset Early
Keywords:M&A, IPO, Finance, Sector
Despite the dedication of the management team and board to a company’s success, an often overlooked component is the dynamics of the segment in which the company operates. In an effort to demonstrate the importance of the external view and how segment dynamics are likely to significantly impact the reality of companies, we analyzed recent data in the three-year period between 2015 and 2017 pertaining to financing events, M&A transactions and initial public offerings (IPO) in three separate sectors: therapeutic devices, oncology therapeutics and antibiotics. The analysis presented will provide management with a good estimation as to the required capital to achieve value-add milestones as well as the anticipated return on investment. These examples demonstrate the fundamentally different dynamics of three sectors, which will impact the most probable path to liquidity of companies in those sectors. Therapeutic devices have to often get regulatory approval prior to an exit where exits happen earlier in clinical development for the oncology therapeutics sector. Despite the high unmet need, there have been limited exits in the antibiotics sector. In all cases, return on investment is greater when the company’s exit included being acquired versus an IPO. This data demonstrates that exit opportunities are largely sector-dependent and suggests substituting external formal thinking, market-driven evaluation and analysis for inward-looking and biased judgment will being beneficial crafting a mature business case as well increasing the probability of success.
Ben-Joseph, O. “Where the Bodies Lie.” Nat Biotechnol. 2016 Sep; 34(9):909-11
Ben-Joseph, O. “How Cognitive Bias Undermine Value Creation in Life Science M&A.” In Vivo, 2017.
“Antibiotics Market Size to Reach $57.0 Billion by 2024: Grant View Research, Inc.” PR Newswire, 2016, https://www.prnewswire.com/news-releases/antibiotics-market-size-to-reach-570-billion-by-2024-grand-view-research-inc-596121101.html.
Fernades, P. and E. Martens. “Antibiotics in Late Clinical Development.” Biochemical Pharmacology. 2017; 133:152-163.
EY. “Biotechnology Report 2017: Beyond Borders, Staying the Course.” 2017, http://www.ey.com/Publication/vwLUAssets/ey-biotechnology-report-2017-beyond-borders-staying-the-course/$FILE/ey-biotechnology-report-2017-beyond-borders-staying-the-course.pdf
Norman, G.A., “Drugs, Devices, and the FDA: Part 1: An Overview of Approval Processes for Drugs.” JACC: Basic to Translational Science, 2016; 1(3):170-179.
Makower J et al. “FDA Impact on U.S. Medical Technology Innovation: A Survey of Over 200 Medical Technology Companies.” 2010, http://www.medtecheurope.org/sites/default/files/resource_items/files/01112010_FDA%20impact%20on%20US%20medical%20technology%20innovation_Backgrounder.pdf
Unless specified by prior arrangement, the author agrees to the following terms and assurances:
- For myself and on behalf of the other authors listed on this work, I assign to thinkBiotech LLC the copyright* in the contribution for the full term throughout the world.
- I/we further give to the following assurances
- I am the sole author of the contribution, or, if not, I have the written authority of the other authors to transfer the copyright* to thinkBiotech LLC and give these warranties;
- I and (where appropriate) the other authors are entitled to transfer the copyright to thinkBiotech LLC and no one else would be entitled to prevent us from publishing the contribution;
- To the best of my/our knowledge, all the facts in the contribution are true and accurate;
- The content of the contribution is entirely original to me (and where appropriate to the other authors) or, if not, the written permission of the owner of the copyright in any material copied from elsewhere has been obtained for all media (all such permissions to be attached to the contribution as supplementary files);
- Nothing in the contribution is obscene or libellous;
- Nothing in the contribution infringes any duty of confidentiality which I/or the other authors may owe to anyone else.
- I and/or the other authors have obtained the appropriate clearances from my/our employer(s) or other concerned institution(s).