Nice idea, but it's challenging to find the right opportunity for this model. Once you start risk-adjusting developmental projects, the value that you obtain for them may not provide much cash in order to service the debt in the short term.
Where I do see opportunities to execute LBOs in biotech are with CROs and other service companies who have a blend of service revenue and a pipeline with substantial upside. If you sell the pipeline, the cash can be used to build the service side by acquiring low-cost infrastructure in India, Asia, Russia, and Eastern Europe. Once the new assets are in place, cash flow will increase in order to service the debt over the long term.
Private-equity firms not making splash in biotech
Seasoned biotech companies should be prime candidates for private-equity firms, which could strip out less profitable projects and sell them to drug giants or through initial public offerings.
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