Over the last few years pharma's corporate venture arms have been stepping up their game, helping to fund more biotechs. And it turns out that their involvement significantly improves the prospects of the biotech companies they're working with.
That's the conclusion of Burrill & Co., which sliced and diced the numbers for venture investing over the last 12 years and found that drug developers with corporate venture backing were more likely to strike a licensing deal, more likely to do an IPO and more likely to be acquired than the companies that went without.
Starting with the 2,907 companies that gained more than 5,000 venture rounds since the beginning of 2000, Burrill found that 10%--286--snagged some corporate cash along the way. About one in four of those companies were acquired, compared with 14.4% of the others. Close to half of the corporate-backed biotechs landed a licensing deal, compared with 30% of the rest. And 12.2% completed an IPO, compared with 7.8% of the larger group.
You might think that the better odds of success had something to do with the pharma companies' use of their front row seat to spur a buyout, but you'd be wrong, notes Burrill. Only 6 buyouts were struck by the parent company of the venture arm that invested in the company.
"Though it's unclear from the research, that may reflect that having corporate venture funding helps guide companies to work on projects that are of higher interest to potential acquirers," says Steven Burrill.
Bruce Booth, an Atlas Venture partner, noted that there are some big differences between the stand-alone corporate groups that are quasi-independent and those that are strictly interested in exploring efforts that relate directly to the franchise. But the key question, he says, is whether Burrill's numbers reflect the corporate group's ability to pick better companies or whether the implicit endorsement and expert guidance they contribute makes the difference. Booth says he's biased in favor of guidance and validation.
Or maybe it's a combination of all three.
- read the release on Burrill's report
- here's Booth's column