Biopharmaceutical Companies That Attract Corporate Venture Investment More Likely to Be Acquired, Go Public, Analysis Finds
Burrill & Company Finds Despite Higher Rate of M&A, Parent of Corporate Venture Investors Is Rarely the Acquirer
SAN FRANCISCO, CA, May 22, 2012 (MARKETWIRE via COMTEX) -- Therapeutics companies that attract investment from corporate venture arms are more likely than other venture-backed companies to enter licensing deals, be acquired, or complete an initial public offering, according to an analysis from Burrill & Company.
The analysis comes as the pharmaceutical industry, looking for new ways to access promising, early-stage technologies, have increasingly turned to making venture investments as a way to gain insight and access.
"Our analysis shows that companies that were able to attract the participation of a corporate venture fund had a significantly greater likelihood of providing an exit for its investors," says G. Steven Burrill, CEO of Burrill & Company, a diversified global financial services firm focused on the life sciences industry. "The ability to attract corporate venture capital is a validation for companies that secure those investments."
The analysis, published in the June 2012 edition of The Burrill Report, examined all therapeutics venture investments made between January 1, 2000 and December 31, 2011 in the S&P Capital IQ database. A total of 2,907 companies received disclosed venture capital funding through 5,100 rounds of financing during that period. Of those companies, 9.9 percent (286 companies) received funding in part from a corporate venture fund. The publication is available for free online at (http://www.burrillreport.com/article-the_june_2012_issue_of_the_burrill_report.html).
Of the companies that received corporate venture funding during the period analyzed, 24.5 percent (70 companies) were acquired compared to 14.4 percent (380 companies) for those that did not receive funding from a corporate venture investor. But while having corporate venture funding was a greater predictor of an eventual acquisition, it wasn't because the parent of the corporate venture fund was likely to buy the company. In fact, only 8.6 percent, or six of the corporate venture funded companies that were eventually acquired, were acquired by the parent of that corporate venture arm.
Companies that received corporate venture funding were also far more likely to enter into licensing or collaboration agreements. A total of 48.4 percent, or 139 companies, that received corporate venture funding during the period entered into at least one licensing/collaboration agreement. That compared to 29.9 percent of non-corporate venture funded companies (782 companies) that entered into licensing/collaboration agreements during the period.
"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 Burrill.
Corporate venture funding was also a greater predictor of an eventual IPO for a company. A total of 12.2 percent of corporate venture backed companies (35 companies) successfully completed IPOs. That compared to 7.8 percent, or 205 companies, in the analysis that did not receive corporate venture backing.
There was not a significant difference between the two groups in terms of the time from first venture funding to an M&A or IPO for the companies in the analysis that achieved exits. The companies backed with corporate venture capital achieved exits, on average, at four years. That compared to four years and three months for non-corporate venture backed companies.
Biotech 2012: Innovating in the New Austerity, Burrill & Company's 26th annual report on the life sciences industry, makes note that corporate venture investing in life sciences has risen steadily over the last few years and accounted for about 20 percent of life sciences venture investment in 2011. With many traditional venture capitalists focusing on later-stage deals, corporate venture funds have helped fill a gap in earlier-stage funding. To purchase a copy or download the table of contents, a list of charts, and a sample chapter, go to www.burrillandco.com/resources .
A single-user PDF can be purchased for $319. Discounts on multi-user licenses are available. The print edition is available for $349. The 352-page book features more than 200 charts and graphs. For information on multi-seat licenses contact Bryan Plescia, director of business development for Burrill & Company at [email protected].
About Burrill & Company Founded in 1994, Burrill & Company is a diversified global financial services firm focused on the life sciences industry. With $1.5 billion in assets under management, the firm's businesses include venture capital/private equity, merchant banking, and media. By leveraging the scientific and business networks of its team, Burrill & Company has established unrivaled access and visibility in the life sciences industry. This unique combination of resources and capabilities enables the company to provide life sciences companies with capital, transactional support, management expertise, insight, market intelligence, and analysis through its investments, conferences, and publications. Headquartered in San Francisco, the company oversees a global network of offices throughout the United States, Latin America, Europe, and Asia. For more information visit: www.burrillandco.com .
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SOURCE: Burrill & Company