The Role of Private Equity in Life Sciences

Jeff Greene, Dennis Purcell, Brian Edelman, Doug Giordano, Richard Ruback, Dean Mihas, Tim Opler, Tom Cahill and Glen Giovannetti

Journal of Applied Corporate Finance, 2010, vol. 22, issue 2, 8-35

Abstract: In a roundtable published in this journal a year ago, there was a clear consensus that the R&D function in big pharma was inefficient and in need of major restructuring, possibly through increased investments by venture capital and private equity firms. In this discussion, an accomplished group of industry practitioners begins by looking at the prospects for both venture capital and private equity to play meaningful roles in financing early‐ and mid‐stage drug development. In so doing, they explore questions like the following: • Are there ways for big pharma and biotech to reduce “science risk” and make R&D funding more profitable and attractive to venture capital and private equity—and perhaps even hedge funds? • What roles do you see for specialty PE firms like Symphony Capital and Paul Capital, which are now bundling mid‐stage development assets and securitizing royalties? Then the panelists turn to the broader life sciences industry and consider the outlook for leveraged private equity transactions involving marketed products, late‐stage development, and services. Here they consider issues like the following: • Will PE be attracted to less‐R&D‐intensive activities like medtech and generics? • Have the recent consolidation through mergers and reorganization of big pharma into decentralized business units created opportunities for carve‐outs of certain businesses? For big pharma and life sciences companies in general, the answers to such questions point to greater specialization and focus achieved partly through strategic alliances with venture capital, private equity, and even hedge funds, and involving marketed products and services as well as early‐stage drug development.

Date: 2010
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