The Life Sci VC blog has provided an analysis of venture-backed biotech M&A figures for 2012. It notes 3 main trends:
– median investor return multiples have risen from 2.5x in 2011 to 3.5x in 2012.
– European biotech exits have a far lower invested capital to return multiple. In 2012 it was 1.3x for Europe and 3.5x for the US.
– time from founding to trade sale has increased from 5 years in 2005 to 9 years in 2012.
Pondering on the lower returns for European exits, it’s not too surprising. I know that in the UK at least, there is far less money in the system and that must lead to companies being bought out more cheaply. It’s more difficult to be optimistic about the future when financing is hard to get. However I would also propose from personal experience that UK biotech is more insular than US biotech, at both the academic and research company levels, and that means it is less responsive and less influenced by commercial considerations. I would imagine fewer UK companies know their market as well as US companies, to the extent for example where they would have analysed the likelihood of their product outcompeting existing products. That means European companies are at risk of developing technologies which may be excellent, but which are going to make less money than technologies chosen and developed with an eye on the commercial considerations.