It’s the scenario emerging biopharma organizations hope for: your company just discovered a groundbreaking piece of data, showed proof of concept in patients or an innovative animal experiment demonstrated an important piece of biology or your technology.
Your company’s intrinsic value has increased and you need money to advance to the next stage. Now the question in your mind is: What do I do now?
While not appropriate for all situations, we frequently recommend a company run a multitrack process to maximize their value.
Here are a few key reasons it’s beneficial to run a multitrack process:
- Companies that pursue multiple options simultaneously typically experience better valuations on a financing or better terms on a license or M&A trade sale. Everyone understands that competition typically improves deal value. What might not always be as obvious is that you only need one financing source and one strategic option to improve deal value. Even the threat of going with the other option creates scarcity.
- Investors want to understand if there is a potential buyer for the company if the next set of data is positive. How does the company know the answer to that unless they ask strategic partners that question?
- Strategics don’t want to overpay unless they know there is competition, especially competition that the company can go it alone without them. This tension applies both to private financings as well as to initial public offerings.
- Bankers want to know that investors are interested in the company before committing to underwrite the story. Certain investors want to know that bankers are around the table to help take the company public in the near-term before they consider investing.
- Certain Japanese pharma companies are interested in securing a regional deal prior to global rights being sold to multinational pharma. Selling regional rights often can catalyze pharma companies to buy the remaining territories, as selling off a piece conveys demand.
All of these moving pieces require a delicate orchestration and appropriate timing. A significant number of meetings are required with varying materials that need to be prepared. Long story short, while we recommend the multitrack process, it is a lot of work.
We will have an in-depth section dedicated to running a multitrack process in our Locust Walk Institute: Financing from idea to IPO course how to approach this situation both strategically and tactically and how to maximize the odds of success and improve deal value in the process.
We hope you can join us May 4th & 5th. Register by Friday, April 15th to get the early bird discount.
Written by Geoff Meyerson