Deal Theory

In the summer of 2019, Locust Walk launched a blog post, Financing overhang or hangover: The impact on partnerships for public biotech companies, that was born out of observations and conversations with many public, non-revenue generating biotech companies over the years.

These types of biotechs are voracious consumers of capital that generally require infusions of equity on a semiregular basis. Even companies that just raised capital are always thinking about the timing of their next raise. In that blog post, we conducted research to analyze the impact of licensing transactions on the stock prices for publicly traded biotech companies with a similar market capitalization that we put forth in this whitepaper. What we found was interesting, but not surprising. For upfronts >$20M, a more material transaction, one month after a licensing deal, we see a general pattern of a 38% stock price lift.

Because we saw this trend, we pushed the variables we used in our original post to examine the impact that licensing deals and strategic alliances have on the near to medium-term share value for public biopharma companies with $25M-$750M market capitalization. We discovered factors and deal criteria that create a roadmap to driving tangible value for investors and the companies.