Life Sci VC published excerpts of an analysis by HBM Partners of the 2010 Biotech M&A Survey. The post goes on to cite several observations from the survey/analysis:
- Acquisitions of VC-backed biotech companies were up in 2010 back to pre-crash 2007 levels. The expectation is for M&A activity to accelerate in 2011
- ROI-capital multiples were good with several nice upfronts
- But...the average upfront payments were down to only 1.5-2x (3-4x for overall deal) which only represents 7-10% IRR. This is not sustainable for most VC firms looking for 20+% IRR
- Small to mid-size PHARMA drove 60% of M&A activity - not big pharma or big biotech
In general, the environment seems to be improving but the greater unwillingness to pay large upfronts may ultimately result in a capital crunch - but this is unlikely to be the case in 2011.
Posted by Bruce Lehr March 27th 2011.