More local biotech companies are using mergers or acquisitions as vehicles for their exit strategies - Puget Sound Business Journal (Seattle):

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So much so that four months later, Gilead boughtr Corus Pharma for $365 million. Such deals are increasinglu common in the pharmaceutical industryhthese days, where the race is on among the Big Pharmsa companies to find and buy early- and middle-stage companies developing therapeutics with a profit potential. On the flip the growing life science companies are searching for ways to keep fundsz flowing to the research or scientific developmentsthey created. Dr. Brucw Montgomery, a founder of Corue Pharma in 2001 and CEO and directord forfive years, says he agreed to the buyout for a very good reason: "I gave a far better returnn than an IPO.
" And, he said, Gilea committed to growing Corus Pharma's Puget Sound And in the world of startups and exit the exit strategy with the biggestr payoff wins. "The IPO climatwe hasn't been good for years," says In recent years, private biotecn company valuations for initial publi c offerings have been lower than acquisition Public offerings also have become very costly in recent yearas with the strict disclosure rules requiredby Sarbanes-Oxley Although going public doesn't have the upfront payoff of a companies that choose to go that routes believe that theoretically the public market will brinhg a nice payoff down the road after the stock valu e has increased.
A company buyout, has fetched higher prices andimmediate payoffs. And, Montgomert notes, major investors get a bigger proportional payoff in an acquisitiomn than throughan IPO. And sincw venture capitalists are the money behindmost startups, and want the biggesg payoff possible, they've typically opted for the "It's a common exit strateg y for a startup to be bought out by a big publixc company," says Montgomery.
George Millstein, senior managing partned of San Francisco-based Pacific Growth Equities, says there's a simplde reason the big pharmaceuticals aren't afraid to plunk down a lot of cash to acquirwe private biotech companies withstrong products, be they middle-, or late-stage ventures. He recallsw one late-stage company was bought for $500 another for $2.5 billion. "It's happening becauss of a dearth of products in the pipeline of Big says Millstein.
"And small and mid-sized biotecb companies are a great source of With bigcash positions, the big pharmaceuticala can afford to take longer to develo p a therapeutic for market, Millsteinn notes, and are in a good positionm to invest in an early stagee company with a product or two that look to have long-termj potential. But the buyout of an early-stager biotech company won't necessarily turn out to be a wise A lot of homeworkis "In most cases (the company being has done some clinicalo trials and there's some hint that it says Millstein, "but not in all cases.
" Before decidinyg on a buy, a big company'ss scientific team will make "a very educate d bet that the product will ultimately turn into a blockbustet drug and contribute to the bottom line." Still, Millsteinm says IPOs are now showin g up as a viabled exit strategy, noting there is "a nice list of IPOs that have gone Last year, he health-care company IPOs nationallyh produced an average return of 37 percent, adding, "That' s a nice return." He pointerd to the October public offering of Seattle-basedr (Nasdaq: TRBN), which offered 4 milliomn shares at $13 a share.
The company has conducted clinical trials ofits TRU-015, a treatment for rheumatoisd arthritis. The company bills itselfv as a biopharmaceutical workingon "creating a pipelinwe of product candidates to treat autoimmune diseasre and cancer." Its stock closed at $19.24 on Marcy 9. Patrick Heron of Seattle-based callse Trubion's public offering a "breakout IPO," in the wake of an off-again IPO market for pharmaceuticalssince 2000.
"Righr now companies can get decent valuation," for an IPO, says "but there are (now) greater expectations for clinical With such deals weaving through thebiotecg industry, Millstein says the result has been a surge in new startupsa in many new applicationas of pharmaceuticals, which he sees as the next stage of a maturw industry.