An article written by Aglaia Oncology Funds
A historical analysis of oncology deals can help bioentrepreneurs navigate the right time for partnerships and exits and can inform on the type of investors likely to be interested.
Bioentrepreneurs have to think about when and how to exit, and plan venture capital financing accordingly, at every step in the process of developing their companies. Many articles provide general insights but do not tailor their advice depending on the stage of maturity of the company and its assets. Here, we analyze the economics of venture financings and trade sales in the oncology field from 2004 through 2020. Our analysis provides pointers about the financial requirements required to advance a company through each stage of development, to estimate the right time for an exit and how it can be enabled, and to forecast a company’s chance of moving to the next stage of business.
Attrition in drug development
The high attrition rate of drug development means that most venture capital (VC) investments in this sector are unprofitable. VC funds are driven by a few outlier investments that provide superlative returns. The European Investment Fund (EIF), a limited partner/investor in hundreds of VC funds, including many life sciences funds, has showed that of the 3,592 EIF-backed VC investments made during 1996–2015, only ~60% had achieved an “exit,” with the remaining companies still in the VC fund’s portfolio1. Of the 60% of life sciences investments that exited, 75% were written off or returned less than the invested capital. The other 25% of the exits returned more than 1× the invested capital, but just 6% of those returned more than 5× the invested capital. That 6% of outliers, on average, returned half of a VC fund. Similarly, VC thought leader Bruce Booth has estimated that only 10% of exits on US biotechs return 4× or more2.
Download the entire article Stepping to the Exit.pdf.
