Although 2009 is certainly a year to forget - Unquote

life sciences
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Life sciences:
testing times ahead?
Pharmaceuticals and biotechnology have fared marginally better than other sectors
during the global recession, but the last two years have still been lacklustre for
private equity investments in life sciences. However, with a healthy number of deals
already this year, what is on the cards for the rest of 2010? Greg Gille reports
As in many sectors, the top end of the life sciences market
struggled the most in both 2008 and 2009. Buyouts more than
halved; unquote” only recorded four each year, down from a 10
per year average between 2005 and 2007. Expansion deals were
also scarce, with 16 in 2008 and 18 in 2009, compared to an
average 35 per year recorded between 2005 and 2007.
However, early-stage investments remained in line with
pre-2007 levels. 2009 saw 54 venture capital investments, a
marginal improvement on the
46 per year average recorded
between 2004 and 2006.
Venture capitalists remained
active throughout the crisis,
betting strategic investments
in innovative businesses would
prove fruitful in the coming
years. Michiel de Haan,
partner at venture firm Aescap,
explains: “We are interested
in companies that are very
ambitious and we therefore aim
for the long term. If you want
to be a successful venture firm in life sciences, you cannot look
for exits on the short term.”
So far this year, there have been five buyouts in the sector,
already topping both 2008 and 2009. The year started with
a bang from Charterhouse Capital, which bought Deb Group
from Barclays for a generous £325m. Other notable deals
include AAC Capital’s £100m acquisition of Martindale
Pharmaceuticals, as well as the £400m Cerba Lab buyout by
PAI partners.
As far as venture investments are concerned, the 27 earlystage
and 14 expansion deals recorded in the first half of 2010
point to a return to pre-crisis levels of activity, in both volume
and value. De Haan highlights the strengths of Europe for the
near future: “Life sciences has a very favourable outlook, with
an ageing population and a growing need for better medicine
and healthcare; emerging countries also offer opportunities
for European life sciences firms. Technology has always been
better in Europe than in the US; what has been lacking for the
last 20 years and now reversed
is the human capital.”
That is, of course, if investors
stay on track, for a looming
hurdle might test their resolve
to support innovation through
the economic slowdown. The
AIFM Directive is certainly a
cause for concern for venture
firms; portfolio disclosure in
particular is seen as a major
competitive disadvantage for
innovative companies, left open
to the prying eyes of competitors.
The EVCA is vocally opposing the directive and warns that
many firms could stop investing altogether. “Small startups
are hit the hardest by regulation, which is aimed at big
banks and large private equity houses. It is alarming how
governments urge us to promote innovation, but make it very
difficult for investment companies,” de Haan adds. However,
he leaves the door open to optimism: “It hurts, but obviously
we have to get over it.”
10 UNQUOTE AUGUST/SEPTEMBER 10 ENTIRE CONTENTS COPYRIGHT 2010 INCISIVE MEDIA INVESTMENTS LTD
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