Securing PIPEs to Progress Fledgling Clinical Portfolios
Executive Summary
Many of the small biotech companies that have listed on the public markets in the past few years have had to grapple with less-than-hoped-for IPO proceeds, low market valuations, and poor share liquidity. PIPE financings are allowing some of these companies to progress promising portfolios and offering investors potential upside on undervalued assets.
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Call the Plumber: PIPE Logic is Leaky
Extraordinary times for capital markets have made cheap public biotechs attractive to venture investors. These private investments in public equity (PIPEs) are seen by some as a lifeline to a troubled and undervalued sector, and many VCs are considering significant public investments. But few deals are likely to get done as venture funds set a high bar for investment, regardless of fire-sale prices. Recipients of large PIPE deals may indeed provide venture-like returns for private investors, but an analysis of these financings shows why they are the exceptions that prove the rule.
Call the Plumber: PIPE Logic is Leaky
Extraordinary times for capital markets have made cheap public biotechs attractive to venture investors. These private investments in public equity (PIPEs) are seen by some as a lifeline to a troubled and undervalued sector, and many VCs are considering significant public investments. But few deals are likely to get done as venture funds set a high bar for investment, regardless of fire-sale prices. Recipients of large PIPE deals may indeed provide venture-like returns for private investors, but an analysis of these financings shows why they are the exceptions that prove the rule.
Infinity Reverse Merges Into Discovery Partners
Through a reverse merger with Discovery Partners, oncology discovery and development play Infinity Pharmaceuticals will access the public market and Discovery's roughly $70-75 million cash. That the deal won't secure Infinity the kind of market capitalization that the firm's top-notch pedigree and previous private valuations pointed toward merely reflects the market's healthy skepticism for early-stage assets. It also suggests that even for companies as promising as Infinity, reverse mergers are increasingly the smoothest-and in some cases the most lucrative-path to the Nasdaq.