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Private Equity Comes to Discovery

Executive Summary

Through what could be a $550 million investment, Invus wants to play for Lexicon the role Roche has played for Genentech, enabling the biotech to finance both its more advanced projects and its discovery programs-something it couldn't do with smaller public market offerings or with lower-value deals on early-stage programs. The financial lynchpin for Invus: the huge prices Big Pharma is willing to pay for Phase II products. Will other private-equity firms follow Invus' lead?

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Symphony's Project Financing Model Adapts

As Wall Street fails to significantly reward companies with strong clinical news, the fall-out also affects the project financiers, like Symphony Capital -- an increasingly important alternative to traditional equity or alliance financing. On one hand, the hard times make Symphony's expensive-looking capital increasingly attractive to biotechs, including companies that once would have had plenty of other financing alternatives. On the other, Symphony's model is shifting more toward equity investing. It's still financing projects, but it's padding its upside with a lot more cheap stock.

Infinity/Purdue: The Challenge of Reprising Roche/Genentech

Infinity's "Big Brother" deal with the privately held affiliates Purdue and Mundipharma comes closest of any recent deal to replicating the structure of the Genentech/Roche relationship -- swapping the majority of a biotech's pipeline to a well-heeled partner in return for independence from the capital markets and enough commercial upside to deliver a long-term return for investors. But the idiosyncrasies of the Purdue/Mundipharma ownership and structure, and the recent stormy history that opened minds to the possibility of such a deal, show why further iterations of the model will remain a rarity.

Symphony's Project Financing Model Adapts

As Wall Street fails to significantly reward companies with strong clinical news, the fall-out also affects the project financiers, like Symphony Capital -- an increasingly important alternative to traditional equity or alliance financing. On one hand, the hard times make Symphony's expensive-looking capital increasingly attractive to biotechs, including companies that once would have had plenty of other financing alternatives. On the other, Symphony's model is shifting more toward equity investing. It's still financing projects, but it's padding its upside with a lot more cheap stock.

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