Sequenom's Failure Highlights an Underappreciated Risk of Biotech Investing
Executive Summary
Sequenom's late April announcement that the R&D data associated with its soon-to-be-launched test for Down syndrome "was mishandled by individuals in our company" sent a cold shiver throughout the biotech investment community. As if the biotech investment model wasn't risky enough, the firm had to go and introduce a new one.
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2009 was the most difficult year the device industry faced in a long time, particularly given the boom years that preceded it. Public and private investors grew nervous and sat on the sidelines, as did most corporate acquirers. As a result, most start-ups found it difficult to raise money and VCs were frustrated by the poor returns being generated, especially compared with the previously frothy climate. The silver lining may be that there are signs that the economic environment may be improving and that corporate acquirers will continue to pay a premium for the right deal. Overhanging all of this, however, is the specter of health care reform and its impact on the device industry, whether through a device tax, comparative effectiveness or some unanticipated other result, meaning the industry is far from out of the woods.
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