With Pharma Ready to Pare Portfolios, Project Financing Funds Make Their Pitches
Drug firms need to find good homes for hundreds of early-stage experimental compounds that ideally they could claw back once new developers demonstrate proof-of-concept. New project financing funds are clamoring for those assets, but first they must convince LPs to invest in unproven financing models, deal with pharma's accounting demands, and negotiate deals with asset-holders that will provide a decent return.
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Flexion Therapeutics had the pedigree, determination, and corporate connections to source and speed to clinical proof-of-concept its in-licensed pharma assets, and it planned to build a business around getting paid to do so. But a funny thing happened on the way to the bank.
The pharmaceutical industry has a hard time saying goodbye to strategic assets. In fact, it’s much more adept at welcoming new ones: diversification – either geographic or into areas beyond pure-play pharmaceuticals – has become commonplace. But pharma needs to overcome its entrenched resistance to asset externalization, which should become a critical third leg in its attempts to build long-term shareholder value. Strategic, almost biotech-like externalization strategies should move from a peripheral to a core part of pharma’s activities. Why haven’t they already been embraced?
Several biopharma venture investors are experimenting with new models to avoid the long timelines and massive pay checks typically required to nurture new biotech companies. One of those investors, CMEA Capital of San Francisco, officially debuted its model Thursday, June 23, but not before making a major strategic shift.