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Aliga: Are Mergers Between Biology and Chemistry Financeable?

Executive Summary

The combination of Dutch firm Kiadis and Germany's Biofrontera, a technological fit, now needs to score with investors and provide the proposed new firm with enough cash to survive the biotech drought.

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How the Fund-Raising Game Works in Europe

A handful of private European biotechs have raised money, but the process takes time, and the sums aren't great. Since VCs can invest in late-stage companies at the same prices they used to pay for newer ventures, early and mid-stage biotechs are being forced to broaden their search for funds, and meet growing demands for cost cutting and detailed spending plans. Both VCs and biotechs may emerge stronger from the squeeze, however.

Medical Acquisitions: No Icebreaker in Sight

At the top of the industry, consolidation has frozen out much additional M&A; horizontal mergers among large companies have become much more difficult to get through regulatory authorities as the industries themselves have consolidated. In medical devices, M&A is at a 10-year low, reflecting a paucity of high-value small-company opportunities. Perhaps as important, some successful big-company development programs undermine a basic assumption of medical device investing: that big companies must source innovation from small ones, usually through acquisitions. Meanwhile In biotech, the number and value of M&A is down, despite the apparent logic of consolidation and the unprecedented willingness of sellers to accept low valuations. The key problem is that there are few buyers: those without extremely strong balance sheets aren't willing to take on additional burn rates, having seen some acquirers come to grief as their new, apparently stronger companies are unable to raise money in this bear market.

M&A Makes Sense for Procognia

Procognia's acquisition of fellow Apax portfolio company Sense Proteomic could indicate a more proactive stance from VCs intent on consolidating their bets behind likely winners.

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