2018 May Be Banner Year for Life Sciences Deals
On the heels of the January 8-11, 2018 JP Morgan Annual Healthcare Conference, there is strong momentum among the life sciences industry for 2018. Despite the existing challenges of raising capital in the public markets, this year may be ideal and advantageous for life science companies to get financial deals done. But they need to act quickly.
“While there is a sense of optimism in the life sciences industry, companies should not delay in capitalizing on the robust year ahead or they may miss the window,” said Alex Castelli, Managing Partner of Emerging Markets, which encompasses the Life Sciences Industry practice, and Leader of the Firm’s National Liquidity and Capital Formation Advisory Group. “With the current strong availability of capital, coupled with a kinder regulatory environment, now is the ideal time to raise capital or explore a liquidity event.”
Castelli notes a number of positive factors impacting overall market conditions this year, including:
Life sciences companies are currently attractive to investors because of the high potential for growth and strong ROI. While IPO activity may be relatively flat, private equity, venture capital and strategic investors continue to make significant investments in the space. Those companies with innovative science and a demonstrated ability to grow will continue to attract capital.
Abundance of Capital
The landscape for life sciences companies has changed due to an abundance of capital. Venture capital, private equity investors and strategic buyers are seeking quality investments. Life sciences companies should actively explore these options, which offer an attractive combination of financial and intellectual capital without the costs or regulatory and reporting requirements.
Strategic Partners as Investors
Corporate investors like big pharma continue to buy growth by acquiring companies that can provide new product lines or reach into new markets. “Life sciences companies shouldn’t forget about their existing strategic partners, who not only can provide immediate capital, but whose milestone payments may eliminate a need for additional fundraising or an IPO.
IPO Route An Option
Companies shouldn’t discount going IPO. If a company has the ability to scale with a good, proven product, an IPO is still a very viable – and strong – option to explore. While the IPO market has been flat, life sciences has represented a significant portion of the total number of IPOs.
Heightened M&A Market
Tax reform has the potential to slow down the M&A pace, but it won’t necessarily do so. The increase of corporate earnings and the need for profitability may increase acquisitions in the market place, improving the overall M&A market.
For information on how your life sciences company can take advantage of today’s improving market for life sciences transactions, contact Alex Castelli, Managing Partner, Emerging Markets, or visit our M&A and Capital Markets Resource Center.