Start-up biotech company investors generally used to find an exit in a merger or acquisition (M&A) once their company’s compound reached Phase II in clinical trials.
According to finance experts at the recent MidAtlantic Bio conference, companies are now expected to enter Phase III, or even attempt to market their new drug before large pharmaceutical companies become interested in buying or licensing the technology.
This puts tremendous stress on the companies, which now need to further dilute their equity in successive financing rounds to reach their goals. Although medical device companies generally have lower capital needs, this trend can be found in this sector as well.
Companies are expected to already have United States Food and Drug Administration approval before entering negotiations with United States partners.
New Zealand companies generally come to the United States market early looking to attract capital to further their New Zealand-based research and development efforts before being bought by United States firms.
This will get more difficult as the cost of capital increases and investors need to be at a more advanced stage before exiting. United States-based angel investors may fill the gap, but will require the company to be fully located in the United States.
Source: NZTE
