Life Sciences Venture Equity Market Review: Evolving Role ...
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Securities offered in the United States are offered through Torreya Capital LLC, Member FINRA/SIPC. In Europe such services are offered through Torreya Partners (Europe) LLP, which is authorized and regulated by the UK Financial Conduct Authority.
June 2021
Life Sciences Venture Equity Market Review:The Evolving Role of Crossover Investors
The Market for Equity Privates in Life Sciences
2TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Total Private Venture Financing Volume: 2000-2021 H1
Source: Torreya analysis and records, CapitalIQ and Crunchbase
2340 35
55
81 7288
145
97109 111
121 122
96
138
224
184
226
373356
523
334
0
100
200
300
400
500
600
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021H1
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Ag
gre
gat
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olla
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olu
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of
Pri
vat
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inan
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gs
($m
m)
Total Volume of Private Biopharma, Diagnostics and ToolsFinancing Rounds by Year Jan 2000 - June 2021
(deals over $25mm, excluding medical devices, worldwide)
Transaction Count Dollar Volume ($mm)
Given volumes in the first half of this year, there is little doubt that 2021 will shape up to be the most active year in history for private financing activity in the life sciences sector.
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Fresh Venture Capital Flowing into Life Science Sector
$7.4$6.6
$3.8$2.8 $2.7
$5.5 $5.7
$7.5$6.8
$2.6 $2.8$1.8
$3.6 $3.9
$6.1
$7.5 $7.2
$9.1$10.3
$14.1
$28.9
$15.4
$0
$5
$10
$15
$20
$25
$30
$35
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021H1
Ne
w C
apit
al F
low
ing
into
Ve
ntu
re F
un
ds
($b
n)
Life Sciences Venture Capital Funds – Raised, $Billions
We are on track to see record amount raised in life science venture capital in 2021.
Source: Venture fund press releases, Torreya analysis and records, CapitalIQ
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Fresh Venture Capital Flowing into Life Science SectorOver $10 billion flowed into life science venture capital funds in Q2 2021 – an all-time high
$2,017
$1,582
$2,412
$1,633
$2,180
$1,564
$3,608
$6,467$6,200
$7,796
$6,875
$5,164
$10,086
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Life Science Venture Capital Funds, Amounts Raised by Quarter ($millions)
Source: Venture fund press releases, Torreya analysis and records, CapitalIQ
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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The Role of Crossover Investors
6TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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• We define crossover investors as late-stage investors that typically participate in the public equity markets but
“cross over” to the private markets to gain exposure to attractive equity stories prior to an IPO.
• In practice, the presence of crossover investors can be a major plus in structuring and executing a successful
IPO. Often, they can reposition or even institutionalize the shareholder profile of a company.
• “Cross-over” institutions offer implicit support for an IPO and often explicitly in the form of either insider
commitments or anchor orders at the time of the IPO.
• Hedge funds are the key drivers of the crossover market. Many of these funds have become large and are
looking for new ways to deploy capital while earning a return, hence their increasing participation in privates.
• Most hedge funds are allowed to put 5 - 10% of their capital into private investments. These investments are
typically held in “side pockets” that are infrequently marked to market. There is substantial discretion on how and
when such investments get marked to market.
• Several hedge funds and mutual funds have created dedicated teams or subfunds just for crossover
investments. For example, Perceptive, RA and RTW have created dedicated venture groups.
• The crossover market is susceptible to closure in periods of financial uncertainty. Nevertheless, the crossover
market reestablished itself in 2018. Since 2020 the market has taken off dramatically and activity thus far in 2021
is unabated.
• Hedge fund managers in the life science sector are generally very strong scientifically and can often rival the in-
depth knowledge of their counterparts in long-only funds. Some of the top life science hedge funds have
substantially more highly qualified staff on hand than perhaps do the largest public funds. By way of example,
Wellington Management (US) is the largest investor in biotechnology stocks with over $40 billion deployed. They
have a handful of analysts (one with a Ph.D.). In contrast, Deerfield and Perceptive with less than $8 billion each,
have far more analysts. RA Capital has an order of magnitude more analysts.
The Role of Crossover Investors
7TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
Investor Types Most Often Seen in Crossover Rounds
Crossover Funds Venture Capital Private Equity China Investors Family Offices
SelectedExamples
▪ Adage Capital▪ Perceptive▪ RA Capital▪ T. Rowe Price
▪ Abingworth▪ ARCH Venture▪ Forbion▪ Orbimed▪ Sofinnova
▪ General Atlantic▪ GTCR▪ KKR▪ MVM
▪ 6 Dimensions▪ Decheng Capital▪ Legend Capital▪ Qiming
▪ Emerson Collective (Laurene Powell Jobs)
▪ Founders Fund (Peter Thiel)
▪ Invus (Eric Wittouck)
Pros ▪ Highly scientifically knowledgeable
▪ Less valuation sensitive▪ Can dictate terms▪ Help get an IPO done▪ Light hand on
governance▪ Supportive and helpful
▪ Willing to do mid-stage▪ Sophisticated and
medically savvy▪ Can perform due
diligence that others can leverage near closing
▪ Many like to lead▪ Collaborative and value
add
▪ A commercial launch story can work well for private equity investors that are at the borderline of venture (pre-commercial) and commercial.
▪ Tend to write larger checks than venture
▪ Less valuation sensitive than venture
▪ Attracted to very good stories
▪ Tend to be less governance focused and are typically constructive on boards
▪ Chinese government committed to building out life sciences understanding
▪ Attracted to very good stories
▪ Interested in financing projects that have medical impact and benefit humanity
▪ A subset of super high net worth investors and associated family offices can invest $50m or more into life sciences companies
Cons ▪ Need to be fairly IPO ready (18 months out or less)
▪ Distracted. Hard to get focused on a story
▪ Not necessarily committed to future rounds. Less patient.
▪ Valuation sensitive▪ Can be conflicted▪ Can have agendas driven
by fund life▪ Slow process▪ Like control and demand
board representation
▪ Can be distracted and very busy
▪ Will often be deep in a subsector but not as scientifically strong as crossovers
▪ Don’t like small check sizes.
▪ Want to build.
▪ All China investors are government-linked to some degree. Impacts their behavior
▪ Negotiating with some funds not easy
▪ Communication can be less direct
▪ Not always scientifically sophisticated and able to evaluate opportunities
▪ Often have idiosyncratic taste for investment opportunities
▪ Relationships with investor partners important
Key Points ▪ Least valuation sensitive investor type
▪ Not governance focused▪ Distracted and not
necessarily in for the long run.
▪ Does not always need a lead investor
▪ Gives strong syndicate, time to prep for IPO
▪ Term sheets from VCs are the easiest to generate and can help a financing process
▪ Can be tough on terms and governance
▪ Less valuation sensitive than venture but more committed to the long run than crossovers.
▪ Can be highly committed to build-out / add-on stories
▪ Very interested in life science space
▪ Can be valuation friendly▪ Very “brand sensitive”
▪ Super high net worth investors play an increasingly important role in financing life sciences companies
▪ Can be valuation insensitive
▪ Relationship focused
8TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Date Issuer Field Headquarters Series
PreMoneyValue
($mm)Deal Size
($mm)Lead
Investor(s) Investors
May-21Oncology
DiagnosticsIrving, TX -- $7,000 $830.0
Mar-21Cell and Gene Tx
CompaniesBoston
Area, MAC -- $525.0
Jan-21Low-cost cancer
drugsBoston
Area, MAB $1,070 $500.0
Mar-21 AI drug discoveryBay
Area, CAC $2,100 $400.0
Apr-21COVID-19
antibodyBoston
Area, MAC $1,400 $336.0
May-21Sequencing
ToolsOxford, UK -- $2,500 $270.5
Feb-2110 biotechs in
oneBoston
Area, MAA $519 $250.0
Feb-21 VaccinesChengdu,
ChinaC $700 $230.0
Jan-21 MAPS VaccinesBoston
Area, MAC $860 $226.0
Apr-21 AI drug discovery Oxford, UK D $861 $225.0
Jun-21In vivo cancer
immunotherapySeattle, WA B $450 $210.0
Apr-21 Research ToolsBay
Area, CAE $4,000 $200.0
May-21 Research Tools Singapore A $600 $200.0
May-21Difficult targets
in cancerDelaware C $250 $200.0
May-21Multicompany
PlatformNew
York, NY-- $7,100 $200.0
Jan-21 Cardiometabolic Netherlands A -- $196.0
Review of Top Life Sciences Crossover Rounds YTD 2021
Source: Torreya analysis and records, CapitalIQ, Pitchbook and CrunchbaseTORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Crossover Venture Financing Volume in Life SciencesThere were 123 crossover financings in biopharma, tools and diagnostics in the first half of 2021. If current trends persist to year-end, we are on track for $32 billion in crossover privates this year.
Source: Torreya analysis and records, CapitalIQ and Crunchbase
7 84 5
10 8 1118
10 84
812 11
39
78
32
46
87
72
168
123
0
20
40
60
80
100
120
140
160
180
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021H1
Tra
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($m
m)
Volume of Biopharma, Diagnostics and Tools Crossover Financing Roundsby Year Jan 2000 - June 2021
(deals over $25mm, excluding medical devices, worldwide)
Transaction Count Dollar Volume ($mm)
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Crossover Activity Strongly Linked to Market PerformanceCrossover investors typically participate in pre-IPO private rounds when the market is doing well.
Source: Torreya analysis and records, CapitalIQ and Crunchbase Nasdaq Biotech Index
Nasdaq Biotech Index
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
7 84 5
10 811
18
10 84
812 11
39
78
32
46
87
72
168
123
0
20
40
60
80
100
120
140
160
180
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021H1
Nu
mb
er
of
Pri
vat
e C
ross
ov
er
Fin
anci
ng
s ($
mm
)
Number of Biopharma, Diagnostics and Tools Crossover Financing Roundsby Year Jan 2000 - June 2021
(deals over $25mm, excluding medical devices, worldwide)
Transaction Count
12
Crossover Financings Increasingly ImportantOver Half of all Life Sciences Venture Capital Today is Being Raised in the Crossover Format
Source: Torreya analysis and records, CapitalIQ and Crunchbase
The crossover market historically was largely open in very strong bull markets including 2000 and 2004. Starting in 2014 the market matured, and more public funds built up their capabilities to invest in private, less liquid financings. With the mostrecent bull market in the life sciences the activity of public funds in venture capital has been exceptional.
34%
22%
10% 10%
18%
14% 14%13% 13%
8%5%
9% 8% 9%
34%37%
16%
24%
30%
25%
38%
51%
0%
10%
20%
30%
40%
50%
60%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021H1
Pe
rce
nt
of
Ro
un
ds
wit
h a
Cro
sso
ve
r In
ve
sto
r
Crossover Financing Rounds as a Percent of All Life Science Venture Financings by Year, January 2012 - June 2021 (deals over $25mm, excluding medical devices, worldwide)
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Crossover Financings Activity Slowed Down in Q2 2021Volume peaked in March 2021 and has been down slightly in recent months. Despite this, the percent of venture dollars raised via crossovers remains at an all-time high.
Source: Torreya analysis and records, CapitalIQ and Crunchbase. Deals shown worldwide, exclusive of medical device companies. Transactions under $25mm excluded.
33 3644
55
73
52
0
10
20
30
40
50
60
70
80
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Nu
mb
er
of
De
als
Number of Life Sciences Crossover Deals by Quarter, Jan 2020 to June 2021
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Do
llar
Vo
lum
e ($
mm
)
Dollar Volume of Life Sciences Crossover Deals by Quarter, Jan 2020 to June 2021
42.0%
34.1% 36.4%40.2%
50.7%53.7%
0%
10%
20%
30%
40%
50%
60%
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Pe
rce
nt
Percent of Life Sciences Venture Dollars Raised in the Crossover Format by
Quarter, Jan 2020 to June 2021
32.0% 31.9% 31.0%33.3%
38.2%
33.5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Pe
rce
nt
Percent of Life Sciences Deals Raised via the Crossover Format by Quarter, Jan 2020 to
June 2021
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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20 Most Active Investors in the Crossover Market in 2021Count of transactions, January 1, 2021 to June 20, 2021
Investor LocaleDeals in 2021 (through June 20)
Boston 39
Boston 36
Denver 29
New York 26
New York 25
San Francisco 25
San Francisco 19
New York 19
Boston 18
New York 18
Source: Torreya analysis and records, CapitalIQ and Crunchbase. Deals shown worldwide, exclusive of medical device companies. Transactions under $25mm excluded.
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
Investor LocaleDeals in 2021 (through June 20)
San Francisco 18
San Diego 17
San Francisco 17
Zurich 17
New York 17
New York 17
New York 16
Baltimore 16
Baltimore 16
San Francisco 14
15
Other Active Investors in the Crossover Market in 2021 January 1, 2021 to June 20, 2021
7 to 13 Transactions 5 to 6 Transactions 3 to 5 Transactions
EcoR1 Capital Avoro Capital NEA Quan Capital Fairmount Funds
Farallon Capital Bain Capital Northpond Ventures Sands Capital Management Flagship Pioneering
GV Catalio Capital Osage University Partners SR One Capital Forbion Capital Partners
Vivo Capital Eventide Pontifax Temasek F-Prime Capital
Wellington Management LifeSci Venture Suvretta 5AM Ventures Gilde Healthcare
Arch Venture Partners Nextech Invest Tekla Capital Abingworth GT Healthcare
Eli Lilly PFM Health Sciences Versant Ventures Acorn Bioventures Intermediate Capital
Octagon Capital Advisors SoftBank ArrowMark Partners Agent Capital Lundbeckfonden Ventures
Deerfield Management TCG Crossover Leaps by Bayer Aisling Capital Lux Capital Management
Foresite Capital Vida Ventures Bristol-Myers Squibb Ally Bridge Group LYFE Capital
Omega Fund Management Woodline Partners CHI Advisors LLC Alta Partners LP M Ventures
Polaris Partners Access Biotechnology Cowen Healthcare Altium Capital Marshall Wace LLP
Ridgeback Capital aMoon Fund Emerson Collective LLC Apeiron Investment Group Novartis Venture Funds
Viking Global Investors CaaS Capital Gilead Asymmetry Capital Parian Global Management
Acuta Capital Partners Franklin Templeton Khosla Ventures Atlas Venture Pavilion Capital
Adage Capital JJDC MPM Capital Atlas Venture L.P. PBM Capital
Novo Holdings Longitude Capital Oxford Innovation CAM Capital Peter Thiel
Soleus Capital Menlo Ventures Presight Capital Commodore Capital Pfizer Ventures
Venrock Partners Mirae Asset Capital Pura Vida Investments Driehaus Capital Pivotal BioVenture
Avidity Partners Monashee Qiming Venture Partners EDBI Point72 Ventures
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Does Crossover Participation in a Private Round Help a Company to Get Public?
Size of Last Private Round(4 to 18 months ago) Total Rounds
Percent of All Companies that Later
Went Public
Number of Crossover
Rounds
Percent of Crossover
Companies that Later
Went PublicOther Types of
Rounds
Percent of Non-
Crossover Companies that Later
Went Public
> $500mm 8 50.0% 5 80.0% 3 0%
$150mm to 500mm 35 51.4% 23 56.5% 12 42%
$75mm to 150mm 151 31.1% 88 39.8% 63 19%
$50mm to 75mm 115 13.9% 37 37.8% 78 3%
$25mm to 50mm 175 6.9% 20 15.0% 155 6%
Grand Total 484 20.0% 173 39.9% 311 9%
Average Private Round Size $82 million $112 million $66.6 million
Likelihood of Going Public of Cohort of Life Sciences Companies that Did a Private Round between June 2020 and March 2021 (includes going public via IPO, SPAC or Reverse Merger)
Source: Torreya analysis and records, CapitalIQ and Crunchbase. Life sciences universe globally included. Transactions under $25mm excluded.
1. Not surprisingly, companies that carried out a crossover round were four times more likely to go public than those that did not.
2. Companies that carried out a crossover financing had rounds that averaged $112 million in size versus $66.6 million for non-crossover rounds.
3. Companies that carried out rounds that were under $75 million in size were much less likely to go public than companies with larger rounds.
Key Observations:
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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June 2021 Biopharma IPOs Listed in the US
IPO Pricing Date Target/Issuer Stage – Therapeutic Area
Last Round a Crossover Financing?
Pre-Money of Last Private
Financing ($mm)
Size of Last Private Round ($mm)
Time from Last
Round to IPO (days)
IPO DealSize
($mm)
Valuation Step up from Last
Private Round
06/25/2021 Phase 1 - rare disease Yes $104 $151 106 $238 2.70x
06/24/2021 Phase 2 - oncology Yes $71 $65 226 $100 1.95x
06/24/2021 Phase 2 - neuroscience Yes $374 $125 84 $160 1.30x
06/23/2021 Preclinical - oncology Yes $126 $95 103 $222 1.81x
06/17/2021 Phase 1 - oncology Yes $174 $200 220 $126 1.48x
06/17/2021 Preclinical - cardiology Yes $267 $94 155 $224 1.68x
06/17/2021 Phase 1 - oncology Yes $193 $80 132 $133 1.44x
06/17/2021 Preclinical - oncology Yes $535 $160 112 $243 1.23x
06/17/2021 Phase 2 - neuroscience No $726 $157 106 $225 1.55x
06/16/2021 Preclinical - cardiology No $2,010 $493 458 $425 1.48x
06/11/2021 Preclinical - oncology Yes $221 $125 57 $223 1.40x
Source: Company press releases, SEC Form S-1 and F-1 filings, Torreya calculations. Deals where less than $50 million was raised were excluded.
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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April and May 2021 Biopharma IPOs Listed in the US
IPO Pricing Date Target/Issuer Stage – Therapeutic Area
Last Round a Crossover Financing?
Pre-Money of Last Private
Financing ($mm)
Size of Last Private Round ($mm)
Time from Last
Round to IPO (days)
IPO DealSize
($mm)
Valuation Step up from Last
Private Round
05/27/2021 Phase 3 - renal Yes $519 $245 118 $330 1.82x
05/26/2021 Phase 2 - oncology Yes $162 $130 114 $160 2.76x
05/06/2021 Phase 3 - renal Yes $204 $115 226 $150 1.73x
04/29/2021 Preclinical - oncology Yes $88 $72 128 $120 2.01x
04/29/2021 Preclinical - vaccines Yes $261 $125 43 $111 1.21x
04/22/2021 Phase 1 - oncology Yes $48 $64 231 $125 2.64x
04/22/2021 NDA - neuroscience No $96 $68 868 $80 1.29x
04/15/2021 Phase 1 - rare disease Yes $679 $246 226 $502 4.03x
04/15/2021 Preclinical - oncology Yes $101 $56 113 $153 2.14x
04/08/2021 Phase 3 - GI Yes $91 $55 175 $147 2.95x
04/08/2021 Phase 1 - rare disease Yes $68 $95 122 $94 1.66x
Source: Company press releases, SEC Form S-1 and F-1 filings, Torreya calculations. Deals where less than $50 million was raised were excluded.
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Observations on IPOs and Crossover InvestorsThe presence of crossover investors is consistently associated with better valuation step-ups and better after-market performance
Q2 20212014
0
0.5
1
1.5
2
2.5
Step-up Multiple from Last Round into IPO Valuation – Q2 2021
With CrossoverInvestors
Without CrossoverInvestors
2.0x
1.3x
Bruce Booth wrote an article on crossover investors in the life sciences and noted that in 2014 the presence of these investors was associated with:1. Higher pre-money valuations2. Higher step-up multiples from last round to IPO
and3. Better post-IPO performance
In 2021, the second and third observations hold as they did in 2014. Valuation step-ups were higher with crossover investor involvement in Q2 2021. While not shown (and data are limited), post-IPO performance was also significantly better. We should note, however, that of the 22 biotech IPOs in the U.S. in Q2 2021 only 3 did not use crossover investors in their rounds. Two of these employed family office investors and one went with traditional VC’s from its prior round. The shares of the latter company are down more than 60% since deal pricing. Because the two deals with family office investors came out with high IPO valuations (ATAI and Lyell) we are not able to say that the crossover format is associated with higher valuations.Source: www.forbes.com/sites/brucebooth/2014/11/07/the-biotech-cross-over-phenom-
biomarker-of-quality/
Source: Torreya analysis of S-1/F-1 filing data.
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Benefits to Public Investors of Participating in a Crossover Round
Knowledge. Investors thrive on understanding of complex subject matter in the life sciences. Numerous investors cited the ability to learn about a company and its area with a CDA in place as the top reason for participating in crossovers. Investors have noted that traditional IPO marketing processes, particularly during the pandemic, leave precious little time to really under the merits of an investment.
Speed and Certainty. Traditionally crossover investments have involved making illiquid investments that can be outstanding for years at a time. But the median time from last round to IPO pricing in 2021 has been 125 days. Because most IPOs take eight months from start to finish, these rounds are taking place inside the IPO window and thereby are relatively low risk.
Access and Return. While crossover rounds involve higher illiquidity than public investments they offer public investors relatively low risk step-ups from IPOs – hence excellent returns, on average. Importantly, it is often difficult to accumulate positions in high quality companies even after an IPO. Thus, the pre-IPO round facilitates building a position.
We have spoken to many crossover investors about the pros and cons of participating in these rounds. The reasons given in favor of participating are as follows:
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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Comparison of Approaches to Going Public
Traditional IPO SPAC Merger Reverse Merger
Description Go public through an S-1 filing and marketed saleGoing public through merger and S-3 filing. Target is a special purpose acquiror with no
operating history
Going public through merger and S-3 filing / proxy statement. Target is an operating company
Pros
• Public biotech valuations are at peak levels
• Ability to conduct advance investor marketing
• Optionality in filing publicly and launching roadshow
• Investor base comprised of Top Tier institutional investors
• Coverage by market-leading equity research analysts
• Aftermarket trading and liquidity support from UW syndicate
• IPO process may also catalyze pre-emptive strategic interest
• Path to long-term liquidity for existing shareholders
• Consideration and structure determined at deal signing
• SPAC incentivized to complete a transaction –provides target shareholders leverage in negotiation
• Higher potential for shareholder liquidity
• Substantially faster timetable to closing compared to IPO
• SPAC sponsor may bring ancillary benefits to target company (experience, credibility, connections, etc.)
• Can capture cash at a target firm
• Avoids some costs of IPO
• Can be synergies with existing programs / management teams
• Can be “hidden assets” in target firm
Cons
• Generally executed in stable market environments (VIX < 25)
• Typically, 20-week process (however, Piper experience plus sponsor commitment may accelerate this timetable)
• Market-based pricing mechanism
• Potential future dilution to SPAC / Sponsor from warrants
• Deal subject to SPAC shareholder vote
• Risk SPAC shareholders approve deal but redeem their cash preventing purchase price from being funded; sponsor may backstop
• Punitive failed deal consequences – proxy statement and financials are public, yet target remains private
• May have longer-term Lock-up provisions
• Typically, a non-fundamental investor base
• Limited equity research coverage or institutional investor awareness
• Limited aftermarket trading & liquidity support
• Limited track record for successful life sciences transactions
• Not easy to get a “good deal” versus an IPO
• Lack of sponsorship from either an investor or an investment bank
• Integration cost could be significant
• Historically, reverses associated with poor post merger returns
• Torreya study shows median 1-year market-adjusted return following a reverse merger of -33% and -59% by year 2
Time to Completion 7 to 9 months 3 months 4 to 6 months
Years of Audited
Financials Needed3 years 2 years 2 years
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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About Torreya
22TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
23
Torreya is a Global Healthcare Investment Banking Firm
We are known for:
• Deep RelationshipsWe have strong personal
relationships across the
pharmaceutical and
healthcare sectors.
• Operating PerspectiveMany of our senior
colleagues come from
industry and bring decades
of experience.
• Deal ExcellenceTorreya is known as a firm
that gets tough deals done.
Our team is skilled in highly
structured transactions.
• Healthcare FocusOur healthcare focus spans
pharma, biotech,
bioproduction, pharma
services, physician services
and HCIT.
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Up to $470 millionJanuary 2015
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Acquisition of generics business of
Acquisition of
Sale of FXR program toSale of
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Generic Pharma Specialty Pharma
Asset Sale / BiotechDivestiture /
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Mergers & Acquisitions
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License of NOV03 in North America to
Licensing / Biotech
Up to $306 millionJanuary 2020
License of Navicixizumab to
Licensing / Biotech
$50 MillionDecember 2018
JV Partnershipin China with
JV / Specialty Pharma
Representative Transaction Work
$106 million + milestonesMarch 2021
Specialty Pharma
Sale of 100%equity stake to
$1.5 billionOctober 2020
Advisor in its merger with
Biotech
Pending
Sale to
Specialty Pharma
We have over 50 employees working from offices in New York, London and Mumbai
$125 million
September 2018
$104 million
May 2021
€44.5 million
October 2020
Equity / Biotech
$200 million
February 2021
$125 million
April 2019
Sale of majority stake toDebt recapitalization &
acquisition of NextWave Pharmaceuticals from
Growth Equity / Pharma Services
PE Recap / Generics
Series E equity financing
Debt / Specialty Pharma
Equity financing round
Growth Equity / Diagnostics
Equity investment from
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
24
• We cover Latin America, South Africa and
parts of Asia through affiliate relationships
• 3 people cover Japan and China in partnership
with local advisory firms
Torreya: Global Presence With 50+ Professionals Focused on the Life Sciences Sector
London
New York
Mexico City
Rio de Janeiro
Riyadh
Hong Kong
Tokyo
Mumbai
Shanghai
Beijing
Moscow
TORREYA
AFFILIATE RELATIONSHIP*
• 34 people based in New York
• 11 people based in London
• 5 people based in Mumbai
• 1 person in Tokyo
* Key affiliate partners are Kybora in Africa and MidEast; Novus Capital in Russia; Natixis in China and Korea; Panarea in Latin America; and GCA in Japan.
• Life Sciences advisory in
North America, Europe
and Asia
• Focused on strategic
transaction and financing
transactions
• M+A: Corporate &
asset-level
• Royalty monetizations
• Licensing
• Acquisition financing
• Recapitalizations
• Structured Debt
• Equity Financings
Seoul
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
25
Strong Capabilities in Arranging Private Equity Capital Raises
Successful Execution of Private Equity Markets Transactions
$104 million
May 2021
Crossover Pre-IPO Financing Round
$200 million
February 2021
Equity investment from
Venture Raises in Principal Investments
$15 million
January 2019
Series A Convertible Preferred
Equity Placement
$14 million
Pending
Equity Capital Raise
$6 million
March 2021
Series A Private Equity Raise
$100 million
September 2020
Series B Crossover Equity Raise
Torreya’s team takes on selective equity capital raises for venture stage and growth stage companies and has strong capabilities to place
shares among crossover investors, family offices, private equity groups and venture funds. Our team maintains relationships with several
hundred investors worldwide. In addition, Torreya has an active principal investments area which does not act as placement agent in raises on
its own but has supported a number of recent financings in companies started by Torreya.
$68 million
May 2020
Disposal of stake in
$15 million
August 2020
Registered direct common equity offering
€44.5 million
October 2020
Equity financing round
$30 million
October 2020
Investor Advisor in Series C
Private EquityPlacement
February 2020
Investment by
$125 million
April 2019
Sale of Equity stake to
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
26
Disclaimer
This presentation may not be used or relied upon for any purpose other than as specifically
contemplated by a written agreement with Torreya. This publication has been prepared for general
guidance on matters of interest only and does not constitute professional advice. You should not act
upon the Information contained in this publication without obtaining specific professional advice. The
information used in preparing these materials was obtained from or through public sources. Torreya
assumes no responsibility for independent verification of such information and has relied on such
information being complete and accurate in all material respects. No representation, warranty or
undertaking, express or implied, is made and no responsibility is accepted by Torreya as to or in
relation to the accuracy or completeness or otherwise of these materials or as to the reasonableness
of any other information made available in connection with these materials (whether in writing or
orally) to any interested party (or its advisors). Torreya will not be liable for any direct, indirect, or
consequential loss or damage suffered by any person as a result of relying on any statement
contained in these materials or any such other information. None of these materials, the information
contained in them, or any other information supplied in connection with these materials, will form the
basis of any contract. To the extent such information includes estimates and forecasts of future
financial performance (including estimates of potential cost savings and synergies) prepared by or
reviewed and discussed with the managements of the Company and/or other potential transaction
participants or obtained from public sources, we have assumed that such estimates and forecasts
have been reasonably prepared on bases reflecting the best currently available estimates and
judgments of such managements (or, with respect to estimates and forecast obtained from public
sources, represent reasonable estimates). There is no guarantee that any of these estimates and
projections will be achieved. Actual results will vary from the projections and such variations may be
material. Nothing contained herein is, or shall be relied upon as, a promise or representation as to the
past or future. Torreya expressly disclaims any and all liability relating or resulting from the use of this
presentation. Torreya assumes no obligation to update or otherwise review these materials. These
materials have been prepared by Torreya and its affiliates and accordingly information reflected or
incorporated into these materials may be shared with employees of Torreya and its affiliates and
agents regardless of location. This presentation speaks only as of the date it is given, and the views
expressed are subject to change based upon a number of factors, including market conditions.
Distribution of this presentation to any person other than the recipient is unauthorized. This material
must not be copied, reproduced, distributed or passed to others at any time without the prior written
consent of Torreya. This presentation has been prepared solely for informational purposes and is not
to be construed as a solicitation or an offer to buy or sell any securities or related financial instrument.
You should not construe the contents of this presentation as legal, tax, accounting or investment
advice or a recommendation. Torreya does not provide any tax advice. Any tax statement herein
regarding any U.S. federal or other tax is not intended or written to be used, and cannot be used, by
any taxpayer for the purpose of avoiding any penalties. Any such statement herein was written to
support the marketing or promotion of the transaction(s) or matter(s) to which the statement related.
Each taxpayer should seek advice based on the taxpayer's particular circumstances from an
independent tax advisor. This presentation does not purport to be all-inclusive or to contain all of the
information that the Company may require. No investment, divestment or other financial decisions or
actions should be based solely on the information in this presentation.
The distribution of these materials in certain jurisdictions may be restricted by law and, accordingly,
recipients represent that they are able to receive this memorandum without contravention of any
unfulfilled registration requirements or other legal restrictions in the jurisdiction in which they reside or
conduct business. By accepting these materials, the recipient agrees to be bound by the foregoing
limitations. Insofar as these materials originate in the United Kingdom or are capable of having an
effect in the United Kingdom (within the meaning of section 21 of the Financial Services and Markets
Act 2000) they are directed only at classes of recipient at whom they may lawfully be directed without
contravening that section or any applicable provisions of the Conduct of Business Sourcebook of the
Financial Conduct Authority, including persons of a kind described in Article 19 (Investment
professionals) or Article 49 (High net worth companies, unincorporated associations etc.) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) and are not
intended to be distributed or passed on, directly or indirectly, to or relied or acted on, by any other
class of persons. Torreya (Europe) LLP, which is authorised and regulated in the United Kingdom by
the Financial Conduct Authority, is not acting for you in connection with any potential transaction(s)
described in these materials and thus will not be responsible for providing you the protections
afforded to clients of Torreya (Europe) LLP or for advising you in connection with any potential
transaction(s) as described in these materials except and unless subject to a subsequent specific
written agreement relating to such potential transaction(s) between you and Torreya (Europe) LLP.
Torreya (Europe) LLP is authorised and regulated by the Financial Conduct
Authority. Securities offered in the United States are offered through Torreya
Capital LLC, Member FINRA/SIPC.
TORREYA | PRIVATE LIFE SCIENCES VENTURE FINANCING MARKET REVIEW – JUNE 2021
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