Venture Round: Finding the Exit

This week brought on a flurry of news reports about venture capital firms setting out to raise new funds. VentureWire Lifescience reported that Atlas Venture, Scale Venture Partners, Pappas Ventures are at varying stages of raising new funds.

Toss in the news about Orion Healthcare Equity Partners hiring some new personnel, and the list of firms setting out to raise new funds just gets longer. (We first reported on Orion here and talked about other fund raisers Interwest Partners and Versant Venture's fund raising here)

It’s always nice to read about the flow of fresh new capital coming into the sector. Eventually, these articles will be followed up with new ones on fund closing. (Hello, this week's news about Split Rock Partners and last weeks' post on Kleiner Perkins Caufield & Byers.)

But who’s watching the dollars after they’ve been invested? Well, we did this month.

Our April issues of START-UP and IN VIVO offer some unique, data-driven insights on the opportunity for exits in the biopharmaceutical and medical device industry. The pieces are written by our fearless leaders Roger Longman and David Cassak, who are aided with data from our own Strategic Transactions Database and other sources.

Roger’s Valuation Watch takes a look the status of biopharmaceutical companies that have gone public since 2003. We’re sorry to say, the picture is not pretty for the companies or their investors. Hence the headline, “Marooned! VCs Stuck in the Public Markets.”

Among the group of 76 still-independent biopharma-focused biotechs (only a small number of recently public companies have been acquired and only a handful of those have been acquired at even a moderate profit for their investors), 61 companies are trading below their IPO price. The average trades 24.3% below its IPO price, the median 46% below.

The report names names, offering a list of the most troubled companies and the VCs who look like they’re might be in store for a good soaking.

David, meanwhile, examines both big and small cap mergers and acquisitions in the medical device industry. After pouring through piles of transaction data from our database, David opens the story with this:

To anyone with a vested interest in medical devices, investors and company executives alike, anecdotally, the past several years have felt like good times. And, in fact, by one standard alone, the total dollar values of M&A in devices, things have never been better. Total M&A dollar volume in the period 2005-2007 was up almost three and a half times that of the three-year period just prior, 2002-2004. And while a couple of very large deals, most notably Boston Scientific Corp.'s play for Guidant and the private equity takeout of Biomet Inc., have helped to push deal values up, dollar volumes over the past three years would still be much higher, even if those outliers are factored out.

But it's one thing to say that payors are paying more for device companies than they ever have. It's another to ask, What exactly are they paying for?

David’s report goes onto answer those questions and more. Deal Analyst Amanda Micklus, meanwhile, compiled some impressive tables showing what companies have been the most active buyers and, more intriguing, on what disease or conditions are those buyers spending their dollars?

There you go, you’re all caught up. Not only do you know who is raising funds, but now you’ve got the means to find out what is happening to venture bucks already invested.

As always, if you have any private suggestions, tips, or if you would like to meet up at Heart Rhythm 2008email me here.

(Image courtesy of Flickr user Paulbence Photography through a Creative Commons license.)