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the biggest of the biggest pharmas. They all are throwing the baby with the bathwater, totally changing what they call R&D into S&D, you know, Search and Development.
So we should be on top of the world. We should think, God! Yes! we have proven we can innovate, from early innovation to the market.
Basically what Kevin is saying is that it’s so unfair. We get a deal and we’re [supposed to be] so happy to get our money back and the hope of potential earn-outs that never come. That is basically because the venture industry is at an incredibly weak position, because the cash has not been forthcoming from our own limited partners, and we are under pressure. [VC] funds are under pressure, there are no more funds for some of them. Because of that pressure cooker of the venture industry, we are pressing our companies for liquidity. We are pressing them for liquidity, maybe a touch too early for what the companies can do. That’s my hypothesis.
There are deals where the balance of power is not so skewed, and there are a number of such deals, where you have five term sheets for an acquisition. Those deals a pharma has to do. They are bidding actually quite high prices for products that are still in the making. What Kevin is describing is that we as an industry basically need that cash so badly that we are agreeing to bad deals.
Xconomy: Is it different Europe, or do you and Kevin share a global perspective?
AP: It’s totally global. Our companies get sold to global companies in Europe and the U.S. On the IT side, I think it’s quite different. Social media is happening in the U.S. But in the life sciences, I would say it’s a totally global industry. The pharmas have no preconception where they buy companies. They are buying companies for the compounds they have or the technologies they have. From San Diego to Paris, it’s precisely, exactly the same.
X: Kinsella pointed to three specific areas of abuse, as well as a kind of overall, hardball business posture that isn’t really conducive to sustaining the venture biotech ecosystem.
AP: So why do they do it? Because they can. To me that’s it. The equilibrium only happens if you have the same pressure on both sides. And there isn’t. I think it’s because of the weakness of the venture-backed companies, partly because of the weakness of the venture groups.
I’m not excluding ourselves from that. We have the good situations and bad situations. We have signed deals where we … Next Page »