Updated on 8 June 2012
Dr Fernandez: In the US, these challenges are primarily highly volatile capital markets, uncertainty with regulatory issues, and a reimbursement system that has grown increasingly hostile toward innovations. Pan-Asian countries present a different set of challenges with their regulatory regimes and the fact that these markets are highly fragmented. While the "out-of-pocket" payment for medical expenses is attractive because it subverts all the reimbursement challenges, there is a price sensitivity that one needs to be very conscious of. Economies of scale might still compensate for low profit margins that these markets will demand. The other factor to be aware of is curbing of drug pricing as governments seek to contain costs. One needs to be mindful of these issues.
We are big on forming new companies around cutting edge technology or well-differentiated products. I spend a considerable amount of time with Indian companies and I think it is sad that they don't have major players backing them financially in their own country. This is the reason why we wanted to form a region specific fund for India but that has been a challenge for us. We are still in search of the right partner who is willing to make a financial commitment with us.
What are the recent achievements of B&C?
Dr Fernandez: Our latest achievement has been the commencement of operations on Burrill Capital Fund (BCF) IV, which has aggregate capital commitments of $313 million. We looking to achieve a final goal of $500 million. The fund will invest globally in the life sciences, including early-to late-stage investments in therapeutics, diagnostics, medical devices, healthcare delivery, wellness, and digital health.
Among our most significant exits has been Pharmasset, a B&C portfolio company. Pharmasset was acquired by Gilead for $11 billion in cash and even before Gilead offered an 89 percent premium to Pharmasset's closing stock price, the company ranked as the top performing IPO in the life sciences sector since the late 1990s and one of the top performing IPOs, even including the IT sector, over the past decade. The acquisition ranked as the highest-valued M&A deal ever for a clinical-stage biotech company.
Shire, a global specialty biopharmaceutical company, also recently announced an agreement to acquire FerroKin BioSciences, a B&C portfolio company, for an upfront payment of $100 million, payable in cash at closing, plus potential post-closing milestone payments of up to $225 million, depending upon the achievement of certain clinical development, regulatory and net sales targets.