For a pharmaceutical company raising funds, are middle market investment banks a good source of finance?
This is a odd question, but I know this forum has a lot of people who work in investment banking
I and my 2 of colleagues have recently started a startup pharmaceutical company that has identified 3 derisked drugs to bring to market that would have a massive return overall. We would raise a initial small capital to get some regulatory approvals then go to a PE fund to raise capital for the trial.
FYI, we are all MDs (physicians) by background and one of us has previously worked for a biotech as chief of staff to bring a drug to phase III. We are still in our 20s.
Naturally, as we try to raise capital, we hit a bit of a weird bump because unlike most startup that can slowly grow. These oppertunities we identified is straight up capital intensive and there isn't much traction we can show asides having the assets and some regulatory plans with us which we already have. Our data room is pretty solid.
Whilst, we could raise capital from VCs most of them aren't really interested in single asset opportunities to flip if that makes sense. Or at least that's what my few limited conversations have led me to believe. They are looking for the unicorn type companies which stay generational.
We recently started to outreach a few middle market IB in the US, trying to see if this might be of interest to them to sell to their network (ie family offices, HNI etc). We have a meeting with one, but would love to hear those who work in this space -
1) Do you think investment banks are useful players for us to approach?
2) We will initially raise $3m to $5m and then later go for a larger raise ($50m per asset) for the trial itself- what would be the middle market IB fees for this roughly?
Does the above strategy seem sensible?
3) Is there alternative options of raising finance for a attractive return that would fund a specialist one off oppertunity like this? - (FYI we found that since biotech is very niche not many traditional investors have much experience in investing in biotech space
Based on the most helpful WSO content, here’s what you need to know:
Are middle market investment banks (IBs) useful players for your approach?
Middle market IB fees for your raise:
Alternative options for raising finance:
Your strategy of raising an initial smaller round for regulatory approvals and then pursuing a larger raise for trials seems logical. However, the key will be to clearly articulate the value proposition, risk mitigation, and potential returns to investors. Networking with specialized biotech investors and leveraging your team's MD background and prior experience will also be critical in building credibility.
Sources: Healthcare / Biotech Venture Capital?, Biotech finance: from IB to VC / HF to funded startup, Top Venture Capitals that hire juniors?
Starting a company like this would be a dream for me congrats and best of luck.
If I were you and needed funding that size, I would be reaching out to angel investors / VCs that could go for a seed that would get me to the IND. If you’re in the Bay Area or Boston there’s a few lab / accelerators out there which have events to meet sources of capital / people who have the same problem.
Unless you have a strong connection with an MD at a bank, I don’t think anyone will move their feet for you at that size. I work at a bulge not MM if someone thinks differently please correct me.
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