Title says it all. Have never come across a biopharma LBO apart from Advent-Zentiva? Not sure if that was just an acquisition or a LBO as well. I know that PE investors typically seek to make returns within five years, something that has been difficult to do in the biopharma sector given this industry’s high failure rate, long clinical development times, and expensive late stage studies. Curious if anything has changed in the current market that would make specifically generic pharmaceuticals an attractive space for LBOs
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You said it all in your post -- generic drugs don't have to deal with development times, FDA approvals, establishing a market etc. Makes it way easier to lever up and generate a decent return. I can't imagine any traditional lender getting comfortable with a drug development story (I'm sure there's some weird niche-y exceptions).
Zentiva is generics and OTC as well
To add my 2 cents to the above, the risk associated with future cash flows from drugs in development is not compatible with an LBO in which you need to have a high certainty of the cash flows that the business will generate in order to apply as much leverage to it as you can at the point of acquisition. The risk associated with drugs in development is not normally distributed but much more binary in nature which is the main issue. PE funds are very active however in the specialty pharma, OTC and generics industries which are highly cash generative business and don't have the same development risk. Some recent acquisitions in the space are Nordic Capital / ADVANZ, Permira / Neuraxpharm, SERB / BTG Specialty etc
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