How to Tell if a BUYOUT is Coming:
3) Your Controlling Shareholder is at the End of Her Career. Or the Beginning of Her Career.
The funny thing about the world of biotech is that companies can be valued at a $ 1 Billion or more without selling a single product. All of the value is in the assets that the company has developed, which will theoretically lead to boku bucks one day. Theoretically.
So you can understand why a 67 year old scientist founder might be tempted to take a giant payout from Big Pharma and move to Boca Raton. Let’s consider the math. It’s not unusual for a biotech with a promising phase two product and good data to be valued as high as $500,000,000. Now, at this point the founding team has probably been laboring in obscurity for years, and they likely have taken on investors to fund their expensive biotech dreams. Its rare for a founder to retain majority control throughout the product development process because it’s just so expensive. However, the founder, or founding group, could retain 5 or even 10% of the company’s shares. That may well make him or her the largest, most influential shareholder. So, if Pfizer offers to buy that company for $500,000,000, some ageing nerd with a PhD may well be walking away with $50,000,000. That is. A. Lot. Of. Money.
By the way, few scientist founders achieve those kinds of take out offers without suffering through a long career of disappointments and setbacks. They may well understand that the current $500 million valuation that the market is assigning to their still unproven company could vanish with one bad trial result. If they have been burned once, twice, or three times in their younger years, sometimes they know a good deal when they see it. If you chose to take a biotech ride with an experienced, elder founder, you may well have the chance to ride off into the sunset together.
