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Private Company Valuations: Biotech

Posted by Justin Byers, Lead Business Intelligence Analyst on May 14, 2008

Have you ever wondered how top-tier venture firms value and structure their investments? The PEDataCenter.com business intelligence team conducted exhaustive research on some of the top Biotech deals of Q4 2007. Some of our findings include:

• Leading the charge was Ambit Bioscience Corporation. This company received approximately $49.3MM in additional funding from several different investors, including Aisling Capital, Avalon Ventures, and GeneChem Financial Corporation. The deal terms of the funding included, among other things, Participating Preferred series D stock, a 1x liquidation preference, and Non-Cumulative dividends. This brought the post-money valuation of the company to $105,094,854.

  
  

• REVA Medical, Inc. (formerly MD3, Inc.) came in with approximately $42MM in additional funding from several different investors. Some of the investors involved were Cerberus Capital Management, Domain Associates LLC, Pequot Capital Management, and Bain Capital. The deal terms of the funding included, among other things, Conventional Convertible series H stock, a 1x liquidation preference, and cumulative dividends of 6%. This brought the post-money valuation of the company to $127,723,257.

  
  

• Did you know about Cogentus Pharmaceuticals, Inc. (formerly Amplify Therapeutics)? Did you know they raised approximately $40MM from investors including, but not limited to, Prospect Venture Partners and Pinnacle Ventures. The deal terms from these funds included Conventional Convertible Preferred Series C stock, Weighted Average anti-dilution provisions, and Non-Cumulative dividends. The post-money valuation came out to be $154,000,000.

  
  

• Another company reeling in additional funding was Fluidigm Corporation (formerly Mycometrix Corporation). Fluidigm was able to bring in an additional $34.1MM. This series E funding included Conventional Convertible stock, Full Ratchet anti-dilution provisions, and non-cumulative dividends of 10.75%. This leaves a post-money valuation of $312,308,268.

  
  

We plugged in the deal terms of these particular deals into our Cost of Capital Benchmark to see who received the “cheapest” money. The Benchmark shows us that the real winners of these were REVA Medical and Cogentus Pharmaceuticals. They came in with the “cheapest” money.

Keep in mind, the lower you are on the chart, the more company-friendly the money, the higher you go on the chart, the more investor-friendly the money. If you are a company raising money, you want be lower on the chart. This is a time when it is not best to be on top if you are the company raising money.

Cost of Capital Benchmark

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