Last week I had the pleasure of spending a few days in Boston attending two separate life science events, Device Talks and McDermott Will & Emery’s Life Sciences Dealmaking Symposium. Although I love spending time in Boston, which is booming, I wish these events had been another week as I was not at home for my wife’s birthday (FaceTime is nice but it doesn’t replace the real thing). Fortunately, I have a super supportive wife and I tried making up for it, but one more time…happy birthday! Today, I want to focus on the Device Talks event and what I learned.
Because the two events overlapped I was only able to attend Device Talks on Monday and Tuesday. As you probably guessed, the event was focused on medical device companies. There were a wide range of companies there, from the largest device companies to early stage companies and everything in between, along with investors and service providers. There were three concurrent tracks – Ecosystem, Technology and Investment – that you could pick and choose from depending on what interested you. For Tuesday I attended only the Investment sessions and was very pleased with the content.
I attended two of the sessions, the first focused on the use of Strategic investors and the second focused on the risks facing companies as the mature. It seems to me that most of these events now have a panel on strategic investors or corporate venture and rightfully so as this is a large source of capital. Some takeaways were that strategics have a time horizon of 24-36 months when they make an investment. For the majority of products they want the product to be in the market and producing revenue within that time frame or they will not be very interested unless your product is a completely new product. They essentially were saying that they want the product to be as derisked as possible. They are also looking to fill holes within their portfolio. They may do a deal simply to fill in a gap that their competitors can offer and might be less about the economics of the deal. If they can prevent their competitor from getting shelf space and getting a foot in their door for their other products then smaller deals to prevent this scenario could make sense for them.
The second session was about thinking about the risks emerging companies might face and how to overcome those when seeking investment or acquisition. The panel was a mix of investors and attorneys. This panel started out discussing that M&A deal activity is down as far as dollars are concerned compared to 2017 but if you took out the mega deals in 2017 the average deal size is actually up. Similar to Corporate VC’s, investors are looking for companies to be more accretive to revenue faster and this is especially true when compared to biotech. Interesting tidbit, biotech companies are sitting on an average of two years’ worth of cash. The panel had the following suggestions to help derisk your company/product:
- Reimbursement is and will continue to be very important. Investors want to know companies have a track for reimbursement and it was suggested that you bring in reimbursement specialists early because it can be a stumbling block for getting a deal done.
- Along the same lines, bring in a regulatory specialist early.
- When raising money, make sure your goals are aligned with your investors and they are a good fit for what you want to accomplish, there is a lot of money out there so don’t necessarily take the first check that you are offered.
- Be honest and transparent when engaging with investors or a company that might acquire you. The starting price is usually the top number you can get and if skeletons are found in the closet it could derail the whole deal or reduce the price. If you lay out issues from the get go before a number is agreed upon you will be in a much better position long term.
- Listen, keep your ears open. The industry is constantly innovating and you want to be able to adapt. Don’t be afraid to take advice (I think this could be applied to most industries).
The second panel was excellent and unique in the makeup of the panelists, more attorneys than you would expect but all with diverse backgrounds and specialties. Although I only attended half of the event, I learned a lot and would recommend if you are an emerging company that you attend this in the future. There is a lot to learn and a good mix of companies that would be worth meeting.