A white paper created as part of the biopharma partnership between Tiger Group and Liquidity Services provides a primer on how investors and lenders can bolster the position of biopharmaceutical firms by leveraging asset valuation and disposition to right-size company operations, launch new products and acquire promising startups.
Tiger Group and Liquidity Services formed the partnership in November 2018. It focuses on rapid, high-recovery disposition of assets in biopharmaceutical manufacturing using global marketplace channels such as AllSurplus.
The 13-page white paper — available here free of charge — is titled “How to Right-Size Your Biopharmaceutical Operations Through Asset Valuation.” It explores three key takeaways:
- Investors and lenders serving biopharmaceutical companies need partners specializing in asset valuation and liquidation to ensure companies’ abilities to maintain sustainable operations through downsizing or otherwise extract maximum recovery during bankruptcy scenarios.
- Biopharmaceutical companies need new products to stay ahead of potential regulation, competition, expiring patents and research and development failures — all of which eat into revenue and profits. Against that background, some companies may need to retrofit or replace existing manufacturing lines to produce tomorrow’s drugs.
- To bring new products to market, biopharma companies acquire new businesses — particularly biotechnology firms — with innovative products but also acquire unneeded assets while becoming dangerously burdened with debt. This results in the need to either downsize operations and occasionally leads to bankruptcy.
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The paper begins with an analysis of the market. On the one hand, the authors note, the biopharmaceutical industry is in the midst of a renaissance, with high funding levels and record drug approvals, not only across traditional therapy classes like small molecules and biologics but also for cutting-edge gene and cell therapies.
But pressures are intense. While the largest companies can weather major adverse events, smaller firms are in a more tenuous position. The reality is a single clinical trial failure can scuttle the entire enterprise.
“Or paradoxically, a single success can lift a biotech onto the radars of pharmaceutical buyers eager to add potential gems to their R&D pipelines, and the difficult work of merger integration lies ahead,” the authors of the white paper wrote.
In fact, biopharma has seen a resurgence of large-scale M&A. The authors of the white paper explore how major M&A can lead directly to excessive assets and bloated operations. Detailed case studies take a look at how several leading biopharmaceutical companies leveraged asset-valuation and disposition to manage M&A, consolidations and bankruptcies.
Lastly, the authors encourage stakeholders to weigh three key questions about the biopharmaceutical companies in their investment or lending portfolios:
- Is the firm positioned to profit within a changing political and competitive arena?
- Could it handle redundant resources after M&A?
- Has it cataloged its current assets and equipment to serve as potential collateral?
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“Carefully consider the answers to these questions,” the authors wrote. “Because they could mean the difference between a thriving, expanding business — or a rapid downfall after a single product failure.”
