Biotech Investing

Opportunities For Biotechs Backed By Venture Capitalists

As some of the largest pharmaceutical companies will have to part with the patents of very a few of their best selling drugs in a few years from now,smaller biotech firms with prospective money-making drugs in early development stages but scarce capital have come under the radar of venture capitalists and bigger companies.

Buyers of smaller capitalized biotechs have to assume a large risk, but there is also a great financial reward attached to biotech investing if all works out well. Each year, often a few times a year, investment banks trying to increase capital for the smaller biotech companies schedule a biotech conference where potential investors have the opportunity to listen to the biotech's chief executive officer talk about the drugs in the company's pipeline, the stages each drug needs to complete before government sanction, the likelihood of getting authorization from the United States FDA to market the drug, in addition to the market the drug is targeted to reach, whether its a certain kind of blood disease, cancer, migraine or virus.

At the biotech conference, the company's CEO will talk about the finances required for a number of company operations, including the capital needed to successfully finish the different government testing phases, and other R&D costs required for developing the drugs.

Investment bankers will typically discuss the biotech company's capital structure, the quantity of corporate bonds, preferred stock or common stock shares that will be issued by the firm and the funds required for company operations and research, at the biotech investing symposium.

Once the company concludes with its presentation, hedge fund companies and venture capitalists with biotech investing experience will assess the rewards and risks to decide whether to invest as well as how much to invest.

Also, the larger pharmaceutical company's CEO may discover that that smaller biotech?s drugs support the product line of his company. The big pharmaceutical firm may also decide to make its foray into a new market, aimed at the drugs made by the smaller company and decide on a partnership in return for profits from the sale of drugs in the pipeline in the future. The larger pharmaceutical firm can also decide to buy out the smaller biotech and establish a merger among the two.