Pharmaceutical Executive Europe - November 2008 - (Page 11)

VC: Virtuous or Vampire Capital? Gerhard Symons reviews Venture capital and the European Biotechnology Industry, a book to be published later this month, and speaks to its author, Dr William Bains. I t is a truth universally acknowledged that a biotech start-up in possession of little fortune must be in want of venture capital (VC). Perhaps less wellacknowledged, is that VC investors operate in a way consistent with being rational economic entities — creating VC shareholder value at the expense of investee company value, and maximising management fees by raising new funds at the expense of effectively managing existing investments. This is the controversial message of a new book by William Bains, which purports to uncover the real VC business model, and for the first time, to link it to the withered European biotechnology industry which, in comparison to the US, has singularly failed to thrive. Dr Bains’ contrarian conclusions are the fruit of a career spanning two decades as an academic and a life sciences entrepreneur, in which he has founded four companies and helped in the creation of several others in a variety of roles, including as an investor. It is his intimate familiarity with the seminal events of company development through the biotech growth, boom and bust eras, with the liberal sprinkling of real-life examples on almost every page that lends credibility to the book. Speaking exclusively to Pharmaceutical Executive Europe, Dr Bains said: “I had a hypothesis that something was wrong with the VC business model and that it was a major contributory factor to why biotech companies fail, along with the other business school reasons: cyclical public markets, institutional investor and public non-acceptance of biotech, and tension between management and entrepreneurs. The result is a book which doesn’t conform to what people think about VC.” The first six chapters whet the reader’s appetite with a highly-readable history of the biotech industry, VC origins, and the weaknesses of European biotechnology before moving on to the main course, which has considerably more bite. What follows is a text-book style dissection of the effects of VC management on investee board-level issues: veto powers, directors’ responsibilities, company strategy, preference shares, and even the performance of senior pharma executives parachuted in as biotech CEOs. On this latter point I asked Dr Bains for advice to pharma executives considering a move into biotech: “Biotechs are generally a level playing field — there is no hierarchy in a start-up. You also have to be personally excited by the opportunity, not just with having the CEO title or a big salary — kudos will run out when the VC fires you. Usually pharma executives fall down on how fragile a biotech start-up is: one day you might have to help buy some laboratory kit, the next day discussing financial strategy with the Board.” SPECIAL OFFER FOR PHARM EXEC EUROPE READERS Venture Capital and the European Biotechnology Industry is published in hardback by Palgrave Macmillan priced at £60.00. To PEE readers, it is available at the special discounted price of £30.00(+postage and packing).* To receive the discount: 1. Online – enter the reference code WVENTURE2008a into the promo box on the checkout page when ordering on 2. By email – quote the reference code WVENTURE2008a when you order this title from 3. By phone – quote the reference code WVENTURE2008a when you call Palgrave Macmillan Orders on +44 1256 302 866. * Please note this offer is only available to customers living outside the US or Canada. 13 Critical Vision Is pharma recession-proof? 15 Executive Profile Dr Jacques Servier 19 IT Using IT to maximise a company’s brain power 23 Event Review Last month’s EuroBIO in Paris

Table of Contents for the Digital Edition of Pharmaceutical Executive Europe - November 2008

Pharmaceutical Executive Europe - November 2008
From the Editor
News Round-Up
Brussels Report
Using the Wooden Spoon
VC: Virtuous or Vampire Capital?
Is Pharma Recession-Proof?
Servier: Patience and Passion
Boost Your Brain Power
Innovation, Innovation, Innovation
Last Words

Pharmaceutical Executive Europe - November 2008