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Tiger Liquidity Services Warns of Risks of Excess Assets in Biopharma Sector

Analysis by Tiger Liquidity Services Biopharma Partnership underscores the strategic value to hedge funds, private equity firms, asset-based lenders, and bankruptcy professionals of leveraging asset-valuation and disposition in the biopharma/pharmaceutical space

Tiger Liquidity Services Biopharma Partnership has issued a primer on how investors and lenders can bolster the position of biopharmaceutical firms by leveraging asset valuation and disposition to right-size these companies’ operations, launch new products and acquire promising startups.

With substantial capital resources as well as deep experience in sector-specific asset valuations, sales and remarketing, Tiger Group and Liquidity Services. formed the partnership in Nov. 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’ ability to maintain sustainable operations through down-sizing, or otherwise extract maximum recovery during bankruptcy scenarios.
  • Biopharmaceutical companies need new products to stay ahead of potential regulation, competition, expiring patents, and research & development failures—all of which eat into revenue and ultimately 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 down-size operations—and occasionally leads to bankruptcy.

The paper begins with a clear-eyed 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 that a single clinical trial failure can scuttle the entire enterprise.

“Or paradoxically,” the authors write, “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.”

In fact, biopharma has seen a resurgence of large-scale M&A. The authors 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 catalogued its current assets and equipment to serve as potential collateral?

“Carefully consider the answers to these questions,” the authors conclude, “because they could mean the difference between a thriving, expanding business—or a rapid downfall after a single product failure.”

The full paper is available here.