Challenges in exiting biotech portfolio investments

The journey of a large number of bio technology or life science entrepreneurs is initially fuelled by private and public grants as well as collaborations with educational institutions. However, these grants and collaborations come with their set of challenges and restrictions, especially concerning the underlying intellectual property rights.

A private equity or venture capital exit from a portfolio company is typically achieved either through (i) a listing of the company’s shares on a stock exchange; (ii) a strategic sale of either the portfolio company or its assets; (iii) a sale to an institutional investor or other private equity or venture capital funds; or (iv) a promoter buyout or a company buyback.

In some instances, the investor also has the right to “drag along” the other shareholders of the portfolio company such that the acquirer gets control of the company. While these exit rights may be contractually available to an investor, in practice, their implementation would depend on the restrictions and conditions that are imposed on the portfolio company under law or under contract.

Ekta Bahl is a partner and Sandeep Pareekshit is a senior associate at the Hyderabad office of Samvad Partners.