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The veteran banker and former Pharma R&D chief has launched a fund to acquire some of the nearly 300 listed biotechnology that have undergone disappointing clinical trials and have returned cash to shareholders and earned valuable intellectual property.
After that, Alis Biosciences hopes to provide large investors like Fidelity and Wellington with an easy way to spread bets across the industry. The listed biotechnology estimates that it has a total of approximately $30 billion in cash on its balance sheet.
Former biotech banker and entrepreneur Nick Johnston said the fallout from the sector’s long-term market defeat, as the pandemic was a “tragedy” for shareholders.
He calculates that the struggling listed biotech has market capitalizations ranging from $5 million to $100 million, but cash reserves of $10 million to $400 million, respectively.
“The basic problem is that there’s too much cash in the wrong place at the moment,” he said.
Annalisa Jenkins, former dean of German drug maker Merck, will chair the board. After the list, Alis Biosciences plans to develop some of the early stage drug candidates, including putting together various acquisitions and individual ideas.
The S&P XBI index, which tracks the performance of biotech stocks, is down 50% from its February 2021 high.
During the pandemic, investors have become keen on the sector, with many startups coming out much earlier than the public and much earlier than usual.
Johnston said that when early clinical trials yielded inadequate results, the stocks often fell so far as investors were stuck with them because they had no buyers.
Management is still collecting cash during a booming era, so they are pleased to work hard and try different approaches frequently. Some of the new ideas were like “lemming off the cliff,” he said.
Alis Biosciences value businesses at 90% of their market capitalization, borrow money to buy them, then return most of their balance sheet cash to investors.
Johnston said Alice could return the money much faster if she had a bankruptcy process.
“We only ask two questions. Do you own intellectual property and have you committed a scam? Yes, that’s all we need to know,” he said.
Jenkins said investors have expressed “strong support” to ALIS Biosciences “reflecting the demand for new solutions to this long-standing problem.”
“In this challenging financial market environment, we need greater creativity to find the answer,” she said.
