Monday, September 12, 1994
For the past two years, the common wisdom at conferences and in meeting rooms has been that - sometime, eventually, sooner-than-later - the biotech industry must suffer its consolidation, ridding itself of excess executives, bricks and mortar, and projects that aren't products, and rationalizing the plethora of companies into coherent portfolios of technology applied against a common market or disease state.
And as share prices inexorably declined, we worried about how companies could preserve technology values in a Dutch auction environment, where prices fall until a buyer finally appears to halt the downward spiral. In the biotech sector, patient buyers apparently could acquire technology at fantastic bargains as falling share prices and dwindling cash balances created desperation at biotech companies.
The flip side
However, as time has passed and the ballyhooed consolidation seems as remote as ever, we're reminded that the Dutch auction works in two ways. While asset holders have to worry about falling values, buyers have to worry about losing access to technology they truly need or want. Under this theory of value, bidders will offer a fair price when they fear that desired assets might be snapped up by someone else as the price gets lower.