The Recipe for Success Behind Elevation Pharmaceuticals’ $430M Deal

The Recipe for Success Behind Elevation Pharmaceuticals’ $430M Deal

What was Bill Gerhart’s recipe for success at San Diego’s Elevation Pharmaceuticals?

Less than four years ago, Gerhart took a glycoyrrolate, a generic drug approved decades ago by the FDA, and set out to reformulate the compound for use with a nebulizer for chronic obstructive pulmonary disease (COPD), which includes emphysema and chronic bronchitis.

Gerhart persuaded San Diego’s renowned serial entrepreneur Cam Garner and pulmonologist Ahmet Tutuncu to join him. Together they raised $44 million in venture capital, formed an 11-member drug-and-device development team—and voila! They got the buyout offer from Marlborough, MA-based Sunovion Pharmaceuticals yesterday that could eventually be worth as much as $430 million.

“It’s a very important product for Sunovion,” Gerhart told me during by phone yesterday. “It could form the cornerstone for their respiratory product line.”

The deal is a testament to capital efficiency and the lean business model for life sciences startups that has been in vogue in recent years. But is this a recipe that others can follow? Or did an unusual combination of factors come together at Elevation that would enable the VCs to double their money immediately—and perhaps eventually realize a nearly 10x return on investment?

As lead investor Brent Ahrens of Canaan Partners told me by yesterday, the $430 million buyout represents a value creation over the 32 months since Canaan led the Series A round (in January, 2011) that amounts to over $430,000 dollars a day.

Yet Ahrens acknowledged that many of the biggest risks had been minimized when he first looked at … Next Page »

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