Herbert Boyer, founder of Genentech, has warned biotechnology entrepreneurs that future venture capital funding levels might be smaller as the chances of making large companies out of start-ups was unlikely.
Founded by venture capital firm Kleiner Perkins Caufield & Byers in 1976, Genetech created the biotech industry and after a complicated corporate venturing involvement with Switzerland-based drugs company Hoffman-La Roche, was finally fully acquired and integrated in 2009 in a $46.8bn deal.
In a keynote presentation at the 14th Annual Corporate Venturing and Innovation Partnering conference presented by International Business Forum, Boyer said: "Outside of Genentech and a number of other well-known names, the biotech industry has been the biggest loss-making sector [for venture capitalists]. There will not be as much [funding] in future and entrepreneurs will create platforms or molecules to be bought by existing companies rather than integrated companies.
"The reason is the more research done in biotech means the less you know as life is not as simple as we first thought."
On the takeover by Roche, Boyer said: "The Swiss know how to make money. The sale was $15 below what I thought it was worth but given the approach at the end of 2008 during the financial crisis there were no other interested parties. But while some of the older [pre-deal] employees are unhappy or disappointed with the integration, newer employees love Roche and it has [overall] worked well."
Roche had initially bought all of Genentech in 1999 after calling in its option to buy the company using its option for a right of first refusal granted in 1995. Roche had initially merged with Genentech in 1990 in a $2.1bn deal to help fund the company’s cancer treatment prospects and a few months after its call to buy the remainder, Roche re-floated 46% of Genentech in 1999 and 2000 to capitalize on the success of these treatments.