PE Firms Flipping Drugs

A recent Bloomberg article explained how dealmakers are treating aging drugs like companies and flipping them. The model is perfectly legal and equally simple: acquire licensing rights, raise the price, and put the licensing back on the market at a hefty premium. Private equity firms are attracted to what some are calling “financial engineering,” because it’s relatively low-risk with a speedy payout.

Consider Actimmune, which Genentech sold to a private equity firm in 2012 for $55 million. The firm raised the drug’s price 434% before selling it to Horizon Pharma for $660 million just two years later. According to data from Connecture, about 650 branded drugs doubled between 2011 and 2015, and 100 of them raised prices 500% or more.