Structured Debt Finance for Healthcare Companies

Note: For the purposes of this paper, we will define “healthcare” as life sciences/biotech, medical devices, diagnostics and health tech.
Capital Advisors Group is a Boston area-based institutional investment advisor that has been helping venture-backed companies invest their cash assets for more than 23 years. Its debt finance consulting division helps early stage companies, both public and private, determine their optimum capital structure, identify appropriate lenders, source term sheets and negotiate deals.

Executive Summary

There has been a noticeable shift over the past two to three years in how early stage healthcare companies finance their operations. The traditional model of seed stage financing followed by venture capital and, perhaps, some mix of bank or venture debt is becoming less and less the norm. It appears more difficult now to get ideas off the ground through traditional methods. We are now seeing a mix of creative structures that sometimes include venture capital syndicates combining for large early rounds. We are seeing large pharmaceutical companies partner with companies at earlier stages and licensing agreements or outright sales of programs in the clinic to finance other products in the pipeline. In addition, the debt financing landscape has been altered by new players in the market who have added to a growing source of funds for early stage healthcare companies and created increased competition among lenders.
The goal of this paper is to provide an update on the shifting landscape of the debt financing markets, ranging from bank debt to structured debt with a specific focus on how this structured financing has helped fuel an extremely competitive debt market.
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