Happy New Year, and welcome back to Baby Breakerdom! This week's quest to find budding Rule Breakers proves that it pays to have partners, and that private firms may do better to eschew the public markets. (The horror!)
We begin this week with Perlegen Sciences. According to its web site, Perlegen studies the genetic causes of diseases, which helps bring advanced therapies to market more quickly. Perlegen's approach has drawn the interest of many of the big pharmas, including AstraZeneca, Bristol Myers Squibb (NYSE: BMY ) , GlaxoSmithKline (NYSE: GSK ) , Johnson & Johnson (NYSE: JNJ ) , and Motley Fool Income Investor pick Merck (NYSE: MRK ) .
Now you can add Motley Fool Inside Value pick Pfizer (NYSE: PFE ) to the list. In a deal closed the week before Christmas, the drug maker purchased a 12% stake in Perlegen for $50 million. Why, you ask? Pfizer's senior vice president for research and development told VentureWire that the company recognizes that many diseases have a "genetic component." Indeed. And that could augur well for other biotechs, especially those developing up-and-coming gene therapies.
The benefit could be even greater in light of our next bit of news. According to researcher VentureOne, venture capital-backed firms chose mergers over public stock offerings in 2005. Though the overall number of both types of deals fell, the average value of VC-backed mergers rose a dramatic 17% to $27.33 billion. IPOs, conversely, generated less than half the value they did last year, down to $2.24 billion from $4.98 billion in 2004.
Rule-Breaking investors, take note: The search for multibagger returns in 2006 could take us to firms whose assets are incredibly valuable to companies with big bank accounts -- like the big pharmas.
Sadly, there were no Baby Breaker public offerings this week, which means it's time to say goodbye. See you back here next Friday when we continue the quest to find the next ultimate growth stock.
Further Rule-Breaking Foolishness:
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Fool contributorTim Beyerslongs for a big bank account, though he admits that his Rule-Breaking investments are off to a good start in 2006. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.