The world of private equity (PE) is moving in on pharmaceuticals and drug development, dreaming up innovative deal structures and acquiring knowledge, all to get closer to the science. “Inevitably, PE funds look at this and see a huge opportunity”, said Graham Defries, Life Sciences partner in London. However, the drug development sector is binary by nature: a drug will either be a success or it will fail, most likely the latter – 90% is a commonly quoted ratio of new drug candidates that fail. In addition, drug development is very expensive, costing millions or often billions of US dollars, and time-consuming, taking more than a decade on average. Investing into VCs is a “very clever way” for PEs to get closer to pre-revenue life sciences companies with binary risk, said Life Sciences partner Sophie McGrath. Should they progress and get to late-stage clinical trials, PE becomes a source of funding for these companies, which are capital-intensive at that stage, she said to Mergermarket.