Biotechnology financing dilemmas and the role of special purpose entities

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Before they fell into disfavor, legally independent affiliates of biotech companies—special purpose entities—had supported the development of several blockbuster drugs. Are they about to stage a comeback?

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Figure 1: SPE structure.
Figure 2


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    Recombinant Capital. Year-end '98 financing numbers: A Tale of Two Biotechs. Signals Magazine, ( February 7, 1999.

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    Ernst & Young LLP. Convergence: Ernst and Young's Biotechnology Industry Report, Millennium Edition (Ernst & Young, New York, 2000).

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    Solt, M.E. SWORD financing of innovation in the biotechnology industry. Financial Management 22, 173–187 (1993).

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    Edwards, M. et al. Value creation and sharing among universities, biotechnology and pharma. Nat. Biotechnol. 21, 618–624 (2003).

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    Financial Accounting Standards Board. Exposure Draft, Proposed Interpretation: Consolidation of Certain Special Purpose Entities, an interpretation of ARB NO. 51, File ref. no. 1082-200 (FASB, Norwalk, CT, June 28, 2002).

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The authors would like to thank the two dozen executives, investment bankers, investors and accountants who generously gave their time and shared their opinions in the interviews that form the basis for much of this research.

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Correspondence to Leora Schiff.

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Schiff, L., Murray, F. Biotechnology financing dilemmas and the role of special purpose entities. Nat Biotechnol 22, 271–277 (2004) doi:10.1038/nbt0304-271

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