Biotech's financial engineering tricks

Drug development fails 95% of the time, making biotech a brutal investment environment. So how does the industry keep the money flowing? Abhishaike Mahajan, also known as Owl Posting, has a great post on the financial engineering tricks that have emerged to make this survivable. The examples range from hub-and-spoke holding companies, which pool uncorrelated drug programs so that one big win can offset many failures, to synthetic royalties — manufactured financial claims on future drug revenue that let biotechs raise cash without diluting shareholders or taking on debt. Priority Review Vouchers also get a mention — tradable tickets that speed up FDA review, originally designed to incentivize neglected disease drugs. As I’ve often thought, he mentions that while they reward getting a drug approved, they don’t reward whether it actually gets manufactured or reaches patients affordably.