Thanks to FASB, Alliances Just Got More Expensive
Executive Summary
The latest cause of financial angst in biotech is FIN 46, the new accounting rule that could force drug companies to consolidate the expenses of their biotech partners, whether they own significant equity stakes or not. What will this affect? How about: any joint ventures, any co-development deals, and co-promotion, any R&D funding contracts-even, possibly, distribution and supply contracts.
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With no public market to provide competition, the theory among biotech's optimists was that Big Pharma would step in and buy lots of bargains. But cheap prices and easy availability haven't increased drug company appetites: They will only buy what they really want. Deal volumes, both for M&A and alliances, are falling, while Big Pharma has learned to put more of the risk back on biotech. What will change this dynamic, putting more bargaining into biotech hands, is the revival of the public market - and there are hints that such a revival may be on the way.
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