Financial contracting in biotech strategie alliances

Journal Article (Journal Article)

We analyze 125 strategic alliance contracts, all of which concern early-stage research at small biotechnology research and development companies. Staged investment is ubiquitous, but solutions to agency problems vary. The cycle of equity participation in alliances resembles what we observe in venture capital contracts: they involve convertible equity and sometimes contain antidilution provisions, warrants, and board seats. Contracts rights vary explicitly with the size of die equity stake. Contracts contain explicit provisions linking equity participation to subsequent initial public offerings and contain clauses designed to insulate both parties from multitasking problems. Contracts often specify provisions that are unobservable or difficult to verify, which suggests a role for expected litigation as an enforcement tool in contract design. © 2007 by The University of Chicago. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Robinson, DT; Stuart, TE

Published Date

  • August 1, 2007

Published In

Volume / Issue

  • 50 / 3

Start / End Page

  • 559 - 595

International Standard Serial Number (ISSN)

  • 0022-2186

Digital Object Identifier (DOI)

  • 10.1086/519811

Citation Source

  • Scopus