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| Table 3 Biotech Creative Financing Mechanisms |  |
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SWORDSstock warrant, off-balance-sheet, R & D financings. Allows companies to sell stock and warrants in a package that includes warrants from a large pharmaceutical company. If the biotech company fails, the investor retains the value of the warrants from the large company. |
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SIRRSstock index reset rights. If the biotech stock does not reach a targeted price within a specified period, investors are issued additional shares to provide a cushion against losses. |
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PIPEsprivate investments in public equities. Created in 1993 in an attempt to open the public equity market. |
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| | Regulation S filingssecurities sold to foreign investors. | |
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Novel partnering modelsR & D focused spinout, royalty-based, joint venture, joint R & D, 60/40 without integration, selectively partnered. |
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| | Adapted from Refs. [94,95]. |
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Further, major teaching hospitals that conduct clinical trials are facing severe revenue and budgetary cuts and insurance companies and Medicare are less willing to pay for the hospitalization and medical costs for patients treated with investigational drugs [50]. |
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Changes in the marketplace and cost containment strategies are affecting decisions made in drug development. Pharmaceutical companies are focusing on cost-cutting measures and streamlining research programs. Pharmaceutical companies will be less willing to have all their investigational efforts directed at compounds with higher failure rates than the norm, compounds that are more costly and/or that require the development and validation of clinical trial methodology. They will be more comfortable with a mix. |
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As a result of cost constraints there tends to be a bottleneck at the stage between promising laboratory data and clinical trials. Gaps have already been identified in funding high-risk research on diseases such as opportunistic infections. For example, the National Task Force on AIDS Drug Development intends to study industry barriers to AIDS drug discovery [97]. |
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Market competition is resulting in pharmaceutical companies targeting cost-effective therapies and less on me-too drugs. Risks of a no me-too policy are that research will be aborted before companies know whether the drug will lead to incremental or major advances. Me-too drugs sometimes offer advantages in safety or efficacy over products that precede them. Companies will |
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