Optioning Your Drugs

In the 1980s, while at the San Francisco law firm Shearman & Sterling, Mark Kessel realized that an investor and a biotech company could share the financial risks and rewards of an investment deal outside the traditional routes of either selling off equity to venture capitalists or licensing to pharmaceutical companies. Kessel?s idea was to license the intellectual property (IP) surrounding a single compound in development and work in-house or with partners to get it through a clinical trial. The biotech would get access to needed cash without having to sell a large percentage of the company. It would also have the option to buy back the IP at a predetermined price at a specific time. If the company chose not to exercise this option, Kessel would need to look for an alternative buyer for the IP (or swallow the loss).