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How Much for That Money in the Window?

Cambridge Antibody Technology PLC's January £55 million share-for-share offer for Drug Royalty demonstrates not only CAT's growth in the last decade but also a willingness by biotech companies to indulge in a little creative financing. The move will help CAT reduce its cash burn and ratchet up its R&D spending at a time when the pace of more traditional methods of raising cash remains sluggish. And not least important, the deal illustrates how a transparent financing transaction to improve biotech P&L can be a straightforward alternative to today's obfuscating accounting practices which, in the current climate, look disturbingly Enronian.

If biotech was a TV movie, we'd hear the starlet claim: "I was young. I needed the money." In 1994, a young Cambridge Antibody Technology PLC (CAT) needed the money: it sold 3.5% of future revenues until 2004—falling to 2.5% until 2009—to Canada's Drug Royalty Corp. Inc. for a paltry £1.5 million [See Deal].

Back then, cash was paramount for the UK-based antibody developer. Today, however, a better-funded, maturing CAT is winding its way...

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