Pharma dealmakers hot on virtual call options

Every biotech company looking to make a deal on one of its assets always has to negotiate around one key question: How much is their clinical-stage asset really worth? For the buyers in this market, the best answer to that question--and the shortest route to a handshake--points to a structured acquisition agreement.

Pharma companies purchase a virtual call option giving them the right to buy the company later for a set price. Or they can settle on a low price for the company with a payment later if a drug is successful, says Dow Jones. Pharma companies can strike a deal for little down and a price they can afford and biotech companies get cash they need now.

"It really is the need for funding that is driving these deals," said E&Y's Jeffrey Greene, global transactions leader for life sciences. "These kinds of deals are among the best options for raising the right amount of cash."

- read the story from Dow Jones