Financing methods that drive innovation in biotech and pharmaceuticals : the meagfund [sic] IPO model

Current research has shown that a mega fund and securitization approach using debt financing can not only mitigate risk in investments in cancer but can also align research and development in the right direction for new and innovative breakthrough therapies. We propose a new application of this megafund biopharma model - the megafund IPO model. There are almost arbitrage-like opportunities for investors where there are heavily discounted investments opportunities which are generated in IPO's. However, these events driven investments are only for the institutional investor and hence pooling capital into a more scalable mega fund structure could generate returns that are not otherwise possible while encouraging innovation in biomedicine. The investment vehicle is attractive to investors because of the significant amount of alpha that the fund can generate on de-risked basis. Risk is mitigated by the fact that there is an arbitrage like opportunity for the institutional investor in events driven investments for the mispricing of an IPO. We examine a back-testing of ten years examining a long only strategy and later also look at a case study of Monashee Investment Management that currently most closely resembles the megafund IPO model.

Department dc:contributor.department

Sloan School of Management. Master of Finance Program.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2014

Author dc:creator

• Cho, Harngid

Advisor dc:contributor.advisor

• Andrew Lo.

• Sloan School of Management. Master of Finance Program.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/90227

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/90227