Monday, December 5, 1994
Big Arris deal goes against the grain
Over the last few years, an equity investment by corporate partners has come to be
viewed as a requisite seal of approval validating a biotech company's technology.
According to this reasoning, the potential upside of an equity stake builds an incentive
for the senior partner to make the smaller company's programs succeed.
However, from the latter's point of view, the downside is that the smaller partner in
effect pays the bigger party twice: once through the rewards of successful products and
again through stock appreciation. The company also dilutes shareholders by issuing