Europe's spinning wheel

Corporate spinouts are classically done by established companies that want to maintain a core focus. Over the past three years, at least a dozen European biotech companies have done spinouts. In addition to the conventional desire to maintain focus, however, some of the companies cite a related reason: that investors no longer want the dual service business/therapeutic product model that was popular in the late 1990s.

In the current tense financing situation, companies simply can't get the money to keep a broader focus, so they are giving away assets to reduce burn rate and save cash. They also hope that the cleaner profile of both parent and spinout will make each more attractive to investors or as M&A candidates...