Securitization of a Drug Development Mega-Fund: The Time-Certain Research-Backed Obligation.

Without sufficient capital, the cost of engaging in sustainable clinical development of a drug or drug compound is exceedingly difficult. Fagnan, Fernandez, Lo, and Stein have proposed the securitization of a drug development "mega-fund" as a means of attracting capital from traditional long-term corporate bond investors to the clinical stage of drug development. Our contribution to this line of thinking is the modeling of the cash flows of such a biopharmaceutical mega-fund and their distributions over time to develop an innovative design of securities that control the timing risk of cash flows.