The SWORD i.e Stock And Warrant Off-Balance Sheet R&D is a separate entity that is connected and linked to the outside investors and the biotech company through several legal obligations. These kind of Investors usually lies in the category of institutional investors or wealthy individuals looking to capitalize on the latest technology. The investors are hoping to benefit from the warrants on the common stock of the biotech company and partial rights to the technology developed from the project.
Biotech companies benefit from a SWORD by being able to develop projects they would otherwise be unable to afford. Also, being able to use outside investors reduces the risk put on current shareholders. Using SWORDs allows companies to minimize the effects of R&D spending on the firm’s bottom line.
A financing option developed to help biotechnology companies access capital that could be used to finance new or ongoing research and development projects by establishing a separate entity. The financing received through outside investors gives the biotechnology company the needed capital in exchange for giving the investors partial rights to the outcomes of the R&D projects they are funding.