DEFINITION of 'Stock And Warrant Off-Balance Sheet R&D - SWORD'

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.

BREAKING DOWN 'Stock And Warrant Off-Balance Sheet R&D - SWORD'

The SWORD is a separate entity that is connected to the outside investors and the biotech company through several legal obligations. Investors are usually 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.

RELATED TERMS
  1. Biotechnology Industry ETF

    An exchange-traded fund that invests specifically in the rapidly ...
  2. Financing Entity

    A financing entity is the party in a financing arrangement that ...
  3. Research And Development (R&D) ...

    Any expenses associated with the research and development of ...
  4. Return On Research Capital - RORC

    Return On Research Capital is a measure to assess the revenue ...
  5. Biotechnology

    The use of living organisms to make products or run processes. ...
  6. Capital Project

    A long-term investment made in order to build upon, add or improve ...
Related Articles
  1. Investing

    IBB: iShares NASDAQ Biotechnology ETF

    Learn about the iShares Nasdaq Biotechnology exchange-traded fund, which offers one of the most diversified ways of investing in the biotechnology sector.
  2. Investing

    (XBI, FBT, IBB) 3 Bond ETFs in the Biotech Sector

    Learn about the top biotechnology ETFs, such as the SPDR S&P Biotech ETF, the First Trust NYSE Arca Biotech ETF and the iShares Nasdaq Biotech ETF.
  3. Financial Advisor

    Investing In Biotech: Is It Worth The Risk?

    Investors shunned biotech after a weak start in 2014. Now that a comeback is in the works, should they reconsider?
  4. Investing

    Risks and Rewards of Biotech Companies

    We look at the risks and rewards of investing in biotech companies.
  5. Investing

    The Top 5 Biotechnology Mutual Funds for 2016

    Explore detailed analyses of the top biotechnology-related mutual funds for 2016, and learn about the characteristics of these funds poised for a rebound.
  6. Investing

    Key Financial Ratios to Analyze Biotech Companies (AMGN, GILD)

    Explore the rapidly growing biotechnology industry, and learn some of the key financial ratios investors use to analyze companies in the industry.
  7. Investing

    Are Bears About to Burst the Biotech Bubble? (IBB, BIB)

    The recent biotech rally has richly rewarded many investors. So will the fortunes be soon swept away?
  8. Investing

    The Top 5 Biotechnology ETFs for 2016 (XBI, IBB)

    Read analyses of the top biotech ETFs for 2016, and learn about the characteristics of the funds that may be poised to rebound.
  9. Trading

    Biotech Stocks Trade Near Major Levels of Support

    With biotech stocks tumbling toward long-term levels of support, we take a closer look at how active traders will trade the bounce.
  10. Investing

    XBI: SPDR S&P Biotech ETF

    Discover the investment management style of SPDR S&P Biotech ETF, and learn which investors can benefit from the fund's focused biotech holdings.
RELATED FAQS
  1. Biotech vs Pharmaceutical company

    Though biotech and pharmaceutical companies share similar business features, there also have differences. Here, we'll distinguish ... Read Answer >>
  2. What are the benefits of R&D (research and development)?

    Learn about the many benefits of research and development (R&D) efforts for companies in competitive markets, including the ... Read Answer >>
  3. How much of a drug company's spending is allocated to research and development on ...

    Explore the level of spending on research and development in the pharmaceutical sector, and how it compares to R&D spending ... Read Answer >>
  4. What is finance?

    Finance is the study of how money is managed and the process of acquiring needed funds. Personal finance, corporate finance ... Read Answer >>
Hot Definitions
  1. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  2. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  3. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  4. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  6. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
Trading Center