The Great Biotech Cash Arbitrage: Anatomy of a Sector in Distress

A record 161 biotechnology companies traded at negative enterprise value in mid-2025, representing over $5 billion in trapped capital where shareholders hold claims on cash that market prices say is worth less than nothing. This unprecedented phenomenon has spawned a new breed of financial predators—acquirers who systematically purchase struggling biotechs at steep discounts to their cash holdings, wind down operations, and extract value through complex contingent payment structures.

The scale is staggering: approximately half of all U.S. public biotechs traded below their cash value by mid-2025, up from 19% in February. Roughly 1 in 6 Nasdaq biotech companies now trade below their cash holdings—approximately $30 billion in trapped capital across nearly 300 distressed companies. This article examines the companies caught in this vortex, the acquirers profiting from their distress, and the structural forces that created one of the most unusual value dislocations in modern capital markets.

The scope of biotech's cash crisis has accelerated dramatically

The biotech sector entered 2025 in a state of unprecedented financial stress. According to the Kybora database, companies trading at negative enterprise value surged from just 34 in 2019 to a peak of 173 in 2021, settling at 139 by mid-2024 before expanding again through 2025. The William Blair Biopharma Quarterly Review documented 161 companies still trading at negative EV as of Q2 2025, with 70% of all publicly listed biotech stocks carrying enterprise values below $100 million.

The cash runway crisis intensified throughout 2024-2025. EY's Biotech Beyond Borders 2025 report found that 39% of biotechs—the highest in six years—ended 2024 with less than twelve months of cash remaining, up from just 18% in 2021. Approximately 36 biotechs were burning more than $1 million per day, and 70% of companies deplete their funds within 18 months of going public.

The XBI (SPDR S&P Biotech ETF) demonstrated remarkable recovery in 2025, rising 36.78% year-to-date through December 19 to reach $123.43, hitting a 52-week high that represented an 85% gain from its 52-week low of $66.66. The IBB (iShares Biotechnology ETF) gained 27-28% to $166.19. Yet this rally masked a brutal bifurcation: while larger biotechs with proven platforms attracted capital, clinical-stage companies facing trial failures continued trading at fractions of their cash holdings.

The IPO market remained effectively frozen. Q2 2025 marked the first quarter in 15 years without a single biotech IPO, and full-year 2025 tracked toward just 10-16 offerings versus over 100 in 2021. The 30 biotechs that went public in 2024 raised approximately $4 billion, but only 8 of 30 (27%) traded above their IPO price by year-end. Secondary financing collapsed, with deal volume down 63% and proceeds down 69% in H1 2025 versus H1 2024.

The core companies illustrate how quickly value evaporates

iTeos Therapeutics: From $655 million to wind-down in four months

iTeos Therapeutics represented the largest below-cash acquisition of 2025 in absolute terms. The Belgian immunotherapy company held $655 million in cash as of Q4 2024—approximately $14.80 per share—with runway projected through 2027. Everything changed on May 13, 2025, when the company announced that its lead TIGIT antibody belrestotug, partnered with GSK, had failed to meet the progression-free survival endpoint in the GALAXIES Lung-201 Phase 2 trial.

GSK immediately terminated the collaboration established in June 2021. By May 28, iTeos announced its intention to wind down operations. On July 21, Concentra Biosciences (controlled by Tang Capital's Kevin Tang) announced a definitive agreement to acquire iTeos for $10.047 per share plus a contingent value right, representing a 32% discount to cash per share. The deal closed August 29, 2025, with 72.17% of shares tendered.

The CVR structure entitled shareholders to 100% of net cash exceeding $475 million at closing, plus 80% of proceeds from any asset dispositions within six months.

Elevation Oncology: Clinical failure to acquisition in four months

Elevation Oncology followed an even more compressed trajectory. The company held $93.2 million ($1.57 per share) at year-end 2024 before reporting disappointing Phase 1 data for its Claudin 18.2 antibody-drug conjugate EO-3021 on March 20, 2025. The 22.2% objective response rate was deemed insufficient for competitive positioning in a crowded field.

Management implemented a 70% workforce reduction and began exploring strategic alternatives. Concentra announced an acquisition agreement on June 9 for just $0.36 per share plus CVR—a 77% discount to cash value. The deal closed July 23, 2025.

Allakos: A four-year decline ends in a 79% discount to cash

Allakos represented biotech's longest-running below-cash saga. The company's original collapse occurred in December 2021 when lirentelimab failed two pivotal trials in eosinophilic gastrointestinal disorders, erasing $3.8 billion in market cap in a single day. The stock crashed approximately 90%.

After years of attempting to develop successor programs, Allakos announced in January 2025 that its final pipeline asset AK006 had failed Phase 1 testing in chronic spontaneous urticaria. The 75% workforce reduction that followed left the company with approximately $80.8 million in cash ($0.89 per share) and no remaining development programs.

Concentra acquired Allakos for $0.33 per share—a 79% discount to cash value—in a deal that closed May 15, 2025. Notably, this transaction included no CVR component for asset sales, as the company's pipeline held no remaining value.

Third Harmonic Bio: Orderly liquidation returns 90% of cash

Third Harmonic Bio represented the rare outcome where shareholders received most of their cash value. After the company's lead program THB001 caused liver toxicity in 2022 (dropping the stock 75%), and successor compound THB335 showed concerning side effects in early 2025, the board chose voluntary dissolution over acquisition.

Shareholders approved liquidation on June 5, 2025, with 99.9% voting in favor. The company announced a $5.35 per share initial distribution—approximately 90% of the $5.94 cash per share—with potential additional payments if the THB335 asset sells. Trading was suspended July 31, 2025.

Kronos Bio: 83% workforce cut preceded 69% discount sale

Kronos Bio exemplified the death spiral of serial clinical failures. After discontinuing lanraplenib in December 2023 and istisociclib (its final clinical asset) in November 2024 due to neurological adverse events, the company implemented an 83% workforce reduction and began exploring alternatives.

Concentra announced acquisition terms in May 2025: $0.57 per share plus a complex CVR covering potential asset sales and cost savings. The company held $112.4 million ($1.85 per share), meaning shareholders received a 69% discount to cash value. The deal closed June 20, 2025.

Cargo Therapeutics: CAR-T failure triggers $218 million acquisition

Cargo Therapeutics held $368 million in cash at year-end 2024 before its lead CAR-T therapy firi-cel showed disappointing durability in the FIRCE-1 trial—only 18% of patients maintained response at three months. The company implemented a 90% workforce reduction and began strategic review.

Concentra announced acquisition terms on July 8, 2025, offering $4.379 per share plus CVR against a $217.5 million minimum threshold. This implied approximately $150 million in excess cash flowing to shareholders via CVRs, representing the highest payout potential of any 2025 Concentra deal. The transaction closed August 18, 2025.

IGM Biosciences: IgM platform failure leads to $83 million sale

IGM Biosciences discontinued its lead programs imvotamab and IGM-2644 in 2025 after disappointing clinical results. With $183.8 million in cash but no viable development path, the company became a natural Concentra target.

The acquisition closed in August 2025 at $1.247 per share plus CVR, with an $82 million minimum cash threshold and 80% of IP disposition proceeds flowing to shareholders within one year.

2025 Concentra acquisition summary

Concentra Biosciences emerged as the dominant distressed acquirer

Kevin Tang's Concentra Biosciences has assembled the most aggressive acquisition program in biotech distress investing. The Tang Capital founder—who previously built Ardea Biosciences (sold to AstraZeneca for $1.26 billion in 2012), Heron Therapeutics, and La Jolla Pharmaceutical—launched Concentra in 2023 specifically to acquire cash-rich failed biotechs.

Kevin Tang: The architect of biotech liquidation

Kevin Tang transformed from Deutsche Bank Alex Brown's head of life sciences research (1993-2001) into one of biotech's most prolific dealmakers, now personally worth an estimated $310+ million. Tang Capital Management, founded in 2002 in San Diego, manages approximately $1.8 billion across 202 holdings as of May 2025.

Tang's track record includes co-founding Ardea Biosciences, chairing La Jolla Pharmaceutical (sold to Innoviva in 2022), and directing Heron Therapeutics through four FDA approvals. His team includes Thomas Wei, a former Jefferies managing director and Rhodes Scholar who serves as managing director.

Concentra operates as Tang Capital's dedicated acquisition vehicle. Tang simultaneously serves as CEO of multiple acquired companies—Jounce Therapeutics, Elevation Oncology, iTeos Therapeutics, Allakos—and chairman of Aurinia Pharmaceuticals, suggesting substantial operational infrastructure for managing the liquidation portfolio.

Complete Concentra acquisition database 2023-2025

Total capital deployed 2023-2025: approximately $1.1-1.2 billion across 8 completed acquisitions.

The Concentra playbook follows a consistent pattern: identify companies within days of clinical failures, accumulate shares to establish leverage, make cash-plus-CVR offers, then wind down operations while monetizing remaining assets. Gibson, Dunn & Crutcher LLP advises on every transaction, developing increasingly sophisticated CVR structures. The average time from announcement to close is approximately 6-8 weeks.

Companies that fought back against Tang

Not every target accepted Concentra's advances. Acelyrin adopted a shareholder rights plan (poison pill) in March 2025 after Tang accumulated an 8.8% stake, ultimately merging with Alumis instead. Pliant Therapeutics similarly deployed a poison pill defense and remains independent despite trading at 58% discount to net cash. Tang's offers to Rain Oncology ($1.25/share), LianBio ($4.30/share), Atea Pharmaceuticals, and Kezar Life Sciences ($1.10/share) were all rejected.

XOMA Royalty operates the parallel acquisition machine

XOMA Royalty Corporation (formerly XOMA Corporation, rebranded July 2024) has pursued a complementary strategy: acquiring distressed biotechs not just for their cash, but for royalty streams on partnered programs. The company completed a transformative 2025, executing five company acquisitions, one royalty purchase, and one financing role—totaling seven transactions.

XOMA's decade-long transformation

XOMA pivoted from traditional antibody development to pure royalty aggregation beginning in 2017, officially rebranding to "XOMA Royalty Corporation" in July 2024. Under CEO Owen Hughes (former Cullinan Oncology CEO, appointed January 2024) and CIO Brad Sitko (former RTW Investments managing director), the company targets Phase 1/2 stage assets partnered with major pharma—differentiated positioning versus competitors focused on later-stage commercial royalties.

The legacy portfolio (approximately two-thirds of assets) derives from XOMA's 35-year history of out-licensing antibody technology, providing established relationships and deal flow. Current market cap stands at approximately $384 million.

XOMA complete acquisition database 2024-2025

XOMA's differentiated strategy

XOMA targets companies with assets already partnered to well-capitalized pharmaceutical companies. The LAVA Therapeutics acquisition illustrates this approach—the company's two gamma-delta bispecific antibodies are partnered with Johnson & Johnson (Phase 1 for AML/MDS) and Pfizer (solid tumors). XOMA acquired the shell company, retained the partnership rights, and wound down operations.

Generation Bio, announced December 15, 2025, brings milestone and royalty payments from a Moderna collaboration on cell-targeted lipid nanoparticles for siRNA therapies—a late-stage asset with significant commercial potential.

The Kinnate acquisition proved XOMA's model works. After acquiring the company for approximately $110-120 million in April 2024, XOMA sold all five pipeline assets in April 2025 for up to $270 million in upfront and milestone payments, plus low single-digit to mid-teens royalties on commercial sales. Legacy Kinnate shareholders receive 85% of payments through April 2029 via their CVRs.

XOMA's royalty portfolio and financial performance

XOMA has transformed from a struggling drug developer into a royalty aggregator holding 70+ milestone and royalty assets, including six commercial products: VABYSMO (faricimab), OJEMDA (tovorafenib), MIPLYFFA (arimoclomol), XACIATO, IXINITY, and DSUVIA.

Financial performance validates the model. Through Q3 2025, XOMA generated $43.9 million in royalties and milestones with net income of $25.6 million (versus a $9.9 million loss in 2024). The company holds $130.6 million in cash (plus $85.4 million restricted) and maintains its portfolio of commercial and development-stage assets.

Royalty Pharma dominates synthetic royalty financing

Royalty Pharma (NASDAQ: RPRX) maintained its position as the world's largest buyer of biopharmaceutical royalties with nine significant 2025 transactions totaling up to $4.7 billion including milestones. Unlike Concentra and XOMA, Royalty Pharma focuses on acquiring royalty streams from commercial and late-stage development assets rather than liquidating entire companies.

Royalty Pharma's scale and strategy

Founded in 1996 by Pablo Legorreta and publicly traded since 2020, Royalty Pharma commands $16-22 billion market capitalization and manages 35+ commercial products plus 17-18 development-stage candidates. The January 2025 internalization of RP Management for $1.1 billion completed a corporate restructuring expected to generate $1.6 billion in cumulative savings over 10 years.

The portfolio includes cornerstone assets: Vertex's Trikafta/Alyftrek (cystic fibrosis), GSK's Trelegy (COPD), Roche's Evrysdi (SMA), and Biogen's Tysabri/Spinraza. Portfolio receipts guidance stands at $3.2-3.25 billion for 2025, representing 14-16% growth.

Royalty Pharma 2025 major transactions

The Revolution Medicines deal exemplifies Royalty Pharma's R&D funding model: $250 million upfront toward Phase 3 development of daraxonrasib for pancreatic and lung cancers, with optional additional funding up to $2 billion. Rather than acquiring distressed assets, Royalty Pharma funds expensive late-stage trials in exchange for synthetic royalties.

Capital allocation in 2025 included $1.2 billion in share repurchases through Q3 (targeting $2 billion for the year) and a $2 billion senior notes issuance in September to fund acquisitions.

League table of all active acquirers reveals concentrated market

2025 distressed biotech company acquisitions by deal count

*Includes 5 company acquisitions plus 1 royalty purchase; Generation Bio pending

Total 2025 capital deployed (all transaction types)

2025 bid success rates

Concentra's two known rejections (Acelyrin, Pliant) involved companies with remaining clinical options that deployed poison pill defenses.

Tier 2: Strategic and opportunistic buyers

HealthCare Royalty Partners (HCRx), managing approximately $3 billion in AUM, was itself acquired by KKR in July 2025. The firm's 2025 deals included €185 million for GENFIT's IQIRVO royalty and $175 million for Liquidia's Yutrepia commercialization.

Carlyle and SK Capital Partners closed their bluebird bio take-private in June 2025, offering $3.00 per share upfront plus a CVR worth $6.84 per share if portfolio sales reach $600 million (total potential: $9.84/share). An amended offer of $5.00 cash (no CVR) provided shareholders an alternative. This represented a rescue of a company facing "significant risk of defaulting on loan agreements."

Deerfield Management ($15+ billion AUM) operates differently, taking Singular Genomics private in February 2025 for $20.00 per share (254% premium) while continuing venture investments through a newly raised $600+ million Innovation Fund III.

Other distressed acquirers circle the wounded

Beyond the three dominant players, a constellation of activists, specialized funds, and opportunistic investors have targeted below-cash biotechs in 2025.

David Lazar / Activist Investing LLC completed four biotech control transactions in 2025, taking CEO and board positions at Cyclacel Pharmaceuticals ($3.1M), KALA Bio ($6M), and NovaBay Pharmaceuticals ($6M), while building a position in Matinas Biopharma. Lazar's model differs from Concentra—he takes operational control and pursues reverse mergers or strategic transactions rather than immediate liquidation.

Alis Biosciences, launched April 2025 by chair Annalisa Jenkins (former Merck Serono R&D head), represents the first institutional competitor directly copying Tang's model. The British fund targets the same $30 billion trapped capital opportunity, focusing on companies with $5-100 million market caps and $10-400 million cash reserves. Alis offers three structures returning 95-97% of cash to shareholders while acquiring residual IP.

Key 2025 activist campaigns in biotech

BML Capital (Braden Leonard) demanded liquidation of Elevation Oncology with 9.9% stake; company was subsequently acquired by Concentra.

Deep Track Capital (David Kroin) waged unsuccessful proxy fight at Dynavax Technologies, demanding the company abandon acquisitions and return capital; incumbent board prevailed at June 2025 annual meeting.

ADAR1 Capital accumulated 13.3% of Keros Therapeutics, demanding $475 million capital return after adverse events paused a lupus trial.

Soleus Capital built 10%+ position in Theratechnologies supporting its acquisition by Future Pak at 163% premium.

Additional below-cash companies complete the 2025 cohort

Companies acquired by XOMA and Concentra in 2025

Companies still trading at deep discounts

Kezar Life Sciences remains in active strategic review with TD Cowen as advisor. The company holds approximately $90 million in cash ($12.36 per share) but trades at just $6.30—a 50% discount—after the FDA cancelled a Type C meeting for zetomipzomib in October 2025 and requested a two-year-delayed hepatic impairment study. Enterprise value sits at negative $88 million.

Pliant Therapeutics represents the largest absolute dollar opportunity in below-cash biotechs. The company holds $241.8 million ($3.94 per share) but trades at just $1.23—a 69% discount—following the March 2025 discontinuation of bexotegrast after an unfavorable risk-benefit signal emerged in the BEACON-IPF trial. Enterprise value is negative $106 million, yet the company continues developing oncology and muscular dystrophy programs.

Sensei Biotherapeutics announced in October 2025 that it would discontinue solnerstotug development and implement a 65% workforce reduction, leaving approximately $25 million in cash against a market cap of roughly $250 million. Strategic alternatives are under review.

Enterprise value mechanics explain why cash doesn't equal value

The formula appears straightforward: Enterprise Value = Market Cap + Debt - Cash. When a company with $200 million in cash trades at a $150 million market cap with no debt, EV equals negative $50 million. In theory, an acquirer could purchase all shares, pocket the cash, and profit $50 million.

Reality diverges from theory because of the "melting ice cube" phenomenon. Clinical-stage biotechs typically burn $30-50 million annually in early development and $100+ million in Phase 3. The market doesn't price current cash; it prices expected cash at wind-down. A company burning $40 million per year with $200 million in cash might reasonably be valued at $120-140 million—accounting for two to three years of continued burn before any value realization.

Several structural factors prevent cash from serving as a floor:

Management incentive misalignment means executives with underwater options prefer continued operation over liquidation. Board entrenchment ensures directors lose positions upon wind-down. Poison pills (rights plans) can block accumulations above 10-20% ownership. Hidden liabilities including lease obligations, severance, and clinical trial wind-down costs reduce distributable cash. Illiquidity means small positions can't attract institutional activists to force value realization.

The average negative EV increased to $40 million across the cohort, with 16% of affected companies showing EVs below negative $50 million—indicating terminal distress rather than temporary mispricing.

CVR structures have become the bridge between buyers and sellers

Contingent Value Rights have emerged as the primary mechanism for closing distressed biotech transactions. These instruments promise shareholders future payments contingent on specified milestones—typically asset sales, FDA approvals, or sales targets—while allowing acquirers to limit upfront cash outlays.

Standard CVR terms by acquirer

Concentra Biosciences typically structures CVRs around:

100% of closing net cash exceeding specified thresholds, 80% of net proceeds from asset dispositions (typically 6-24 month windows), cost savings sharing in some deals, and non-transferable instruments (limiting shareholder liquidity).

XOMA Royalty includes:

Net cash thresholds (Generation Bio: >$29M; HilleVax: >$102.95M), 75-90% of proceeds from partnered program milestones and sales, lease obligation savings (90-100%), and longer windows for royalty payments (up to 5 years post-regulatory approval).

The sobering reality of CVR payouts

A Cleary Gottlieb analysis of 36 pharmaceutical and biotech CVR deals from 2008-2020 found that only one-third of CVRs paid anything:

The Bristol Myers Squibb/Celgene CVR failure exemplifies the risk. The 2019 acquisition included a CVR worth $9 per share (~$6.7 billion total) contingent on FDA approvals of three drugs by December 31, 2020. Two achieved approval, but Breyanzi missed the deadline by 35 days—approved February 5, 2021. The entire CVR became worthless. Ongoing litigation (UMB Bank v. BMS) alleges intentional delay; in December 2025, a federal judge ruled the lawsuit could proceed.

In 2025, CVRs represented an average of 26-37% of total transaction consideration, up from 15% in 2024. The achievement rate for any payout remains approximately 33%, with only 13% achieving full milestone completion.

Clinical trial failures drive the entire cycle

The root cause of biotech distress remains unchanged: approximately 90% of drug candidates fail during clinical development. Phase success rates have declined over time, with Phase I success dropping from above 75% (2006-2008) to below 40% in recent years.

Notable clinical failures triggering below-cash status (2024-2025)

Primary reasons for clinical failure

Lack of clinical efficacy accounts for 40-50% of failures, unmanageable toxicity for 30%, poor drug-like properties for 10-15%, and commercial strategy changes for 10%.

The 2020-2021 IPO bubble created structural vulnerability. Those years saw 81 and 152 biotech IPOs respectively, raising $13.5 billion and $25 billion—often for preclinical companies with limited data. Of approximately 350 companies that raised Series A funding through July 2020, only 102 had achieved Series B by late 2023. The remainder faced dilution spirals or cash exhaustion.

2025 market dynamics signal selective recovery

Biotech M&A rebounded dramatically in 2025 after a subdued 2024. Total deal value reached approximately $49 billion through mid-year, already exceeding full-year 2024's $44 billion. Several megadeals exceeded the $5 billion threshold that eluded 2024 entirely:

Big pharma's acquisition appetite reflects $300 billion in revenues at risk from patent expirations through 2028, with 190 drugs losing protection by 2030. Deal capacity exceeds $1.5 trillion according to IQVIA estimates.

Yet the recovery is highly stratified. Companies with validated platforms and data attract premium valuations. Those with failed programs trade at severe discounts regardless of their cash positions. The "have versus have-not" dynamic has intensified, with experienced management teams attracting capital while others remain locked out of financing markets.

XBI's 36.78% year-to-date gain masks this divergence. The equal-weighted index benefits from large-cap stabilization while small-cap clinical failures continue accumulating. William Blair documented 32 companies announcing pipeline prioritization or workforce reductions in Q2 2025 alone—23 of which held more than $100 million in cash.

Investor strategies range from activism to acquiescence

The activist playbook

Investors seeking to force value realization in below-cash biotechs typically accumulate 5-9.9% positions (below poison pill thresholds), file 13D disclosures signaling activist intent, engage privately with boards on capital return options, threaten or launch proxy contests to replace directors, and make tender offers directly to shareholders.

Tang Capital exemplifies the "activist acquirer" approach—taking public positions, making unsolicited offers, and persisting through initial rejections. The firm's success rate has improved as management teams recognize the inevitability of value destruction through continued burn.

Management defensive tactics

Distressed biotechs increasingly deploy shareholder rights plans ("poison pills") to slow activist accumulations. Standard terms trigger at 10-20% ownership, with bifurcated thresholds (10% for activists, 20% for passive investors). However, these defenses merely delay rather than prevent transactions—shareholders can replace boards through proxy contests, and institutional investors increasingly pressure management to negotiate.

Companies adopting poison pills in 2025: Acelyrin (in response to Tang's 8.8% stake), Pliant Therapeutics, and Zymeworks (10% trigger against All Blue Falcons bid).

The 70% preference for wind-down

According to William Blair's investor survey, 70% prefer that distressed companies wind down and return cash rather than attempt pivots to new programs. Approximately $1.5 billion in cash was returned to investors through take-privates and distributions in H1 2025. Median strategic review duration was 61 days from announcement to resolution.

The outlook for 2026 hinges on M&A appetite and interest rates

The below-cash phenomenon will likely persist but evolve through 2026. Several factors suggest gradual improvement:

Positive indicators: Record M&A activity is "clearing" distressed names from the market. Falling interest rates improve present value of long-duration biotech assets. Big pharma faces urgent pipeline replenishment needs. XOMA and Concentra provide reliable exit mechanisms for shareholders.

Persistent challenges: Clinical trial failure rates show no improvement. FDA delays and workforce reductions create regulatory uncertainty. IPO market remains effectively closed for clinical-stage companies. Funding environment favors late-stage assets over early development.

The structural forces creating below-cash biotechs—binary clinical outcomes, high burn rates, and limited financing alternatives—will continue generating distressed situations. The difference is that specialized acquirers have now established efficient mechanisms to arbitrage these dislocations. Shareholders in failed biotechs can expect faster resolution (60-90 days) but continued steep discounts (typically 30-80% of cash value) as the cost of liquidity.

For investors, the below-cash biotech cohort represents a study in the limits of fundamental value. Cash on a balance sheet is only worth what someone will pay for it—and in biotech, that price incorporates not just current assets but the expected trajectory of burn rates, management behavior, and the availability of willing acquirers. The 2024-2025 period demonstrated that with sufficient specialized capital focused on distressed situations, even the most challenged biotechs eventually find resolution. The arbitrageurs have arrived. The question for 2026 is whether the supply of new distressed situations will exceed their capacity to absorb them.

Conclusion: Cash arbitrage has become institutionalized

The biotech below-cash phenomenon represents one of the most unusual value dislocations in modern capital markets—and one that has now attracted sufficient institutional capital to drive systematic exploitation. Tang Capital's Concentra has deployed over $1.1 billion across eight acquisitions. XOMA has established "liquidation as a service" as a viable business model with $240 million deployed in 2024-2025. Royalty Pharma continues aggregating future cash flows with nearly $4.7 billion deployed.

Competition is intensifying—Alis Biosciences' April 2025 launch signals institutional recognition of the liquidation opportunity, while activist campaigns at companies like Keros Therapeutics and Dynavax suggest shareholders increasingly demand capital returns over speculative pipeline development.

Three distinct models have emerged: Concentra's rapid liquidation (return ~97% of cash, monetize residual IP), XOMA's partnership arbitrage (acquire shells with pharma-partnered assets, retain royalty streams), and Royalty Pharma's R&D funding (provide non-dilutive capital for expensive late-stage trials in exchange for synthetic royalties).

The 161 companies still trading at negative enterprise value in mid-2025 represented not just $5 billion in trapped capital but a structural imbalance between biotech's capital formation bubble (2020-2021) and its subsequent correction. The resolution mechanism—specialized acquirers purchasing companies at discounts to cash, winding down operations, and extracting value through CVR structures—has proven remarkably efficient.

For shareholders in below-cash biotechs, the implications are clear: expect significant haircuts to cash value (averaging 50-70%) but faster resolution than historical precedent suggested. For biotech entrepreneurs and investors, the lesson is equally stark: cash runway matters less than clinical execution, and the market will impose severe penalties for failure regardless of balance sheet strength.

The great biotech cash arbitrage of 2024-2025 will likely be studied as a case study in market efficiency—not because prices immediately reflected fundamental value, but because capital eventually found a way to extract it. The biotech distress acquisition market, virtually nonexistent before 2022, has become a $6+ billion annual deployment category with dedicated capital, standardized deal structures, and predictable target profiles.

Disclaimer: The author is not a lawyer or financial adviser. This content is for informational purposes only and does not constitute investment, legal, or financial advice. Consult qualified professionals before making any investment decisions.