When Biotech Dreams Die: The Art of Winding Down Pharmaceutical Companies
In the basement of a nondescript office building in South San Francisco, the fluorescent lights still hummed over empty lab benches. Three months earlier, this space had buzzed with scientists racing to prove that their CAR-T therapy could cure cancer. Now, the centrifuges sat silent, the freezers unplugged, and a lone facilities manager was cataloging equipment for auction. Upstairs, a skeleton crew of lawyers and accountants was doing something far more complex than any clinical trial: they were trying to extract value from the wreckage of a $400 million dream.
This scene has played out dozens of times across the biotech landscape since 2020. The industry calls them "zombie biotechs"—companies that have exhausted their scientific runway but still hold cash, contracts, and something potentially valuable: the rights to future royalties on drugs they once hoped would change the world.
What happens to these royalty streams when a company dies? Who collects the checks that might arrive years from now if a partnered drug succeeds? And how do shareholders—from pension funds to individual investors who believed in the science—ever see a return?
The answer lies in an elegant legal mechanism that most people have never heard of: the liquidating trust.
The Zombie Apocalypse Nobody Predicted
The numbers tell a stark story. According to BioSpace, the biopharma industry recorded 14 Chapter 11 bankruptcies in 2023—a record—followed by 13 more in 2024. But bankruptcies only capture part of the picture. Dozens of additional companies chose to dissolve voluntarily, their boards concluding that returning cash to shareholders was better than gambling on increasingly desperate pivots.
William Blair analysts identified something remarkable in early 2025: $1.5 billion in combined net cash was trapped in just six biotechs trading below their liquidation value. Investors were effectively paying 70 or 80 cents to buy a dollar, betting that management would eventually acknowledge reality.
BioPharma Dive captured the mood perfectly in their reporting on the phenomenon: frustrated shareholders were no longer willing to watch their capital evaporate on long-shot pipeline revivals. They wanted out—and they wanted whatever cash remained.
But here's where it gets complicated. A biotech company isn't like a failed restaurant where you sell the tables and call it a day. These companies hold intricate webs of intellectual property, licensing agreements, milestone rights, and potential royalty streams that might not generate a single dollar for years—or might suddenly be worth hundreds of millions if a partnered drug succeeds.
You can't simply divide these assets among shareholders like slicing a pie. Someone has to hold them, manage them, and eventually convert them to cash. That someone is the liquidating trust.
The Elegant Solution: What a Liquidating Trust Actually Does
Imagine you're winding down a biotech that licensed its lead compound to Pfizer five years ago. The drug is now in Phase 3 trials. If it succeeds, your company is owed a $50 million milestone payment and 4% royalties on all sales. If it fails, you get nothing.
Your shareholders want their money. Your employees need to move on. Your landlord wants you out of the building. But that Pfizer contract could be worth a fortune—or worthless—and you won't know which for another three years.
Enter the liquidating trust.
A liquidating trust is a legal trust established to facilitate an orderly liquidation of assets and distribution of proceeds to stakeholders. In essence, it is a temporary fiduciary vehicle set up when a company (or bankruptcy estate) is winding up, and it holds the remaining residual assets for the benefit of claimants—shareholders or creditors. The trust's sole purpose is to liquidate the assets transferred into it and distribute the cash or benefits to the trust beneficiaries.
Unlike an ongoing business, the trust does not engage in new commercial activities; it simply marshals and disposes of assets, settles any claims, and then terminates. Liquidating trusts are commonly used in Chapter 11 bankruptcies to resolve remaining claims and assets post-confirmation, but they are equally useful outside of bankruptcy for solvent dissolutions of corporations or other entities.
The genius of the structure lies in its tax treatment. Under Treasury Regulation § 301.7701-4(d), a properly structured liquidating trust is treated as a "grantor trust"—meaning it's essentially invisible for tax purposes. Income flows through to the beneficiaries as if they owned the underlying assets directly. There's no entity-level tax, no double taxation, just a clean pass-through of whatever value the trustee can extract.
| Key Characteristic | Description |
|---|---|
| Trustee and Fiduciary Duty | The trust is managed by a trustee (or trustees) who owes fiduciary duties to beneficiaries. The trustee's job is to protect and maximize the value of the trust assets and make timely distributions. This often involves engaging advisors (lawyers, accountants, valuation experts) to handle specialized tasks. |
| Fixed Purpose and Limited Lifespan | By design, a liquidating trust's purpose is limited to winding up the specified assets. It is not intended to operate ongoing businesses or pursue new ventures. U.S. tax regulations require that the trust not unduly prolong the liquidation or stray into active business, or it could lose favorable tax treatment. Typically, the trust agreement will set an initial term (often 3-5 years) with possible extensions if needed to complete the liquidation. |
| Pass-Through Tax Status | Most liquidating trusts are structured as grantor trusts for U.S. tax purposes. This means beneficiaries are treated as owners of the trust's assets and income, avoiding entity-level tax. Income and gains pass through to beneficiaries, who report them on their own returns (much like partners in a partnership). |
| Distribution of Proceeds | As the trustee converts assets to cash (through sale, collections, settlements), it makes periodic liquidating distributions to beneficiaries pro rata based on each beneficiary's share. The trust may retain reserves for expenses or pending claims and distribute in tranches over time as uncertainties resolve. |
The IRS, naturally, has conditions. Revenue Procedure 94-45 requires that the trust's primary purpose be liquidation—not operating a business, not making investments, just converting assets to cash and distributing proceeds. The trust can't drag on indefinitely; extensions require IRS approval. And it must distribute income annually, not hoard it.
Achieving grantor trust status usually requires meeting IRS guidelines which ensure the transfer to the trust is viewed as a deemed distribution to beneficiaries followed by a contribution to the trust. For beneficiaries, any distributions from the trust are generally treated similarly to receiving liquidating distributions from the company—as return of capital, then gain once basis is exhausted, for shareholders.
These constraints matter. A liquidating trust isn't a vehicle for running a pharmaceutical company in slow motion. It's a mechanism for orderly dissolution, nothing more.
Why Companies Choose the Trust Path
When a company decides to wind down, it ideally will distribute all of its assets to stakeholders and close its books. However, in practice, a company may have certain assets or obligations that prevent an immediate, clean closure. The liquidating trust addresses several common scenarios:
Illiquid or Long-Term Assets. The company may own assets that are valuable but not easily sold by the dissolution date—intellectual property rights, minority stakes in other businesses, or royalty streams from licensed products. Such assets might require a "longer-term run-off period" to realize full value. A liquidating trust can hold these illiquid assets beyond the life of the dissolving corporation, allowing time to sell them at a good price or simply collect the income over years. This avoids having to fire-sell the assets at steep discounts or keeping the corporate shell alive for an extended period.
Contingent Assets or Claims. Sometimes a dissolving company has pending legal claims or litigation that could yield future proceeds. It might also be due milestone payments or performance-based payouts—common in pharma deals when a drug hits approval or sales targets. Since these are uncertain and may materialize later, a trust can hold the rights to these claims and pursue lawsuits on behalf of the beneficiaries or wait to receive milestone payments, then distribute the net recovery.
Unresolved Liabilities and Reserves. The company may face known or unknown liabilities that require holding back some cash reserve. In Delaware, a dissolved corporation must make reasonable provision for pending or likely claims (even those that have not yet arisen but might within 10 years). Rather than the company staying semi-active with a reserve on its balance sheet, transferring the reserve into a trust can be cleaner. The trustee can manage the reserve, pay any valid claims, and later distribute any leftover amount.
Cost and Expertise Considerations. Post-dissolution administrative tasks can be labor-intensive and may require expertise that the company's remaining insiders lack. By setting up a trust, the company can delegate the wind-down administration to a dedicated trustee. This can reduce costs—the management team can be let go and replaced by a lower-cost trust administrator who specializes in liquidations. The trust often benefits from exculpation and indemnification provisions that protect the trustees when acting in good faith.
In short, a liquidating trust streamlines the dissolution. It enables the company to dispose of all assets, wind up its affairs, pay or provide for all liabilities, and distribute all remaining assets to shareholders. The alternative—keeping the corporation alive indefinitely to trickle out royalties or wait for lawsuit outcomes—is inefficient and may be impossible due to statutory limits on a dissolved company's lifespan (e.g., Delaware's 3-year post-dissolution period).
The Rise of Zombie Hunters
The stories of PDL BioPharma and Genaera follow a traditional pattern: company decides to liquidate, assets flow to trust, trust eventually distributes cash. But the 2020-2025 zombie biotech wave has given rise to something new—specialized acquirers who have turned winding down biotechs into a business model.
Two names dominate this space: XOMA Royalty Corporation and Concentra Biosciences. Their approach is elegantly predatory: identify biotechs trading below net cash value, offer shareholders immediate liquidity at a premium to market (but a discount to cash), acquire the company, and keep any residual assets—pipeline compounds, royalty rights, milestone interests—for themselves.
For shareholders in a dying biotech, this can be a blessing. Instead of waiting years for a liquidating trust to wind down, they get cash now. Instead of bearing the risk that assets prove worthless, they transfer that risk to the acquirer.
XOMA has been particularly aggressive. As Owen Hughes, XOMA's CEO, told BioPharma Dive: the company is "providing liquidity to shareholders who otherwise would be stuck waiting for a lengthy liquidation process."
The mechanism typically involves Contingent Value Rights (CVRs)—a financial instrument that gives former shareholders the right to additional payments if certain milestones occur. CVRs function almost like liquidating trust beneficial interests, but with the acquirer controlling the underlying assets rather than an independent trustee.
The 2024-2025 Zombie Biotech Liquidation Wave
| Company | Ticker | Year | Acquirer/Structure | Cash Distribution | Total Value | Key Pharmaceutical Assets |
|---|---|---|---|---|---|---|
| Kinnate Biopharma | KNTE | 2024 | XOMA acquisition | $2.34–$2.59/share + CVR | ~$120M | Exarafenib (RAF inhibitor), KIN-3248, KIN-8741 |
| Cargo Therapeutics | CRGX | 2025 | Concentra acquisition | $4.38/share + CVR | ~$217M | Firi-cel (CD22 CAR-T), CRG-023 |
| HilleVax | HLVX | 2025 | XOMA acquisition | $1.95/share + CVR | ~$103M | Norovirus vaccine (Takeda license) |
| iTeos Therapeutics | ITOS | 2025 | Concentra acquisition | $10.05/share + CVR | ~$156M | Belrestotug (GSK collaboration royalties) |
| SQZ Biotechnologies | SQZB | 2024 | Direct dissolution | $11.8M total | N/A | 400+ patents sold to STEMCELL Technologies |
| Turnstone Biologics | TSBX | 2025 | XOMA acquisition | $0.34/share + CVR | ~$8M | TIDAL-01 TIL therapy |
| Mural Oncology | MURA | 2025 | XOMA acquisition | $2.04–$2.24/share | ~$36M | Nemvaleukin alfa |
| Lava Therapeutics | LVTX | 2025 | XOMA acquisition | $1.04/share + CVR | Pending | Pfizer/J&J gamma delta programs |
| Elevation Oncology | ELEV | 2025 | Concentra acquisition | $0.36/share + CVR | ~$26M | EO-3021 ADC, EO-1022 |
| Kronos Bio | KRON | 2025 | Concentra acquisition | $0.57/share + CVR | Pending | KB-9558, lanraplenib |
| Third Harmonic Bio | THRD | 2025 | Direct dissolution | ~$5.35/share | ~$250M | THB335 (mast cell inhibitor) |
| PDL BioPharma | PDLI | 2021 | Self-liquidation + trust option | Multiple distributions | ~$500M+ | Glumetza, Entresto, other royalty streams |
The economics reveal the arbitrage. Kinnate Biopharma, for example, had over $200 million in cash when its RAF inhibitor programs hit clinical setbacks. Its market cap collapsed. XOMA stepped in, offered shareholders $2.34–$2.59 per share in cash plus CVRs, and acquired the company. Shareholders tendered 38.3 million shares—81% of outstanding—into the deal.
Cargo Therapeutics tells a similar story. The company's Phase 2 CAR-T data showed an impressive 77% response rate but devastating durability: only 18% of responses lasted beyond three months. The stock cratered. Concentra offered $4.38 per share plus CVRs providing 80% of any asset sale proceeds over the next two years.
HilleVax distributed $1.95 per share plus CVRs when XOMA completed its acquisition in September 2025, representing approximately $103 million in value. The CVR structure includes 90–100% of savings from office lease obligations and 90% of net proceeds from potential vaccine program sales within five years—demonstrating how liquidating structures now monetize operational wind-down efficiency, not just drug assets.
CVRs vs. Liquidating Trusts: The Tradeoffs
The shift from formal Section 331 liquidating trusts to acquisition-based wind-downs with CVRs reflects regulatory and practical efficiency gains. Traditional liquidating trusts under Treasury Regulation § 301.7701-4(d) require the primary purpose of liquidating and distributing assets with activities "reasonably necessary to and consistent with" that purpose. Revenue Procedure 94-45 adds annual distribution requirements and prohibitions on receiving cash exceeding reasonable claims reserves.
CVR structures achieve similar economics while avoiding these constraints. For shareholders, the choice involves real tradeoffs:
| Factor | Liquidating Trust | CVR Acquisition |
|---|---|---|
| Immediate Liquidity | Limited; distributions over time | Yes; cash at closing |
| Control Over Assets | Trustee manages for beneficiaries | Acquirer controls monetization |
| Upside Participation | Full ownership of outcomes | CVR terms cap participation |
| Timeline | Years; trust must liquidate | Defined CVR period |
| Administrative Cost | Trustee fees, legal, accounting | Absorbed by acquirer |
| Tax Treatment | Pass-through; character preserved | Sale treatment; CVR payments may vary |
| Alignment of Interests | Trustee fiduciary duty | Acquirer profit motive |
| Expertise | Depends on trustee selection | Acquirers specialize in pharma assets |
The control issue is worth emphasizing. A liquidating trust trustee has a fiduciary duty to beneficiaries—former shareholders. The trustee must act in their interests, not its own. But a CVR acquirer has no such obligation. The acquirer might let assets languish if other priorities demand attention. It might sell cheaply if a quick exit serves its portfolio needs. Shareholders become passive recipients of whatever the acquirer decides to do.
On the other hand, acquirers bring expertise. XOMA and Concentra specialize in pharmaceutical assets. They understand royalty valuation, know potential buyers, have relationships with big pharma business development teams. A liquidating trust managed by a generalist trustee might lack these capabilities.
For pharmaceutical royalty assets specifically, both structures flow income to beneficiaries with character preservation (ordinary income for royalties). The key difference lies in control—CVR holders receive contingent payments based on acquirer decisions, while liquidating trust beneficiaries retain pass-through ownership of underlying assets.
The PDL BioPharma Playbook
To understand how traditional liquidating trusts work in practice, consider PDL BioPharma—a company that essentially wrote the playbook for pharmaceutical royalty liquidations.
PDL's story is unusual. Unlike most biotechs, which develop drugs internally, PDL had transformed itself into something closer to a royalty holding company. It owned streams of income from drugs like Glumetza and held interests tied to blockbusters like Entresto. By 2020, management concluded that the best path forward was to monetize everything and return the proceeds to shareholders.
The company's 2020 10-K filing reveals the strategy in detail. PDL would attempt to sell its royalty assets outright, converting future payment streams into immediate cash. But if buyers' offers proved inadequate—if the market was effectively lowballing them because it knew PDL was desperate—the company had a backup plan: "such assets could be ultimately placed in a liquidating trust."
That trust would then "continue to collect royalty income or sell the royalty streams" at a later date when conditions might be more favorable. Either way, "the available proceeds... would ultimately be distributed to our stockholders."
This flexibility is crucial. A forced seller is a weak seller. Buyers circle distressed companies like vultures, knowing management has limited options. But a liquidating trust changes the dynamic. The trustee has time. The trustee can wait for better offers, or simply collect the royalties as they come due over years. Shareholders effectively become their own royalty fund, cutting out the middlemen who would otherwise extract value through discounted purchase prices.
PDL adopted the liquidation basis of accounting and ceased trading in January 2021. The company chose to invoke Delaware's DGCL 280/281 procedures—a formal process for cutting off creditor claims and getting court approval for reserve amounts—providing additional protection for directors and shareholders alike.
The Genaera Model: When the Trust Becomes the Seller
Not every liquidating trust plays the long game. Sometimes the trust itself becomes the vehicle for a sale that wouldn't have been possible while the company still existed.
Genaera Corporation was a small Philadelphia-based biotech that ran out of options around 2009. Its most valuable remaining asset was an IL-9 antibody called MEDI-528, licensed to MedImmune (an AstraZeneca subsidiary). The drug was still in development, meaning Genaera held rights to future milestones and royalties that might—or might not—ever materialize.
Genaera established a liquidating trust to hold these rights after dissolution. The company died, but the Genaera Liquidating Trust lived on, holding the MEDI-528 interests for the benefit of former shareholders.
Then something interesting happened. Ligand Pharmaceuticals—a company that specializes in exactly these kinds of pharmaceutical royalty assets—came calling. Ligand saw value where others saw uncertainty. In 2010, Ligand "purchased from the Genaera Liquidating Trust certain intellectual property and interests in future milestones and royalties for MEDI-528" for approximately $2.75 million.
Was this a good deal for Genaera's shareholders? That depends on what MEDI-528 ultimately became worth. But the key point is that the transaction happened at all. Without the trust, those royalty rights would have been stuck in legal limbo—a dissolved company can't negotiate, can't sign contracts, can't close transactions. The trust provided the legal infrastructure to convert an illiquid, uncertain asset into definite cash.
Aradigm: The Bankruptcy Trust
The Genaera and PDL examples involve solvent companies choosing to dissolve. But liquidating trusts are equally important—perhaps more important—in bankruptcy situations, where creditors and shareholders are fighting over a shrinking pie.
Aradigm Corporation developed inhaled drug delivery technologies, including a promising inhaled ciprofloxacin product for serious lung infections. When an FDA setback derailed its plans in 2019, the company filed Chapter 11.
The bankruptcy plan that emerged in 2020 illustrates how liquidating trusts function in creditor-priority situations. Aradigm sold its key assets to Grifols, but part of the consideration was contingent—milestone payments and royalties that would only materialize if the inhaled ciprofloxacin product eventually reached the market and generated sales.
Under the plan, all remaining assets—including those contingent rights—would be "contributed to a liquidating trust for the benefit of the company's creditors and shareholders." The trust would "collect any milestone payments and royalty payments that are earned and distribute the proceeds."
Here's the crucial detail: creditors came first. The trust would pay creditors (plus interest) before equity holders received anything. Only if there was money left over after satisfying all creditor claims would shareholders see a distribution.
This priority structure is fundamental to bankruptcy law and carries through to liquidating trusts. Shareholders own the residual—whatever remains after everyone else is paid. In a successful drug scenario, that residual could be substantial. In a failure scenario, equity gets nothing.
Aradigm's stock was cancelled, meaning shareholders' only hope for recovery was the trust. If the drug succeeded, they might eventually receive distributions. If it failed, they were wiped out. The trust structure converted a binary company outcome into a more nuanced reality where different stakeholders bore different risks.
The Altaba Saga: When Wind-Downs Take Years
No discussion of liquidating trusts is complete without Altaba—the entity formerly known as Yahoo! Inc.—which demonstrates both the power and the patience these structures require.
After selling its core business to Verizon in 2017, Yahoo transformed into Altaba, essentially a holding company for a massive stake in Alibaba. When Altaba sold that stake and announced its own liquidation in 2019, the process seemed straightforward: distribute the cash and close up shop.
But complications emerged. Akin Gump documented the saga: Altaba faced a major IRS dispute over taxes from the Alibaba divestiture, plus ongoing litigation related to Yahoo's massive data breaches. The company had to reserve approximately $1.5 billion for potential liabilities.
Rather than distribute everything immediately, Altaba made incremental distributions as disputes resolved:
| Date | Distribution | Context |
|---|---|---|
| Late 2020 | $7.48/share | Initial post-dissolution |
| 2021 Q1 | $0.54/share | Reserve release |
| 2021 Q2 | $0.67/share | Further reserves freed |
| Late 2021 | $68.52/share | Major reserve release |
| Ongoing | Additional amounts | As IRS case resolves |
Total distributions exceeded $90 per share, with more potentially coming depending on the IRS dispute outcome—over $700 million remains at stake.
It was expected that to finalize the process, Altaba would transfer all remaining assets and obligations into a liquidating trust to carry it through resolution of the tax case and lawsuits. This demonstrates how even a massive, complex liquidation uses a trust to handle protracted matters while freeing the entity from perpetual existence.
The Altaba experience illustrates why liquidating trusts exist: some situations simply can't be wrapped up quickly. A company with contested tax liabilities and ongoing litigation needs years to resolve them. The trust structure provides the legal framework to continue making distributions as cash becomes available, without keeping a fully staffed corporation alive indefinitely.
The Straight Liquidation: Third Harmonic and SQZ
Not every situation requires a trust or a CVR deal. Sometimes a company simply has cash and sellable assets, and the cleanest path is direct dissolution.
Third Harmonic Bio illustrates this approach. The company had developed THB335, a mast cell inhibitor for chronic urticaria. When clinical development stalled, the board faced a choice: pivot to something new (risky, expensive) or return capital to shareholders (certain, immediate).
They chose the latter. In 2025, Third Harmonic announced a plan of dissolution, aiming to distribute approximately $246–259 million—roughly $5.35 per share—to stockholders. Shareholders approved with overwhelming support, and the company completed its liquidation within the year.
No trust was needed because there were no long-tail assets. Third Harmonic sold its pipeline programs, paid its obligations, and distributed the remaining cash. Simple, clean, fast.
SQZ Biotechnologies followed a similar path. The company sold over 400 patents to STEMCELL Technologies for $11.8 million, obtained 98% shareholder approval, and filed its Certificate of Dissolution in Delaware on March 4, 2024. No trust, no CVR, just a straightforward wind-down.
The lesson: liquidating trusts are tools, not requirements. They're valuable when assets are illiquid, uncertain, or long-dated. When everything can be converted to cash quickly, they're unnecessary complexity.
Other Assets That Land in Liquidating Trusts
While pharma royalties are a notable example, liquidating trusts can hold many types of assets that a company might leave behind at dissolution. Typically, any asset that is valuable but not readily distributable as cash on dissolution day could go into the trust:
| Asset Type | Description | Example |
|---|---|---|
| Intellectual Property | Patents, drug candidates, software code, trademarks | A biotech winding down may put remaining drug compound patents into a trust, which then engages an agent to license them out or sell patent portfolios |
| Equity Stakes | Shares of other companies, partnership interests, JV holdings | If the company holds shares of another company (perhaps from a partnership or prior sale), those might be thinly traded or subject to lock-up |
| Real Estate/Equipment | Buildings, specialized lab equipment | Physical assets that need to be sold after operations cease can be entrusted for orderly disposition |
| Litigation Claims | Lawsuits, insurance claims, arbitrations | The trust steps into the shoes of the company to see through any pending lawsuit; crucial because otherwise the dissolved corporation might lack standing |
| Contingent Rights | Tax refunds, escrow holdbacks, earn-outs, revenue-sharing agreements | Can be assigned to the trust for collection and distribution |
| Cash Reserves | Reserved cash for potential liabilities | The trustee pays claims as they come due; if funds remain after the statutory period, leftover cash gets distributed to equity beneficiaries |
In practice, the liquidating trust's "basket" of assets often includes a mix of the above: some cash, some receivables or royalty rights, and maybe a grab-bag of unsold property. The trust agreement will list the "Retained Assets" that are transferred into the trust at the time of dissolution.
Once assets are in the trust, the original company no longer owns them—the beneficiaries do, via the trust. Shareholders become beneficiaries with "units" or proportional interests in the trust (often not tradable, or only transferable with trustee permission to avoid securities issues). Those units represent claims on whatever value the trust yields from the assets.
The Wind-Down Process: Public vs. Private Companies
The overall wind-down process—planning and executing the dissolution of a company—has common elements for any corporation, but there are additional procedural layers for public companies.
Step-by-Step US Wind-Down Process
| Step | Public Company | Private Company |
|---|---|---|
| 1. Board Decision | Board adopts Plan of Liquidation and Dissolution; must be approved by shareholders at meeting (typically majority vote) | Board/managers adopt plan; may obtain unanimous written consent or vote per operating agreement |
| 2. Regulatory Filings | File proxy statement with SEC (DEF 14A); file Certificate of Dissolution with state; delist from exchange | File Certificate of Dissolution/Cancellation with state; no SEC requirements |
| 3. Public Disclosure | Form 8-K announcement; ongoing 10-K/10-Q under liquidation basis accounting | No public disclosure requirements |
| 4. Settle Liabilities | Pay all debts, terminate contracts, set aside reserves for potential claims (10-year lookback under Delaware law) | Same substantive requirements; more flexibility on timing |
| 5. Initial Distribution | Cash distribution to shareholders of record; shares become non-transferable | Distribution to members/shareholders per governing documents |
| 6. Transfer to Trust | Execute Liquidating Trust Agreement; transfer remaining assets; file for SEC no-action letter if needed | May use trust, LLC, or continue company in passive state |
| 7. Trust Operations | Trustee sells assets, collects income, makes periodic distributions; trust interests generally non-transferable | Same; more flexibility on structure and reporting |
| 8. Termination | Final distribution; de minimis amounts may be donated; trustee discharged | Same |
For both public and private companies, the process begins with the board of directors determining that winding up is in the best interest of the company and adopting a Plan of Liquidation and Dissolution. This plan describes how the company's remaining assets will be disposed, how liabilities will be satisfied, and authorizes the use of a liquidating trust if appropriate.
For example, Maxygen, Inc. (a public biotech) announced in 2013 that its board approved a plan of liquidation, under which the company would pay all obligations, distribute available cash (anticipating an initial liquidating distribution of approximately $2.50 per share), and possibly transfer assets into a trust for shareholders' benefit.
Delaware DGCL 280/281 Safe Harbor
Under Delaware law, directors have a duty to make reasonable provision for claims that are likely to arise within 10 years of dissolution. The Plan of Dissolution might specify a reserve amount or methodology. Some companies choose to follow the formal Delaware § 280/281(a) process:
- Send notice to known claimants with 60-day response deadline
- Publish notice for unknown claimants in newspapers
- Petition Chancery Court to approve reserve amounts for unresolved claims
- If court approves, this shields shareholders and directors from future personal liability beyond those reserves
This "long-form" dissolution route is somewhat complex and not always pursued—many companies instead dissolve and hold back what they deem sufficient in good faith. But for companies with significant potential liabilities, the court approval provides valuable protection.
SEC Considerations for Public Companies
Public companies must navigate securities regulations throughout the wind-down:
| Filing | Purpose | Timing |
|---|---|---|
| DEF 14A Proxy Statement | Seek shareholder approval for dissolution; outline plan and risk factors | Before shareholder meeting |
| Form 8-K | Announce dissolution and material events | Upon occurrence |
| 10-K/10-Q (Liquidation Basis) | Report on liquidation process rather than going-concern financials | Ongoing during wind-down |
| Form 15-12G | Deregister securities under Exchange Act | When eligible |
| No-Action Letter | Confirm trust interests don't require registration | Before trust formation |
If the original company had over a certain number of shareholders (500 and $10 million in assets), the trust interests might technically count as a new class of equity requiring SEC reporting. To avoid this, companies often seek a no-action letter from the SEC or structure the trust interests to not be transferable. Several companies like Nabi Biopharmaceuticals and REMEC obtained no-action relief so that their liquidating trusts did not have to register under the Exchange Act.
Crossing the Atlantic: How Europe Handles Biotech Deaths
The liquidating trust is fundamentally an American invention, rooted in Delaware's flexible corporate law and the U.S. trust tradition. European jurisdictions achieve similar outcomes through different mechanisms—and with notably different timelines.
Comparative Overview
| Jurisdiction | Entity Types | Creditor Protection Period | Typical Timeline | Trust Equivalent | WHT on Dividends | WHT on Royalties |
|---|---|---|---|---|---|---|
| United States (Delaware) | Corporation, LLC, DST | Case-dependent | 6–24 months | Liquidating Trust, CVR | 30% (treaty reduced) | 30% (treaty reduced) |
| United Kingdom | Ltd, PLC | 3-month dissolution notice | 6–12 months | Liquidator holds assets | 0% | 20% |
| Switzerland | AG, GmbH | 12-month Sperrfrist | 12–24 months | None standard | 35% | 0% |
| Germany | GmbH, AG | 12-month Sperrjahr | 15–24 months | Nachtragsliquidator | 26.375% | 15.825% |
| Netherlands | BV, NV | 2-month creditor objection | Days–6 months | Stichting possible | 15% | 0% |
| France | SAS, SA | 60-day final declaration | 12–18 months | None standard | 25% | 25% |
| Guernsey | Ltd, PCC | 2-month notice | 3–6 months | Trust structures available | 0% | 0% |
| Jersey | Ltd | 6 months if assets | Days–6 months | Trust structures available | 0% | 0% |
Switzerland: The Sperrfrist Challenge
If you're winding down a Swiss biotech—an AG or GmbH headquartered in Basel, Zurich, or Geneva—prepare for a mandatory waiting period that no amount of legal cleverness can accelerate.
Swiss law imposes a Sperrfrist (blocking period) of twelve months during which no distributions can be made to shareholders. The rationale is creditor protection: give anyone the company might owe money a full year to come forward before equity holders take anything out.
The process, governed by Articles 736–747 of the Code of Obligations, works like this:
| Step | Description | Timing |
|---|---|---|
| 1. Shareholders' Resolution | Vote to dissolve (2/3 majority for GmbH, simple majority for AG); must be notarized | Day 0 |
| 2. Liquidator Appointment | Must be Swiss-domiciled; can be former directors or third-party professionals | Day 0 |
| 3. Commercial Register Update | Company name modified to include "in Liquidation" | Days 1-7 |
| 4. FOSC Publications | Three publications in Swiss Official Gazette (SHAB) | Days 7-21 |
| 5. Sperrfrist Begins | 12-month creditor protection period starts | Day ~21 |
| 6. Creditor Claims | Known creditors must be directly notified; unknown creditors respond to FOSC notice | Months 1-12 |
| 7. Asset Realization | Liquidator sells assets, collects receivables | Months 1-12 |
| 8. Distribution | Only after Sperrfrist expires | Month 12+ |
| 9. Deletion | Commercial Register deletion upon completion | Month 13-24 |
According to RSM Switzerland and Goldblum & Partners, the Sperrfrist can be shortened to three months if an auditor certifies that all debts have been paid. But this requires certainty that no hidden liabilities exist—difficult for any operating company.
Tax Considerations:
The 35% federal withholding tax applies to distributions of retained earnings. However, returns of capital contributions (Kapitaleinlageprinzip) can be distributed tax-free—a significant planning opportunity for companies with substantial paid-in capital.
Critically for pharmaceutical royalty structures, Switzerland charges zero withholding tax on outbound royalty payments. A Swiss holding company receiving royalties from global licensees and paying them out to a liquidating structure faces no Swiss tax on the royalty stream itself. This makes Switzerland advantageous for ongoing licensing arrangements during wind-down.
Swiss Biotech Casualties:
| Company | Location | Year | Circumstances | Key Assets |
|---|---|---|---|---|
| Kinarus Therapeutics | Basel | 2023 | Chinese investor ChaoDian Hangzhou failed to transfer promised funds; over-indebtedness | KIN001 (acute pancreatitis), COVID-19 programs |
| Obseva SA | Geneva | 2023 | Burned ~$500M since 2012; warned could only cover costs through Q4 2023; SIX delisting | Women's health portfolio |
| Relief Therapeutics | Geneva | Ongoing | Multiple restructurings; regulatory setbacks | ACER-801, RLF-TD011 |
Germany: The Rigid Sperrjahr
If the Swiss timeline seems long, Germany's is worse. The Sperrjahr (blocking year) is an immutable twelve-month minimum that cannot be shortened under any circumstances.
German GmbH liquidation proceeds through three distinct phases:
| Phase | German Term | What Happens | Duration |
|---|---|---|---|
| 1. Dissolution | Auflösung | Shareholders vote (75% majority); notarized resolution; Handelsregister filing | Days |
| 2. Liquidation | Abwicklung | Liquidator realizes assets, pays creditors; three Bundesanzeiger publications | 12+ months |
| 3. Deletion | Löschung | Final accounts; application to delete from Commercial Register | 2–4 weeks |
Total timeline: 15–24 months according to Amicorp Germany and Consultinghouse.
The Nachtragsliquidator Concept:
Germany offers one unique mechanism absent from other jurisdictions: the Nachtragsliquidator (supplementary liquidator). If assets surface after the company has been deleted from the Commercial Register—an old patent nobody remembered, a royalty payment arriving years later, an unrecorded land registry entry—affected parties can petition the court to appoint a Nachtragsliquidator with a limited mandate under § 66 Abs. 5 GmbHG to realize and distribute those assets.
This addresses the problem that plagues all jurisdictions: what happens when a company is gone but money arrives afterward?
Tax Considerations:
German withholding on distributions reaches 26.375% (including solidarity surcharge). However, the EU Parent-Subsidiary Directive reduces this to 0% for qualifying EU parent companies with 10%+ holdings held for 12 months. A October 2022 Cologne Tax Court ruling confirmed 0% rates can apply to distributions funded from pre-liquidation operating profits even when paid during the liquidation period.
United Kingdom: The Liquidator Model
British companies don't use liquidating trusts because they don't need them. The liquidator serves the functional role that American trustees play.
When a UK Ltd enters members' voluntary liquidation (the solvent equivalent of Chapter 7), an insolvency practitioner takes control of the company's assets, operates with fiduciary duties to stakeholders, realizes assets, pays creditors, and distributes proceeds to shareholders. The company remains technically alive—with "Ltd – in liquidation" appended to its name—until the liquidator declares affairs complete.
This structure has advantages. A UK liquidator managing a long-term pharmaceutical royalty doesn't need to worry about trust formation, no-action letters, or grantor trust tax status. The existing corporate shell serves as the holding vehicle indefinitely. There is no strict 3-year limit like Delaware's corporate law; however, UK law does require the liquidator to convene meetings if the liquidation runs over a year, and to show progress.
Bona Vacantia Risk:
The disadvantage is bona vacantia. Under English law, if assets remain after a company is dissolved—because something was forgotten or an unexpected payment arrives—those assets pass to the Crown as ownerless property. This creates pressure to finalize everything before dissolution, unlike the U.S. system where a liquidating trust can exist for years post-dissolution.
IP Considerations:
According to RWK Goodman, Pinsent Masons, and Taylor Wessing, IP rights in UK insolvency require careful handling:
| Issue | UK Position | Practical Impact |
|---|---|---|
| Auto-Termination | Depends on contract; ipso facto clauses may be restricted by Corporate Insolvency and Governance Act 2020 | Review license terms carefully |
| Disclaimer | Liquidator can disclaim onerous contracts including unprofitable licenses | Licensees may lose rights |
| Registration | Advisable to register at UK IPO (£50 fee) for constructive notice protection | Priority against subsequent parties |
Strike-Off Alternative:
Companies House offers a faster alternative for simple cases: voluntary strike-off using Form DS01. Requirements include no trading in the prior three months and no significant assets. Cost: £10. Timeline: approximately three months. Obviously unsuitable for companies with pharmaceutical royalty streams.
UK withholding on dividends is 0%—among the most favorable rates globally. But royalties face 20% withholding, reduced by treaty in many cases.
The Netherlands: Speed Demons
The Dutch have mastered fast dissolution. Turboliquidatie (turbo-liquidation) allows companies with no assets to dissolve essentially overnight.
The mechanism is simple: if a BV has no assets and no liabilities, shareholders can resolve to dissolve, the company ceases to exist, and the KVK (Chamber of Commerce) is notified. No liquidator needed, no waiting period, no creditor call.
According to Bolder Launch and BLD Ekelmans, approximately 50,000 Dutch entities dissolved in 2022, with roughly 90% using turboliquidatie.
| Route | Requirements | Timeline | Suitable For |
|---|---|---|---|
| Turboliquidatie | No assets, no liabilities | Immediate (days) | Shell companies, fully settled entities |
| Standard Liquidation | Assets to realize, creditors to pay | 3–6 months | Operating companies |
November 2023 Temporary Transparency Act:
New requirements within 14 days of turboliquidatie dissolution:
- Balance sheet and income/expenditure statement for dissolution year
- Written explanation of reasons for no assets
- How assets were realized and proceeds distributed
- Notification to remaining creditors
Violations can result in criminal penalties—up to six months imprisonment—and five-year administration bans.
Stichting Structures:
Stichting (foundation) structures remain popular in Dutch life sciences. These foundations have no shareholders (governed by board only) but can hold assets, enter contracts, and conduct business activities while maintaining full independence and limited liability. A dissolving Dutch company could theoretically transfer residual assets to a stichting for the benefit of shareholders, somewhat akin to a US liquidating trust.
Tax Advantage:
The Netherlands charges no withholding tax on outbound royalty payments (except to blacklisted low-tax jurisdictions under the 2024 conditional WHT), making it particularly advantageous for pharmaceutical licensing arrangements.
France: When Giants Fall
French dissolution hit the headlines in 2025 when Ÿnsect—the insect protein company that had raised over €500 million—entered judicial liquidation.
Ÿnsect's trajectory illustrates the French system's flexibility and severity. The company initially sought sauvegarde (judicial safeguard) in September 2024—a process that protects struggling companies while they restructure. When that failed, it moved to redressement judiciaire (judicial reorganization). When that failed too, the court ordered liquidation judiciaire (judicial liquidation) in March 2025.
For solvent companies choosing voluntary dissolution, liquidation amiable follows a structured process:
| Step | Description | Cost/Timing |
|---|---|---|
| 1. Extraordinary General Meeting | Votes dissolution and appoints liquidator | Day 0 |
| 2. Journal d'Annonces Légales publication | Public notice of dissolution | ~€150 |
| 3. Guichet Unique filing | Registration with INPI | Within 45 days |
| 4. Liquidation operations | Realize assets, pay creditors | Maximum 3 years |
| 5. Final AGE | Approves accounts, grants liquidator discharge (quitus) | Month 12-36 |
| 6. Second JAL publication | Notice of completion | ~€110 |
| 7. Radiation | Deregistration complete | Total: 12-18 months |
French exit tax under Article 167 bis CGI can trap departing shareholders if their holdings exceed 50% of company profits or €800,000 in aggregate value—a consideration for relocating entrepreneurs.
Channel Islands: Offshore Sophistication
For pharmaceutical royalty structures requiring tax efficiency and legal sophistication, Guernsey and Jersey offer capabilities unmatched elsewhere.
Guernsey pioneered Protected Cell Companies (PCCs) in 1997, now with 100+ PCCs operating. A PCC is a single legal entity that contains multiple "cells," each with legally ring-fenced assets and liabilities. For a pharmaceutical company managing multiple drug programs or royalty streams, this structure enables remarkable flexibility: individual cells can be wound down—even put into receivership—without affecting other cells or the core structure.
Royalty Pharma Holdings Ltd demonstrates scale—listed on The International Stock Exchange (TISE) in Guernsey, its portfolio includes royalties on 35+ commercial pharmaceutical products including Trikafta, Trelegy, and Evrysdi. The 2014 acquisition of $3.3 billion in royalty streams from the Cystic Fibrosis Foundation on Vertex's Kalydeco exemplifies pharmaceutical royalty aggregation through offshore structures.
The tax environment is extraordinary. According to Carey Olsen, Guernsey's "zero-ten regime" provides:
- 0% standard corporate tax rate
- 0% withholding on dividends
- 0% withholding on royalties
- No capital gains tax
Jersey offers similar advantages with even faster fund authorization—24-hour approval is possible for simple structures.
The Critical Catch:
Neither Guernsey nor Jersey has a tax treaty with the United States. Royalty payments from U.S. sources to Channel Islands entities face 30% U.S. withholding with no treaty relief available. This makes Channel Islands structures unsuitable for U.S.-originated pharmaceutical royalties unless an intermediary jurisdiction is interposed.
Substance Requirements:
Post-BEPS substance requirements since January 2019 constrain planning options. According to Lexology, companies engaging in IP holding must demonstrate:
- Direction and management in the jurisdiction
- Core income-generating activities performed locally
- Adequate physical presence, employees, and expenditure
High-risk IP companies—those acquiring IP from outside the jurisdiction without conducting local activities—face presumption that substance requirements are not met and mandatory information exchange with foreign tax authorities.
The Tax Map: Withholding Rates That Shape Structures
Pharmaceutical royalty payments flowing through liquidation structures face dramatically different tax treatment depending on which jurisdictions are involved:
| Jurisdiction | Dividends WHT | Royalties WHT | Key Features | US Treaty? |
|---|---|---|---|---|
| United States | 30% | 30% | Treaty rates often 0% for royalties | N/A |
| United Kingdom | 0% | 20% | Post-Brexit; no EU directive benefits | Yes (0% royalties) |
| Switzerland | 35% | 0% | Capital contribution reserves exempt | Yes (0% royalties) |
| Germany | 26.375% | 15.825% | EU directives available | Yes (0% royalties) |
| Netherlands | 15% | 0% | Participation exemption; conditional WHT rules | Yes (0% royalties) |
| France | 25% | 25% | EU directives available | Yes (0% royalties) |
| Ireland | 25% | 20% | Knowledge Development Box regime | Yes (0% royalties) |
| Luxembourg | 15% | 0% | IP box; participation exemption | Yes (0% royalties) |
| Guernsey | 0% | 0% | Zero-ten regime | No |
| Jersey | 0% | 0% | Zero-rate regime | No |
The absence of U.S. treaty coverage for Guernsey and Jersey is often the decisive factor in structure selection. Without treaty relief, 30% of every U.S.-source royalty payment goes to the IRS before reaching Channel Islands beneficiaries—an unacceptable drag on returns.
US-European treaties generally provide 0% withholding on royalty payments between the US and major European jurisdictions. Form W-8BEN-E must claim treaty benefits with specific Limitation on Benefits provisions.
Timeline Comparison: How Long Will This Take?
Winding down a company isn't quick anywhere, but some jurisdictions move dramatically faster than others:
| Jurisdiction | Minimum Possible | Typical Duration | Key Constraint |
|---|---|---|---|
| Netherlands (Turbo) | Days | Days | Only for asset-free entities |
| Jersey (Summary) | Days | Days–weeks | Only for simple structures |
| UK (Strike-off) | 3 months | 3–6 months | No significant assets/trading |
| UK (MVL) | 3 months | 6–12 months | Liquidator realization timeline |
| US (Delaware) | Variable | 6–24 months | Asset complexity; SEC process |
| Netherlands (Standard) | 2 months | 3–6 months | Creditor objection period |
| France | 60 days | 12–18 months | 3-year maximum operations |
| Switzerland | 3 months* | 12–24 months | Sperrfrist; *auditor certification |
| Germany | 12 months | 15–24 months | Sperrjahr cannot be shortened |
Germany's absolute 12-month minimum stands out. No auditor certificate, no court order, no clever legal work can accelerate it. If you're winding down a German biotech subsidiary, budget at least 15 months.
The Netherlands and Jersey offer the fastest paths—Dutch turboliquidatie completes immediately upon dissolution for entities without assets, while Jersey summary winding up can finalize within days for simple structures.
US Grantor Trust Rules: The Technical Foundation
Liquidating trusts qualifying under IRC Sections 671–679 achieve pass-through taxation where income, deductions, and credits flow to beneficiaries as if the trust doesn't exist for tax purposes. According to Grant Thornton, the key requirements are:
Treasury Regulation § 301.7701-4(d) Requirements:
- Primary purpose must be liquidating and distributing assets
- Activities must be reasonably necessary to and consistent with that purpose
- Trust loses favorable status if liquidation becomes "unreasonably prolonged"
- Purpose cannot become "obscured by business activities"
Revenue Procedure 94-45 Conditions:
- Trust created pursuant to confirmed Chapter 11 plan
- Primary purpose: liquidate assets with no objective to continue trade or business
- Annual distribution of net income and net proceeds required
- Only reasonable amounts retained for claims and contingent liabilities
Character Preservation:
For pharmaceutical royalty income, the character of income is maintained (ordinary income treatment) as it flows through to beneficiaries on Schedule K-1. This contrasts with CVR structures where payments may be characterized differently depending on their terms.
Trust Term Extensions:
Trust term extensions may require IRS private letter rulings. PLR 202226004 and PLR 202517009 demonstrate ongoing agency engagement with extension requests—typically granted when the trust shows good faith efforts toward liquidation but faces circumstances beyond its control (pending litigation, illiquid assets, etc.).
Delaware Statutory Trusts:
Delaware Statutory Trusts under 12 Del. C. § 3801 provide:
- Beneficial owner limited liability equivalent to corporate stockholders
- Maximum freedom of contract
- Tax classification flexibility (can elect partnership, corporation, or disregarded entity treatment)
- Formation in 1–2 days with low one-time filing fees and no annual fees
This makes Delaware the dominant choice for US liquidating trust structuring.
Practical Lessons: What Works in Pharmaceutical Royalty Situations
After examining dozens of biotech wind-downs, some patterns emerge for practitioners structuring these transactions.
When to Use a Liquidating Trust
Trusts make sense when:
- Long-dated royalty streams will generate income for years
- Milestone payments are contingent on future drug development events
- Pending litigation might yield recoveries but won't resolve quickly
- Asset valuations are depressed and waiting may yield better prices
- Shareholders want ongoing exposure rather than immediate cash
Trusts are unnecessary when:
- Assets can be sold quickly for fair value
- Cash dominates the balance sheet with minimal illiquid assets
- Timeline pressure requires rapid distribution
- Administrative costs would consume significant value
When to Accept a CVR Deal
CVR acquisitions suit shareholders who:
- Prefer certainty over upside potential
- Want immediate liquidity rather than waiting
- Lack confidence in asset values or management's ability to realize them
- Face tax timing needs that favor current-year recognition
They're less suitable when:
- Assets are clearly undervalued in the offer
- Shareholders have long investment horizons and can wait
- CVR terms are unfavorable (low participation rates, short windows)
- Acquirer's track record suggests poor asset monetization
Jurisdictional Structure Selection
For cross-border pharmaceutical royalty situations:
| Situation | Consider | Avoid |
|---|---|---|
| US-sourced royalties, US shareholders | US liquidating trust or Delaware DST | Guernsey/Jersey (no treaty) |
| European royalties, diverse shareholders | Netherlands BV; Swiss AG | High-WHT jurisdictions |
| Multiple drug programs, need segregation | Guernsey PCC | Single-entity structures |
| Speed priority, no assets | Dutch turboliquidatie | Germany (12-month minimum) |
| Creditor protection concerns | Delaware DGCL 280; Swiss Sperrfrist | Strike-off procedures |
| IP-heavy portfolio, EU hub needed | Switzerland (0% royalty WHT) | UK (20% royalty WHT) |
Key Considerations for Pharmaceutical Royalties in a Trust
Royalty rights are unique assets—their value depends on drug sales which can be unpredictable. The trustee needs to manage these rights prudently:
| Consideration | Description |
|---|---|
| Monitoring and Auditing | Auditing or monitoring sales reports from the licensee to ensure accurate royalty calculations |
| License Enforcement | Enforcing license agreement rights, ensuring the drug developer fulfills obligations that affect royalties |
| Sale Timing | Deciding if/when to sell the royalty, balancing immediate liquidity against potential future value |
| Regulatory Risk | Understanding that if partners fail to maintain regulatory approvals or achieve sales, the royalty's value will drop |
| Trust Tax Status | Operating within limits to preserve favorable tax status while maximizing value |
Case Examples Summary
| Company | Year | Structure | Jurisdiction | Key Royalty Assets | Distribution | Outcome |
|---|---|---|---|---|---|---|
| PDL BioPharma | 2020–21 | Self-liquidation + trust option | Delaware | Glumetza, Entresto royalties | Multiple distributions | Completed |
| Genaera | 2009 | Liquidating Trust | Delaware | MEDI-528 (IL-9 antibody) milestones | $2.75M sale to Ligand | Completed |
| Aradigm | 2020 | Chapter 11 Liquidating Trust | California | Inhaled ciprofloxacin royalties | Creditors first, then equity | Completed |
| Altaba | 2019–present | Liquidation + trust | Delaware | N/A (Alibaba shares) | $90+/share total | Ongoing |
| Third Harmonic | 2025 | Direct dissolution | Delaware | THB335 (sold) | ~$5.35/share | Completed |
| Kinnate | 2024 | CVR acquisition | Delaware | RAF inhibitors | $2.59 + CVR | Completed |
| Cargo | 2025 | CVR acquisition | Delaware | CAR-T assets | $4.38 + CVR | Completed |
| SQZ Bio | 2024 | Direct dissolution | Delaware | 400+ patents (sold) | $11.8M total | Completed |
| HilleVax | 2025 | CVR acquisition | Delaware | Norovirus vaccine | $1.95 + CVR | Completed |
| Kinarus | 2023 | Bankruptcy | Switzerland | KIN001 programs | N/A | Completed |
| Obseva | 2023 | Wind-down | Switzerland | Women's health portfolio | Delisted | Completed |
Where This Goes Next
The zombie biotech wave shows no signs of ending. High interest rates have made capital expensive. Investors have grown impatient with speculative pipelines. The FDA approval bar remains high. These forces will continue pushing marginal biotechs toward liquidation.
Meanwhile, the tools for managing these wind-downs continue evolving. XOMA and Concentra have demonstrated that "Liquidation as a Service" can be profitable for acquirers and efficient for shareholders. Expect more players to enter this space.
For pharmaceutical royalty assets specifically, the trend toward specialized holding structures will likely accelerate. Companies like Royalty Pharma—which went public in 2020 at a $16 billion valuation—have demonstrated that aggregating royalty streams creates value. Liquidating biotechs increasingly find willing buyers for their royalty rights, reducing the need for extended trust administration.
European regulatory harmonization may eventually simplify cross-border wind-downs, though the EU has shown little appetite for standardizing corporate dissolution procedures. For now, the patchwork of national regimes—Germany's rigid Sperrjahr, Switzerland's Sperrfrist, the Dutch turboliquidatie—will persist.
What remains constant is the fundamental challenge: when a biotech's science fails, significant value often remains in contracts, intellectual property, and future contingencies. Capturing that value for stakeholders requires careful planning, appropriate legal structures, and—often—patience measured in years rather than months.
The liquidating trust, in its various forms, provides the mechanism. It's not glamorous work. There are no breakthrough therapies, no IPO celebrations, no cures for terrible diseases. Just the quiet, methodical conversion of a failed company's remains into cash for the people who believed in it.
In the end, that's what fiduciary duty looks like.
Disclaimer: This article is a narrative overview based on publicly available information and is provided for general informational and educational purposes only. Cross-border corporate transactions, liquidations, and tax structuring are highly complex matters where details vary significantly based on individual company circumstances, jurisdictional requirements, and the specific terms of underlying agreements.
All information presented was believed to be accurate at the time of writing (December 2025), but laws, regulations, tax rates, and corporate circumstances change frequently—readers should verify current requirements with qualified professionals before taking any action.
This article does not purport to be comprehensive or to cover all relevant considerations for any particular transaction. The author is not a lawyer, financial adviser, tax professional, or licensed in any jurisdiction to provide legal, financial, or tax advice. Nothing in this article constitutes legal, financial, investment, or tax advice, and no attorney-client, advisory, or fiduciary relationship is created by reading this content. Readers should consult qualified legal, tax, and financial professionals in the relevant jurisdictions for advice specific to their circumstances.
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