Transcendent Wealth Creation for Life Science Companies

Life Science/Biotech companies face many challenges including the need for large capital investment, high company failure rate (90% fail to take a drug candidate to market), complex regulatory environment and the ever constant need to attract, reward and retain key employees and executives.  

BIOTECH APPLICATION #1

Three Biotech investors each put $10,000,000 of their personal assets into a new biotech start-up to take a molecule to market. The estimated cost of which is $20,000,000.

Our insurance carriers will allow us to insure the business owners for 1X the business valuation. This means we are able to insure each partner all of whom are active in the company for $30,000,000 collectively ($10,000,000 each). In effect, we are able to lock in the business valuation for the stakeholders of this company.

The funding provided by our credit facility is $1,452,000 per year for eight years ($11,600,000 total).

Beginning in year 15, our credit facility projects $585,000 in annual cash flow or approximately $195,000 to each investor for life. At the death of each investor, their investment of $10,000,000 is paid to their beneficiaries income tax-free.

Whether the business succeeds or fails, we’ve created transcendent wealth for the key stakeholders of the business.

BIOTECH APPLICATION #2

A Biotech company with 300+ employees leverages the premium finance opportunity to place insurance on its key employees.  The company is able to insure each key employee for $4,000,000. 

The company splits the death benefits with its must retain, key employee’s providing a permanent $2,000,000 death benefit to their beneficiaries.  The other $2,000,000 is retained by the company for cost recovery purposes. 

 The net economic impact to the company is projected to be more than $200,000,000 over the life of the plan.  Not included in this figure is the growth on the $175,000,000 funded by our credit facility during the first seven years of the plan. 

The economic impact on the company’s earnings per share calculation are substantial.

When a covered employee passes away, the death benefit pays off the loan associated with the policy leaving a net death benefit of approximately $4,000,000 to be shared with the employee’s beneficiaries and the employer sponsor. 

The policy cash values in excess of the loan balance can be used to create cash flow to the company and employees, typically beginning in the 15th year after plan inception.   This cashflow can be used to satisfy the obligations associated with their Deferred Compensation Plan or any business purpose of the plan sponsor. 

In the event of business failure, the assets in the life insurance policies are creditor protected and unavailable to the employer sponsor’s creditors. 

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