Corporate Spin-Offs And NewCos: Unlocking Value in Biopharma Innovation
By Joseph Pategou
Empirical research comparing corporate and academic spin-offs consistently shows that corporate-originated ventures outperform their academic counterparts in terms of growth and survival. This advantage is largely driven by more mature assets, stronger operational infrastructure, and clearer commercial pathways, enabling faster execution and higher rates of success. At the same time, academic studies show a global rise in spin-offs, with the United States leading with 112, followed by the United Kingdom with 61.1 This surge comes at a critical time for pharmaceutical companies, which continue to struggle with low R&D productivity — just 5.9% in 2024 — despite high spending of $2.2 billion per company in average costs from discovery to launch.
Biopharma companies are increasingly under pressure to address rising development costs, shifting therapeutic priorities, and the need to unlock value from underutilized assets. In response, two structural models have emerged as compelling alternatives to traditional portfolio management: the Hub-and-Spoke model and NewCo structures. Both approaches aim to accelerate innovation while providing operational and financial flexibility, though they do so in distinct ways.
Investors and executives alike have embraced spin-offs and NewCos as effective strategies for capturing value and delivering innovation to patients. For example, in July 2025, Frazier Life Sciences raised a new $1.3 billion fund, intending to allocate 40–50% to the launch of three to five NewCos annually. Daniel Estes, General Partner at Frazier, explained that spinning off underutilized assets provides a pathway to capture value from programs that may otherwise remain under-resourced.
Recent Examples Of NewCos and Spin-Offs
Several recent case studies illustrate how leading biopharma companies are leveraging these models. Bristol Myers Squibb, in 2025, created a NewCo focused on innovative immunology therapies. As part of its strategic optimization, BMS deprioritized certain pipeline assets but retained around 20% equity in the new entity. The NewCo received $300 million in funding led by Bain Capital, allowing the assets to continue development independently.2 Chris Boerner, BMS Board Chair and CEO, emphasized during an earnings call that while some projects may not meet the internal pay line, they can still offer compelling science or commercial potential. “NewCos are a nice way to continue to progress those assets while retaining the ability to benefit from any upside,” he said.3
In 2024, Hengrui Pharmaceuticals adopted a similar strategy with the formation of Kailera, a NewCo focused on obesity therapies. After losing over $1 billion in deal value from the Aiolos Bio transaction in 2023, Hengrui shifted toward longer-term deal structures. By cofounding Kailera with multiple investors and retaining approximately 20% equity, the company aimed to capture long-term value. Investors included Lyra (2.6% or $16M), Atlas Venture (8.8%, $50M), Bain Capital (19.3%, $110M) and RTW (39.4%, $225M), demonstrating the appeal of NewCo models in attracting committed financial partners.4
Pfizer’s creation of Cerevel Therapeutics in 2018 provides another instructive example. As Pfizer scaled back its neuroscience research, it spun off its underutilized neurology pipeline into a NewCo, retaining a 25% ownership stake. Following AbbVie’s acquisition of Cerevel, Pfizer received a $1.2 billion payout and continues to benefit from milestone and royalty rights. Morris Birnbaum, CSO of Internal Medicine at Pfizer, highlighted that Cerevel allows continued development of compounds while contributing to broader scientific understanding in Alzheimer’s and Parkinson’s disease.5
Hub-And-Spoke Vs. NewCo
A comparison of Hub-and-Spoke6 and NewCo structures highlights their distinct advantages and challenges. Both models enable subsidiaries to concentrate on a single asset, platform, or therapeutic area, fostering deeper scientific expertise and maximizing the potential of projects that might otherwise be overshadowed within a large pipeline. Both approaches allow for independent capital formation, attracting investors who believe in the potential of specific assets even when internal capital is constrained. By spinning assets into independent subsidiaries, parent companies also can diversify scientific, regulatory, and commercial risk, allowing different entities to pursue varied modalities, disease areas, and development stages without overloading the parent’s risk profile.
Hub-and-Spoke models offer operational efficiency by leveraging centralized shared services, such as regulatory, legal, business development, and administrative functions. This hybrid approach combines startup agility with Big Pharma infrastructure, though it can face internal challenges including competing priorities, shared leadership bandwidth, and occasional organizational politics. NewCos, by contrast, operate with existential urgency: their survival depends entirely on execution. This drives sharper focus, greater agility, and stronger accountability, often resulting in higher valuations at exit. Cerevel Therapeutics exemplifies this, achieving an $8.7 billion exit after being spun out of Pfizer’s neurology pipeline in partnership with Bain Capital.
Spin-Offs And NewCos Can Unlock Value
As biopharma companies continue to navigate the pressures of rising R&D costs and complex portfolios, spin-offs and NewCos provide a compelling mechanism to unlock value, attract focused investment, and accelerate innovation. For executives and investors alike, understanding the nuances of these models is essential to strategically leveraging underutilized assets while maintaining optionality and maximizing returns.
References
- Yashiro et al., J. Open Innovation, 2023; Wennberg et al., 2011
- BMS and Bain Press Releases
- BMS Q2 2025 Earnings
- Shanghai Stock Exchange Disclosure by Hengrui; Bain Press Release
- Pfizer and AbbVie Press Releases
- BridgeBio Form S-1/A Filing; Nimbus Press Release
About The Author:
Joseph Pategou has authored over 30 articles in esteemed journals such as Cell and Gene Therapy, The Indian Economist, Labotech.eu, Drug Discovery & Development and others. A former consultant at Boston Consulting Group in New York, he has held and continues to hold operational roles in biopharma companies. The views expressed are his own. He holds an MBA from New York University and a master’s degree from HEC Paris.