This TED Talk by MIT Professor Andrew Lo describes how financial engineering can be used to help cure cancer.
In the video he describes what sounds like an ABS with several tranches that would be open to public investors. This way you could get around the inherent risk of investing in startup biotech companies that are reliant on an upcoming drug test.
He notes that the final drug tests tend to have 2 outcomes:
- Fail the drug test, 19/20 chance, investment lost
- Pass the drug test, 1/20 chance, multiples of ROI
The product he is describing is reminiscent of the MBS that were all the rage in the mid 2000's. Different tranches etc.
What do you guys think about using this structure to securitize investing in cancer startups?