Spinning lemons into lemonade: the growing trend of spin-outs helps companies cash out on underappreciated assets.(BioBusiness)

Before 2001, the company now known as Biovitrum was a group of workers with roots in Pharmacia Corp.'s Swedish research division, which was deemed redundant after Pharmacia merged with Upjohn in 1995. But there was intellectual property and promising research on metabolic disease laying dormant, so in 2001 a management group, along with venture capital investors, used $130 million in new funding to spin the company out of Pharmacia.

Since its start with 1,000 employees and major research facilities in Sweden, Biovitrum has scaled down to 500 workers and sold off real estate and business units to finance its own research. It now has several products in clinical trials, partnership agreements with large companies including GlaxoSmithKline and Amgen, and is one of Europe's largest biotechs. "The fact that we did the spin-out allowed the assets of the new company to become core, not just marginal," says Mats Pettersson, Biovitrum's chief executive. Pfizer, which merged with Pharmacia after the spin-out, still owns 19% of the company.

Biovitrum is one of a number of such spin-outs: Tercica, a public company focused on endocrinology, and Rinat Neuroscience are both spin-outs from Genentech. Last year Allergan spun out its nuclear receptor portfolio, in which it had invested $100 million over the past decade, to Vitae …