Productivity in Pharmaceutical Biotechnology R&D: The Role of Experience and Alliances
40 Pages Posted: 11 Apr 2003 Last revised: 10 Oct 2022
Date Written: April 2003
Abstract
Using data on over 900 firms for the period 1988-2000, we estimate the effect on phase-specific biotech and pharmaceutical R&D success rates of a firm's overall experience, its experience in the relevant therapeutic category; the diversification of its experience, and alliances with large and small firms. We find that success probabilities vary substantially across therapeutic categories and are negatively correlated with mean sales by category, which is consistent with a model of dynamic, competitive entry. Returns to experience are statistically significant but economically small for the relatively straightforward phase 1 trials. We find evidence of large, positive, and diminishing returns to a firm's overall experience (across all therapeutic categories) for the larger and more complex late-stage trials that focus on a drug's efficacy. There is some evidence that a drug is more likely to complete phase 2 if developed by firms with considerable therapeutic category-specific experience and by firms whose experience is focused rather than broad (diseconomies of scope). Our results confirm that products developed in an alliance tend to have a higher probability of success, at least for the more complex phase 2 and phase 3 trials, and particularly if the licensee is a large firm.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Do Equity Financing Cycles Matter?: Evidence from Biotechnology Alliances
By Alexander Tsai and Josh Lerner
-
Do Equity Financing Cycles Matter? Evidence from Biotechnology Alliances
By Alexander Tsai and Josh Lerner
-
By Ilan Guedj and David S. Scharfstein
-
By Ilan Guedj and David S. Scharfstein
-
Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality
By Sean Nicholson, Patricia M. Danzon, ...
-
Financial Contracting in Biotech Strategic Alliances
By David T. Robinson and Toby Stuart
-
Contractibility and the Design of Research Agreements
By Ulrike Malmendier and Josh Lerner
-
Contractibility and the Design of Research Agreements
By Ulrike Malmendier and Josh Lerner
-
The Allocation of Control Rights in Pharmaceutical Alliances