R&D Durability of Biotech Start-ups in Financial Crisis

Abstract

This article examines the applicability of real options to the improvement of robustness of Research and Development (R&D) durability of biotech start-ups against the valley of deficits or the systemic risk like the financial crisis, because they have to endure more than 10 years to get approval of the medicine on the market subject to the resource constrains, if they could raise enough financial resources. The organization of this article is consisted of four components except introduction and conclusion. First component mentions the present analysis on investment environment for R&D durability of biotech start-ups. Second component examines the existing basic theory on the decision reserving functions of real options. Third component is attempting to make clear the flexibility value from a sequential compound switching option that is designed to select the optimal mode between the assumed drug development process as a benchmark and the cooperative development in strategic partnership on the way. And fourth component is also trying to mapping of selective decisions at the market and cooperative development risks (or potential) based on these data. Further it aims to support for decision making by creating 3 dimensional graphs on the Net Present Value and both risks and on these indices with market volatility.