Getting an insight in the determinants of new product introductions of US biopharmaceutical start-ups

Abstract

This paper analyses which organisational and industrial factors influence the chance that a US biopharmaceutical start-up is able to introduce a new drug on the US market. Specific attention is paid to the critical mass a biotech company should obtain to improve its chances of bringing a new drug to the market. In the same vein, the economies of scale in R&D are taken into consideration. Second, we analyse whether a biotech start-up can obtain this optimal scale through merger, internal growth financed by the minority participations of larger partners or through strategic alliances with a pharmaceutical partner. But which of these is the most successful with respect to introducing a new drug on the market. To analyse these questions, data on their NDA and R&D activities is collected for all US biotech companies, involved in biopharmaceutical research and development, with more than 50 employees over the period 1982-1994. The findings are challenging, at least. Although many biotech companies are well below the minimum critical mass necessary to introduce a new drug on the market, internal growth through minority participations seems to be a very unsuccessful strategy. The real trade-off seems to be between merger and strategic partnering.