US biopharmaceutical finance and the sustainability of the biotech business model: "Publication year: 2011
Source: Research Policy, In Press, Corrected Proof, Available online 7 July 2011
William, Lazonick , Öner, Tulum
In the decade before the 2008 economic crisis, the US biotechnology industry was booming. In a 2006 book, Science Business: The Promise, the Reality, and the Future of Biotech, Gary Pisano implies that, given the 10–20 year time-frame for developing biotech products and the lack of profitability of the industry as a whole, the US biotech boom should not have happened. Yet the biotech industry has received substantial funding from venture-capital firms as well as from established companies through R&D alliances. Why would money from venture capitalists and big pharma flow into an industry in which profits are so hard...
Highlights: ► Since the 1980s venture capitalists, big pharma, and public investors have funded the biopharmaceutical (BP) industry. ► Massive government spending on knowledge-creation combines with stock-market speculation to attract finance into BP. ► Yet the BP industry has produced only a small number of commercial drugs, and on the whole has been unprofitable. ► Stock-market speculation enables financial interests, including top BP executives, to extract value without creating value. ► The 2008 financial crisis put the BP business model in crisis by suppressing the stock-market speculation essential for IPOs."
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