Capital Efficiency for Development Stage Biotech-Based Firms: An IPO Perspective

Access to multiple tranches of capital is critical for predominantly no revenue development stage biotech firms. While financing needs are monotonically increasing over multiple years in the product development approval cycle, the market for high risk, milestone driven biotech investment is significantly more volatile than the financial markets as a whole. In this paper, we analyzed the role and relative importance of global biotech IPOs, as well as other sources of capital such as strategic alliances, for research and development funding. We also explored and assessed the degree of mismatch between the access to capital, operational efficiencies, and how firms solve the potential unmet capital requirements. Implications for investors, as well as small and large biotech company managers, is discussed.