Star Biotech Start-ups' Past R&D Investment in the Financial Crisis Time

Biotech start-ups are expected to make a breakthrough in drug discovery between the basic research at universities and the clinical development and manufacturing at big pharma. However, the “Valley of Death” as a negative profits period between both stages is becoming deeper and longer. Why can so many biotech start-ups almost survive even in making deficit? Furthermore, why could many biotech start-ups survive the financial crisis time including the Bankruptcy of Lehman Brothers? What is the difference of present Star biotech start-ups from Non-star biotech start-ups at the R&D investment in financial crisis time? A biotech start-up is defined as a portfolio of real options with investment decision opportunities for commercializing the life science ideas as underlying assets. Dataset is financial indices from both the components of NASDAQ Biotechnology Index and the US SEC EDGAR in FY2008 and FY2018. Methodologies are real options and Bayesian MCMC. Main finding is that present Star and then deficit biotech companies' R&D investment productivity was higher than present Star and then positive profits counterpart with FY2008 R&D investment as independent variable and FY2018 total stockholders' equity as dependent variable.