Date of this Version
Journal of Business
We examine the determinants of biotech-pharmaceutical alliance prices to determine whether the market for alliances is characterized by asymmetric information. We find that inexperienced biotech companies receive substantially discounted payments when forming their first alliance. A jointly developed drug is more likely to advance in clinical trials than a drug developed by a single company, so the first- deal discount is not consistent with the drug’s subsequent performance. Biotech companies receive substantially higher valuations from venture capitalists and the public equity market after forming their first alliance, which implies that alliances send a positive signal to prospective investors.
Nicholson, S., Danzon, P. M., & McCullough, J. (2005). Biotech-Pharmaceutical Alliances as aSignal of Asset and Firm Quality*. Journal of Business, 78 (4), 1433-1464. http://dx.doi.org/10.1086/430865
Additional Filesbiotech phamaceutical alliances_1.pdf (265 kB)
Date Posted: 27 November 2017
This document has been peer reviewed.