Winning in Biotech Business Development: Run the Race Alone, Join a Team or Pass the Baton?

Niels-Peter Nielsen & Casper Ravn

Student thesis: Master thesis


Development of a pharmaceutical drug takes a substantial amount of time, requires sufficient capital and resources and capabilities which is why biotech companies are often not able to do the development themselves. Partnerships with pharma companies are therefore very common, because both companies are able to benefit in the long run. A partnership with a pharma company is an important decision for a biotech company, because it could potentially be more profitable to do the development alone or sell the project. The importance of this decision is unneglectable and the authors of this thesis have developed a model that helps a biotech company decide on how to proceed with the development of a potential drug. The input factors in the model are an analysis of the needed cash, needed resources and capabilities, attractiveness of disease area, strategic fit and the pipeline of the biotech company. Based on the analysis the biotech company should be able to tell if they have adequate cash, adequate resources and capabilities internally to continue the development. They should also be able to tell if the disease area is attractive, if they can identify a company with a strategic fit and if they have other products in development. We have consolidated these inputs into a decision tree model that in the end suggest one of the following three strategies: make a partnership, continue alone or sell the company. The model developed is based on well-established economic theory, literature within the area of biotech and pharma partnerships and interviews from executives in the industry. In order to test the model we initiated a case study, where we investigated ten projects by four biotech firms, where nine included a partnership with another company. The cases have been analyzed as a within-case analysis and cross-case analysis. The primary data is interviews with executives from the biotech companies. The case studies have validated the factors that are used in the model, and these factors are generalizable to biotech firms who have to decide how to proceed the development of a drug. We recommend that biotech companies consider these factors carefully when they have to decide on how to develop a new drug from a partnership perspective. Our case studies have not provided sufficient evidence to state that the outcomes of our models are generalizable. It is therefore a task for future research to validate if biotech companies who apply our model have higher returns on their projects than other companies.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final ThesisMSc in International Business, (Graduate Programme) Final Thesis
Publication date2016
Number of pages139
SupervisorsKeld Laursen