On Growth Option for R&D Continuity of Biotech Start-ups Under Uncertainty
- Takao Fujiwara
- … show all 1 hide
Rent the article at a discountRent now
* Final gross prices may vary according to local VAT.Get Access
For biotech drug-discovery start-ups, even though the constraint on managerial resources is very severe, it takes more than 10 years for them to transfer a project from laboratory study to products on the market. In order to increase robustness against financial crisis for continuing R&D, we examine the flexibility value of real options, and especially pay attention to the function of growth options for business entry and exit. Through a case study of a Japanese pioneering start-up in the field of regenerative medicine, J-TEC, we consider a survival strategy during the valley of deficit from the perspective of the growth option. Finally, we apply stochastic optimization to select the pipeline candidates from alternative projects.
- Anderson, C., et al. (2006). Empirical evidence on capital investment, growth options, and security returns. Journal of Finance, 61(1), 171–194.
- Berk, J., et al. (1999). Optimal investment, growth options, and security returns. Journal of Finance, 54(5), 1553–1607.
- Black, F., et al. (1973). The pricing of options and corporate liabilities. Journal of Political Economy, 81(3), 637–654.
- Brisley, N. (2006). Executive stock options: Early exercise provisions and risk-taking incentives. Journal of Finance, 61(5), 2487–2509.
- Burrill and Company. (2009). Biotech 2009. San Francisco, CA: Burrill & Company LLC.
- Burrill and Company. (2010). Biotech 2010. San Francisco, CA: Burrill & Company LLC.
- Copeland, T., & Antikarov, V. (2001). Real Options: A practitioner’s guide. New York, NY: Texere.
- Dixit, A (1989) Entry and exit decisions under uncertainty. Journal of Political Economy 97: pp. 620-638 CrossRef
- Dixit, A. K., & Pindyck, R. S. (1994). Investment under uncertainty. Princeton, NJ: Princeton University Press.
- Fujiwara, T (2008) Japan’s health-care service quality and the death-valley strategy of biotech start-ups. Global Journal of Flexible Systems Management 9: pp. 1-10
- Fujiwara, T (2008) Modeling of strategic partnership of biotechnological start-up by option-game: Aiming at optimization between flexibility and commitment. Journal of Advances in Management Research 5: pp. 28-45 CrossRef
- Fujiwara, T Application of real options analysis for biotech-cluster formation: Optimal investment timing of biotech start-ups under uncertainty. In: Jayachandran, C eds. (2010) Business Clusters: Partnering for strategic advantage. Routledge, New Delhi, India, pp. 193-215
- Fujiwara, T. (2011). Application of timing option to founding investment decision of biotech start-ups. Journal of Business Chemistry, 8(3), 133–146.
- J-TEC, the company home page. (2011). http://www.jpte.co.jp/english/ir/index.html. Accessed 31 Dec 2011.
- Kester, W. C. (1984). Today’s options for tomorrow’s growth. Harvard Business Review, 62(March-April), 153–160.
- Kulatilaka, N., & Trigeorgis, L. (1994). The general flexibility to switch: Real options revisited. International Journal of Finance, 6(2), 778–798.
- Kulatilaka, N., et al. (1998). Strategic growth options. Management Science, 44(8), 1021–1031.
- Merton, R.C. (1973). Theory of rational option pricing. Bell Journal of Economics and Management Science, 4(1), 141–183.
- Mun, J (2006) Modeling risk. Wiley, Hoboken, NJ
- Myers, S.C. (1974). Interactions of corporate financing investment decision: Implications for capital budgeting. Journal of Finance, 29(1), 1–25.
- Nikkei.com home page. (2011). http://e.nikkei.com/e/fr/freetop.aspx. Accessed 31 Dec 2011.
- Smit, H.T.J., et al. (2004). Strategic investment: Real options and games. Princeton, NJ: Princeton University Press.
- Smith, RL (2004) Entrepreneurial finance. Wiley, Hoboken, NJ
- Timmons, J., et al. (2009). New venture creation, entrepreneurship for the 21st century (8th ed.). Boston, MA: McGraw-Hill/Irwin.
- Trigeorgis, L. (1996). Real Options: Managerial flexibility and strategy in resource allocation (pp. 1–4). Cambridge, MA: MIT Press.
- On Growth Option for R&D Continuity of Biotech Start-ups Under Uncertainty
Global Journal of Flexible Systems Management
Volume 13, Issue 3 , pp 129-139
- Cover Date
- Print ISSN
- Online ISSN
- Additional Links
- Biotech start-ups
- Real options
- Growth options
- Valley of deficit
- Path dependent continuity
- Takao Fujiwara (1)
- Author Affiliations
- 1. Toyohashi University of Technology, Toyohashi, Aichi, 441-8580, Japan