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On Growth Option for R&D Continuity of Biotech Start-ups Under Uncertainty

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Abstract

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.

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Acknowledgments

This work was supported with Grant-in-Aid for Scientific Research (B) #21330090 by the Japan Society for the Promotion of Science. I also appreciate Prof. M. K. Nandakumar, IIMK, Prof. Sushil, IITD, and Prof. K. Momaya, IITB for their kindness.

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  1. Toyohashi University of Technology, Toyohashi, Aichi, 441-8580, Japan

    Takao Fujiwara

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  1. Takao Fujiwara
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Correspondence to Takao Fujiwara.

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Fujiwara, T. On Growth Option for R&D Continuity of Biotech Start-ups Under Uncertainty. Glob J Flex Syst Manag 13, 129–139 (2012). https://doi.org/10.1007/s40171-012-0013-6

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  • DOI: https://doi.org/10.1007/s40171-012-0013-6

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