Harvesting Biotechnology Ventures: Modeling the Probabilities for Alternatives Liquidity Events

The path from invention to innovation is a complex process where several factors play a critical role in the success of it. The biotechnology industry has almost three decades creating commercial products and emerging and growing as an entrepreneurial business with strong ties to science and technology, scientific infrastructure, R&D investment, financial resources, specialized human capital, collaborative agreements and alliances, FDA policies among others. This study focus on the exit strategies used for the biotechnology industry in the last 31 years and the main factors that determine the likelihood of these liquidity events. The research findings give us evidence, empirically, of the drivers that participate and shape the evolution, dynamic, characteristics, and frequency of the liquidity events in the biotechnology industry. Funds availability, venture capitalists, investors, and entrepreneurs willing to take risk in biotechnology firms have been key elements in the flourishing and growing of the biotechnology sector. Venture capital funding and rounds have had a significant impact in the decisions about liquidity events in the biotechnology industry. Firm’s assets as patents and strategic alliances and collaborative agreements have contributed significantly in the evolution and dynamic of the liquidity events in the biotechnology industry. These assets establish and lead certain conditions in the firms’ decisions, including the decision of the best exit strategy to have the higher return of the investment. GDP generates economic resources that have an important effect in the creation of wealth through biotechnology firms. The findings in this research show that GDP does have a significant impact in the dynamic of the exit strategies. Stock market perception, valuation, and expectation are important elements with direct and indirect effects on the liquidity events and their characteristics and frequencies in the biotechnology firms. The atmosphere and environment created by regions with specific characteristics as strong scientific infrastructure, health and life sciences institutions, and venture capital investment are conditions that are crucial in the evolution of the biotechnology industry. We found that locations and clusters of biotechnology firms have a significant impact on the type of exit strategy investors decide to take to recover their investment in an optimal way.