Missing Novelty in Drug Development

• 成果类型: Article
• 署名作者: Krieger, Joshua; Li, Danielle; Papanikolaou, Dimitris
• 署名单位: Harvard University; Massachusetts Institute of Technology (MIT); National Bureau of Economic Research; Northwestern University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab024
• 发表日期: 2022
• 页码: 636
• 关键词: research-and-development; MEDICARE-PART-D; market-size; financing innovation; corporate-investment; CHEMICAL SIMILARITY; FIRMS; determinants; GROWTH; rates

摘要

We provide evidence that risk aversion leads pharmaceutical firms to underinvest in radical innovation. We introduce a new measure of drug novelty based on chemical similarity and show that firms face a risk-reward trade-off: novel drug candidates are less likely to obtain FDA approval but are based on more valuable patents. Consistent with a simple model of costly external finance, we show that a positive shock to firms' net worth leads firms to develop more novel drugs. This suggests that even large firms may behave as though they are risk averse, reducing their willingness to investment in potentially valuable radical innovation.