Public Biotech: The Next Credit Crisis Victims

It is, admittedly, a bit of a stretch to connect the following finding in a new NBER paper to the recent credit crisis, but it’s plausible that the sector’s sensitivity to cost of capital is being overlooked:

In the current study we find that biotechnology firms are exposed to greater financial risk than other industries … Average nominal costs of capital over the 1982-2005 time period were 16.25 percent for biotechnology firms.


  1. IMO there is so much risk and upfront capital costs with most biotech firms, you could probably connect any sector’s sensitivity to public biotech :)

  2. Anthony Staines says:

    The sector looks like the internet sector circa 1999. If you have a great deal of money, or better yet, a great deal of someone else’s money, there can be few surer ways to lose it all than biotech startups!