ORCID
0009-0001-6855-1824
Date of Award
4-30-2024
Degree Name
Doctor of Philosophy (PhD)
Degree Type
Dissertation
Abstract
Big pharma is increasingly using acquisitions to fill their R&D pipelines and the proliferation of the biotechnology industry has created a thick market of innovative target startups. This dissertation analyzes the dynamic equilibrium effects of biotech startup acquisitions by big pharma on drug innovation and entry. Using a novel dataset on 175 acquired startups from 2000 - 2018, I document several new facts regarding the R&D outcomes of acquired drug projects and entry behavior of startups in markets where acquisitions occur. Motivated by this evidence, I build a dynamic oligopoly model of the pharmaceutical industry featuring big firms and startups that endogenizes drug development, startup acquisitions, product market competition, and entry. Firms select on unobserved project quality at each phase of R&D and into acquisition, allowing higher quality projects to reach later phases of R&D and be a more likely acquisition target. Counterfactual simulations focused on oncology markets suggest that banning startup acquisitions leads to a decline in entry among low-quality startups, who benefit most from lower R&D costs of their acquiring big firms. This and higher selection on quality during R&D among startups results in a decrease in the number of projects that reach the product market and an increase in their quality. Both of these effects are generally small in magnitude. This result directly informs recent discussions among regulators who have expressed concern about the implications of startup acquisitions for market concentration and innovation in the pharmaceutical industry.
Language
English (en)
Chair and Committee
Stephen Ryan
Recommended Citation
Wabiszewski, Hayley, "Essays on Industrial Organization" (2024). Arts & Sciences Electronic Theses and Dissertations. 3068.
https://openscholarship.wustl.edu/art_sci_etds/3068