can a liquid market save your life andrew metrick university of pennsylvania sean nicholson cornell introduction biotech and pharmaceutical firms invest higher sales in r&d 19 than any other industry new technologies are the catalyst behind increases health care costs benefits if capital markets function perfectly financing should have no affect on quantity or quality drugs developed research question does access to do effects operate at wide company specific level firm is financially constrained there wedge between internal external cost funds demand supply 3 2 1 r source hubbard 1998 how financial constraints s drug development standard prediction initiate fewer projects funded relative high npv considerations rainy day fund regulatory may prevent adjustment extensive margin ie delay so occurs intensive eg spend less per project alliances incomplete contracts commit resources promised companies took full advantage open window 2000 as total us
