Correspondence: Laura Heinonen, Turku School of Economics, Department of Marketing, Rehtorinpellonkatu 3, Turku 20500, Finland. Tel: +358 2 481 4485; Fax: +358 2 481 4299; E-mail: laura.h.heinonen@tse.fi

¹is Research Associate in International Business at the Turku School of Economics. She holds a Master of Science degree in Economics and Business Administration. Previously she worked in the business-development division of a Finnish biopharmaceutical company and is currently working on her doctoral thesis, the aim of which is to assess the role of public funding in the development and performance of biopharmaceutical companies.

²is Assistant Professor in International Business and coordinator of the Global Innovation Management Master's Degree Programme at the Turku School of Economics. She holds a Doctor of Science degree in Economics and Business Administration. Her recent publications include articles in the European Journal of Innovation Management and Creativity and Innovation Management, and a book titled Managing and Marketing Radical Innovation; Marketing new technology (2008, Routledge).

Received 19 May 2008; Revised 19 May 2008; Published online 24 June 2008.

Abstract

The risks faced by biopharmaceutical companies during the process of drug development are multifaceted and complicated. Furthermore, resource intensiveness and the long time perspective force them to rely on external finance. This study describes the risks in the industry along the biopharmaceutical development process and evaluates how public investors take these risks into account in their investment decisions. The empirical study focuses on Finnish public investors. The data consists of both interviews and secondary sources. Biopharmaceutical development is divided into three stages (discovery, development and commercialisation), and the main risks at each stage are identified. The results show that the risk the investors are willing to take is reflected in the stage of the product development process they invest in. Finnish public investors tend to avoid taking commercial risks and thus invest in the early stages of development where there are mainly technical risks involved. They are increasingly emphasising risk management, and they are also keener to emphasise the importance of commercialisation. Paradoxically, however, commercialisation efforts are generally not supported financially.