Biotechnology companies spend a significant portion of their revenues on research and development (R&D). For example,...
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Biotechnology companies spend a significant portion of their revenues on research and development (R&D). For example, Gilead Sciences Inc. (NASDAQ stock ticker symbol GILD) spent 40% of its revenue on R&D in 2019. When research results on the early-stage drug development projects are favorable, Gilead commits additional resources to the next stage of product development. If research results are not promising, Gilead stops funding the project. Gilead, by selectively investing in those technologies that prove to be the most promising, exercises its option to develop a product. In that sense, for Gilead, investing in R&D is like: I a call option a put option a combination of a call option and a put option None of the above Biotechnology companies spend a significant portion of their revenues on research and development (R&D). For example, Gilead Sciences Inc. (NASDAQ stock ticker symbol GILD) spent 40% of its revenue on R&D in 2019. When research results on the early-stage drug development projects are favorable, Gilead commits additional resources to the next stage of product development. If research results are not promising, Gilead stops funding the project. Gilead, by selectively investing in those technologies that prove to be the most promising, exercises its option to develop a product. In that sense, for Gilead, investing in R&D is like: I a call option a put option a combination of a call option and a put option None of the above
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