High risk, high reward. Why would anyone take a higher risk for a lower reward? Pharmaceutical companies in the S&P500 are so profitable because of barriers to

High risk, high reward. Why would anyone take a higher risk for a lower reward? Pharmaceutical companies in the S&P500 are so profitable because of barriers to entry, massive capital requirements, and a whole biotechnology industry feeding them acquisitions. Biotech startups going under with zero revenue after raising hundreds of millions of dollars from VCs and institutional investors is a regular occurrence. Since the brunt of the pure research is publicly funded and other investors chasing ROI take care of much of the R&D risk, big pharma companies benefit a lot from other people's money just for providing exit opportunities for smaller companies.