Why have so many legitimate smaller biotechs sprung up and thrived? I stumbled this question on r/AskScienceDiscussion, but I'd like to ask it from a microeconomics or competition standpoint.
Why can't Big Pharma accomplish what legitimate small biotechs have? Unquestionably Big Pharma has more money and can corner the market. Thus how could smaller biotechs have dawned at all? E.g. Regeneron collaborates with with Bayer and Sanofi. I'm not referring to potential pump-and-dumps like Moderna.

In Q1, Regeneron made over \$281 million from its Bayer partnership, primarily stemming from Bayer's sales of Eylea outside the U.S. It made nearly $247 million from its Sanofi collaboration, with immunology drug Dupixent the primary contributor.

FDA approved Neurocrine Biosciences`s valbenanzine in 2017. Neuocrine has collaborated with Eli Lilly and Company in 1996, GlaxoSmithkline in July 2001, Pfizer in Dec 2002, AbbVie Inc in 2010. But why didn't these Big Pharmas acquire Neurocrine?
On Jul 13 2020, Amgen doubles down on BeiGene investment. On Jul 15 2020, Nabriva inks Sivextro distribution with Merck.
On Aug 6 2020, FDA lets NeuroRx, Relief Therapeutics test RLF-100 in COVID-19 patients, but why haven't Big Pharma bought out or hostilely taken over these biotechs?
In R&amp;D, small biotechs hold their own against big pharma | BioPharma Dive

Despite spending billions on R&amp;D, big pharma doesn't punch its weight in discovering the new molecules that eventually make it to market.
Instead, it's often the smaller biotechs which are responsible for uncovering promising new therapeutic approaches, an industry maxim backed up by an April report from research group Iqvia.
I would prefer to take a broader tact with this: Why aren't all firms bought at a smaller size? Why are there any small R&amp;D firms?
One answer is related to uncertainty.

Some firms look like they will be profitable, but they are not. Perhaps their research fails: they cannot get approval, the drug doesn't work, or it has severe undesirable side effects. This uncertainty is part of the business.
Firms produce signals of their quality. The signals reduce uncertainty and it becomes clearer which startups will be profitable, increasing their prices. Owners will be less willing to sell, and other buyers will make competing offers.
The increased price of the firm leads to a larger asking price, so any net profit of purchasing the new firm is reduced.
Since the profit margins are reduced, the remaining uncertainty leads to continued hesitation in purchasing.
This process continues until the small startup is no longer small enough to buy.

Sometimes, a profitable firm can be identified with sufficient certainty before the final step 5, and that is where you see purchases.