Upstream biotech firms and downstream pharmaceutical firms often form alliances to explore discovery opportunities and exploit new product specificity in new product development. Although the performance implications of such alliances have been investigated, research has not offered insight into how prior experience of R&D project suspensions and failures of the partner firms of such co-development alliances influences upstream partner financial returns. We develop and test hypotheses that suggest that partner’s prior experience of R&D suspensions and failures changes the costs and benefits accruing to upstream partners and that the effect of such experience is influenced by the exploration-exploitation orientation of the alliance at the time of formation. We use an event study method on a sample of 104 biotechnology firms alliance formation activity over an eight year period, to explore the alliance valuation impact of prior experience of R&D suspended projects, project failures and alliance exploration-exploitation. We find that failure and suspension experience changes the abnormal returns achieved by co-development alliance formation in significant and unexpected ways. Project suspension experience of upstream partners has a positive impact upon alliance valuation, their own failure experience has a negative impact, whereas the failure experience of their alliance partner can have the opposite valuation impact. The Exploration-exploitation orientation of the alliance moderates these relationships.