CAA for drugs

Creative Artists Agency (CAA) is the biggest and most powerful agency in Hollywood/entertainment industry, representing everyone from Tom Cruise to Steven Spielberg. One of the most interesting things about CAA: they created and assembled creative projects (actors, script writers, directors), not just representing individuals. Not only was packaging a distinguishing factor from other established talent agencies at the time but was key to CAA’s rise to power shifting Hollywood’s power balance from studios to talent/the agency.

Biotech is a package-and-sell business (take bio insight -> package asset(s) + human data -> sell). Most of the time, value creation happens in the form of Pharma M&A. And this model doesn’t appear to be working super well… Can we improve/make it perform better? How can you shift leverage towards biotech?

Post-ZIRP, people are now catching on to an unfortunate truth: the economics of biotech are broken. $XBI has been flat for over a decade- creating a new drug is simply not that valuable today.

The realities of the industry:

  1. Long, regulated timelines + fixed unit costs per drug make it difficult to accrue value as quickly and cheaply as tech

  2. Steep cost of later stage development + commercialization for larger indications require reliance on Pharma (no leverage given they are the only customers)

*Not including the high risk nature of drugs themselves here. Underwriting the odds of a successful drug seem similar to the odds that the average saas startup will become the next Meta or Stripe :)

Though there are obvious intrinsic costs that differentiate biopharma value scaling but commercial drugs throw off significant revenue (comparable or more than many software companies). So why is bio struggling? 1- Too many biotechs with 1-2 drugs. Private money spread thin over many small bets, not large pools of long capital over fewer companies with more drugs. 2- Lack of later stage funding options creates a power imbalance. Biotech-Pharma reliance for late stage dev & commercialization. Biotechs are built to flip to Pharma- rather than the commercial market of a given drug, biotechs are underwritten to the market of Pharma acquisition. Most biotechs can’t raise enough money to go-to-market themselves which leaves them with only one option.

Without shifting this relationship dymaic, biotechs have limited leverage (and options for later stage independence). Creating leverage in this model is not what most people think it is…

Most people talk about creating leverage for biotech by:

  • Pioneering new technology (novel modalities, targets)

  • Creating proprietary information moat (tech-bio approach)

But this doesn’t inherently change the fundamental dynamics of biotech-pharma reliance.

Proposal: Leverage for biotechs could exist as…

  • Viable path to independent commercialization

  • Building a critical mass of assets (resiliency against single binary clinical outcomes)

What would be the equivalent of CAA for biotechs? Integrating and packaging something different to shift the power balance and get leverage… Right now, biotechs are basically selling IP + human data. Perhaps it is packaging a pipeline? Perhaps it includes talent/team for that specific drug + decision-making leverage so as not to be overridden by Pharma? Is it integration? Some pipeline of clinical + manufacturing + drug package?

Create and launch biotechs with critical mass of assets around a bio thesis?

Who are you trying to attract with the build & flip biotech idea? Can you do it as well as CAA? others have tried (roivant, nimbus, etc) by innovating on company structure. What are you claiming? Or maybe there is no innovation here. Just the analogy is correct. Building a biotech is distinct from building a drug company. Biotech = CAA model.