There’s been an interesting emerging trend in biotech lately: PE-style buying and aggregating of clinical stage drugs.

Up till now, here have been two consensus routes to start a biotech:

  • Traditional east cost biotech VCs incubate or launch companies

  • Generalist biotechs providing even earlier seed funding to founders

Much rarer but there are a handful of new companies cropping up: backed by a warchest of funding upfront, they license or are launched with a pipeline of clinic-ready or close to clinic-ready in a given disease area. I find these quite interesting and suspect they could give way to a new phenotype of biotech in the future.

Why is this interesting & distinct from other mega-round biotechs launched?

The PE-style biotechs integrate elements of both, current consensus drug startups and portfolio building Pharma companies.

Biotechs and Pharma are distinguished by many things: biotech = discovery/development of drugs most of the time while Pharma = discovery, development, and sales of drugs. Partly due to sheer size, commercial activities, etc, Pharma and biotechs drug pipelines look very different.

Generally, biotechs are created around a singular narrative (like any other startup)! Developing X technology or Y drug based on niche expertise. Even platform companies boil down to a singular focus from which all of your clinical drug candidates are derived. Pharma’s are the opposite. They have many more drugs in clinic in parallel, and each drug is individually selected for its own value/promise/biological support, not necessary to have an overall narrative tying every asset together.

There are many bets on the first large scale bio company being driven by superior technology alone. I’d argue that limitations of biotechs today are largely structural, not technology-limited [1]. That makes this an extremely interesting playbook to seed a Pharma startup (which I define as a drug development startup with path to revenue and substantial R&D pipeline within 7 - 10 years).

Building a Pharma startup: Thoughtfully aggregate assets in a reasonable therapeutic cluster = Start off with a pipeline and march towards R&D + commercial ops

Exactly copying and pasting PE playbook from other industries is unlikely to work in biotech, given the unique risks with drug development and regulatory hurdles. That being said, for specific assets (and those clever enough to handpick and aggregate diamonds in the rough), it’s a creative way to start a drug company [2] that could position fledgling companies towards sustainability (financially not the environmental).

I’m less interesting in systematizing finding and flipping assets (biology & serendipity can’t *yet* be scaled reliably). I’m more interested in the aggregating as a different starting point for fledgling drug companies than the two consensus options.

There are several appealing things:

  • Critical mass of assets = you’re building a portfolio of drugs and make R&D decisions as such (without as much existential threat)

  • North star = building a drug company, not a single product [3]. Still focused on a single or related therapeutic areas but everything you build is towards company resiliency (R&D activities, clinical development & commercialization capabilities, type of capital)

[1] why technology advancements don’t indicate a ‘bucking’ of the trend today. Constraints are macro (cost of drug dev, competition for limited late stage dollars = no leverage for any biotechs). most novel techs get eaten up by Pharma anyways. how do we create better environment for small companies to scale (not just the anomalies?)

[2] You could argue companies like Roivant, Nimbus do this. But I would still categorize these differently. Nimbus, like biotechs we discuss above, are a platform focused company that spins out its native assets. Roivant is a closer example but more focused on corporate structure finagling and selling rather than building into a Pharma itself.

[3] I realize this may be antithetical to conventional Silicon Valley startup wisdom. But perhaps it’s time to delineate which pieces of advice are actually relevant to an entirely different indusrty and business. Biology is unpredictable and enduring drug companies need to build resiliency towards potential (and perhaps inevitable) failures.