Some things tech folks should know before building in bio

If you're a tech person going into bio (generally pharma of some variety), it's common to wonder why you can't build SaaS and be successful.

It's generally because pharma revenues are driven by drug sales - the money is in the molecule, so you must own a piece of it.

Between 2010-20, the top-20 big pharma companies launched 35 drugs that generated >$1b in sales - these are the blockbusters moreover, big pharma blockbusters together generated $500b of cumulative revenue (data from Bruce Booth 's Atlas Venture 2023 review):

What's more, just 7 of these 168 drugs were responsible for generating 28% of all top-20 pharma company revenues between 2011-20.

This is venture-style maths.

So if you're working on tech for drug discovery, you need to own the molecule to make the big bucks.

What's also wild, is that historically, public mid-cap biotechs see their stock price fall -10% 3 months after their drug launches and between -20-30% 12 months after launch.

So on average, public markets by default hate your new drug. Why might that be? Reasons could include a) you don't have the money to properly market the drug, or b) they don't like the indication and the attached opportunity. Now, assuming your data is good because you got the approval, this reaction is like having investors de facto not like your product. Crazy.

This chart too is a great primer for new tech founder entrants in bio:

- 43% of new drugs are launched by top-20 pharma cos

- but only 28% of those were actually developed by said pharma cos...65% were brought in from the outside. but where?

- 62% of those molecules were M&A.

As you all know, overall approval probability is extremely low - so anything we can do along the value chain to move that number makes a difference.

This chart shows a bunch of high profile failures, which are part of the biz.

With the JPM conference coming up in 10 days time, a recent set of big deals happening, and the fact that there are 15 pharma's with >$15b of dry powder on their balance sheets that they can mobilise, we can expect a bunch of acquisitions to happen in 2024...

Here's the link to the full youtube video: https://www.youtube.com/watch?v=0DIgT32bFV4