How to build a billion dollar pharma company
There are 2 types of pharma companies:
- Innovators: Discover new drugs, get them clinically approved, produce and sell them (they have exclusive rights under patent protection for a limited period of time)
- Generics: Produce and sell drugs after their patents expire, usually competing on cost and distribution.
Let’s focus on “Innovator” companies. They have 2 components to them:
- Infrastructure: R&D, testing, production and distribution
- Business: The portfolio of patents that they hold
Every competitor has for the most part figured out “Infrastructure” so the real place to compete is by becoming the best at “Business”. One can look at this function like picking stocks. The business function takes bets on molecules that are most likely to become a patent. Patents are assets, in that merely owning them increases the company’s value
The way to bet on molecules are:
- Internal R&D: Build the best research team and hope that they discover new molecules that are effective against some disease and can pass clinical trials
- Acquire molecules: Purchase rights to molecules that are proven to be effective against some disease and put them through to clinical trials
As hustlers with the startup grindset, we’re more interested in “acquiring molecules” to reach scale faster. Believe it or not, the cures of many diseases are sitting in obscure universities across the world.
So here’s the genius strategy that Martin Shkreli, Vivek Ramaswamy and potentially others used to build billion dollar pharma companies:
- Map out the landscape of pharma innovation. Universities, biotech startups, conferences, etc. are all potential places where multi-million dollar molecules sit.
- Build a team of “dealmakers” ie, specialists who travel the world to identify & evaluate molecules. If it makes business sense, they negotiate acquiring rights or licensing deals.
- Integrate the molecule into your development pipeline. This includes further research, development, clinical trials, and eventually, taking the drug to market.
This works because:
- Speed: Acquiring advanced-stage molecules can significantly shorten the time to market
- Diversification: Diversify your drug portfolio quickly, spreading risk across various molecules and therapeutic areas
- Cost-Effective: Outsourcing early-stage R&D is better than developing everything in-house, allowing the you to allocate capital to later-stage development and marketing