"History is hard to know … it seems entirely reasonable to think that every now and then the energy of a whole generation comes to a head in a long fine flash, for reasons that nobody really understands at the time—and which never explain, in retrospect, what actually happened." -- Hunter s. Thompson, Fear and Loathing.
There’s something unique happening in biotech right now. Some once in a generation moment where low cost of capital, a century of maturing discoveries, and a global pandemic collide.
Figuring out exactly what is happening beyond regurgitated headlines remains difficult. Even outside of vaccine progress— rate of new company formation, new discoveries, and cash inflows in the field are all growing at breakneck pace. We literally have no playbook for what the next decade of biotech will look like.
There is no better time to get into the field. We’ve written the following guide to take someone from a weak recollection of how the mitochondria is the powerhouse of the cell, to being conversant enough to navigate the field with confidence. To be clear, this isn’t a guide on how to build a biotech (Kolchinsky already wrote that), or how to be a biologist (need a PhD for that one)— but to get from 0-60 in understanding the field as quickly as possible.
To go deeper, The Eighth Day of Creation is a fantastic book that tells the story of modern biology from the discovery of the double helix to the sequencing of the genome. It’s long, dense, and lovingly crafted— everyone reads at some point— but if you find yourself getting stuck, its not critical to moving forward. Genome serves as a great booster or alternative, providing a more modern history of the genome.
Now before we continue, it’s important to delineate between biotech and healthcare. While the two fields are intimately tied, an understanding of the practice of any of the two does not necessitate an understanding of the other. You should figure out which of the two you care for— and learn it before trying to understand the nuances of where they meet.
If you were a university student learning biology— you’d next go from the intro textbooks to a series of more and more complicated courses where you learned how those basics were wrong in weird and nuanced ways before stumbling onto one nuance you loved enough to build your career around.
If you’re looking to become a biologist, this is the correct way to learn. That is not our goal here, so let’s get moving.
Understanding industrial biotech requires reading a hell of a lot of literature. Reading literature is a skill, the only way to get better at it is to read more literature. We’ll likely go into how to read a paper well at a later date— but for now pick a topic of interest and track it. Follow Nature, Science, Cell, PNAS and NEJM or bioRxiv and medRxiv. Pubmed publishes a daily index of trending papers, and Meta can provide interesting supplementary feeds on particular topics. The 80/20 rule applies here, aim for big ideas, concepts, and cross field connections— exact details will follow later.
Big enough government
Biotech is a regulated industry, from top to bottom. Understanding the regulatory environment is critical in any real understanding of how the industry moves.
FDA is a progressive and a relatively easy to work with agency. This isn’t sarcasm, nor has it always been the case. The FDA isn’t Dikembe Mutombo trying to swat away shots on net - rather, they’re just trying to stop Shaq from breaking the backboard.
It’s worth understanding how a drug gets approved. FDA, unlike many federal agencies, is extremely transparent and well documented. They furnish a treasure trove of information regarding clinical and preclinical trials, regulation, long form advisory committee briefs, and a variety of open data sets.
If you find yourself wanting to understand how we got here— Hilt’s Protecting America's Healthis also a classic. You’ll also want to understand the changes the agency experienced under Scott Gottlieb, and its modernization around Real World Evidence. STAT News has great coverage of both.
For understanding clinical trials— CT.gov reports active and completed trials. The European equivalent is the CTR. All are query-able to various degrees. It’s worth your time to dig through a few trials to understand, across phases, how data is reported, patients recruited, and studies conducted. Learn about inclusion/exclusion criteria and why they matter, what a p-score is, and why statistical power is one of the most important concepts in the field.
Industrial biology has a rich history of peanut galleries of various quality. Some of the higher quality ones are:
STAT — free, premium at $29 a month is often worth it
The truth is outside of STAT and few others, most of these are just grinding republished press releases. Find the writers you like and stick with them, you’ll get 99% of what matters. What matters here is getting a gut sense of the players and firms making up the industry.
We would be remiss to not recommend Kolchinsky’s Entrepreneurs guide to a biotech startup. Perhaps the most widely read industrial playbook in existence, it has been critical to both of our and hundreds of others careers.
Deep Dive: Biotech Foundries
A number of household names in therapeutics are the product of a small subset of biotech investors uniting with leading academic institutions, commercializing advances in research at breakneck speeds. This incubation process doesn’t have a clean parallel in tech investing (Atomic may be the only close parallel), so it’s worth digging in.
Firms like Flagship Pioneering (Moderna, Denali, Editas), Third Rock Ventures (Insitro, Thrive, Foundation Medicine), Arch Venture Partners (Illumina, Alnylam, Juno, Beam), Atlas (Alnylam, Momenta, Intellia) are what we call newco creation funds— investors that are primarily building and funding new firms internally.
These firms often operate with a revolving door system, with key positions at their incubated companies filled by experienced dealmakers and ex-big pharma vets with a strong understanding of their industry’s pain points and emerging trends. Within any given firm, there are often a number of ideas being incubated in parallel, and a partner may be serving as the "fractional CXO" of 6-10 companies at once.
They’ll cycle EIRs (entrepreneurs-in-residence) with notches on their belts into companies to serve as founding executive teams and build the base for institutional fundraising rounds or public market launches - sometimes, the process is EIR-led (ie. a given person wants to take an idea to market), other times it’s tech-driven, and an EIR is matched to the problem space based on their background and expertise.
In most cases, a small syndicate of venture-creation specializing firms will fund the company to its Series A or B, and maintain ownership of ~80% of the company, with the remainder reserved for executives, employees, and new investors, with a goal of maintaining ~50% ownership post IPO.
A few labs, especially out of Harvard and MIT and southern California, are factories for churning out commercializable/ venture-creation friendly IP; it’s no surprise that Boston and San Diego are the world’s biotech dualing Meccas as a result.
The Langer lab has touched almost every branch of nanomedicine imaginable, leading to the creation of over 40 companies and influx of a few billion into the biotech ecosystem (Moderna, Momenta, Kala, Lyndra, to name a few).
The Church lab holds a similarly exalted status in the world of genomics and synthetic biology, leading to the creation of Dyno Therapeutics, Editas, Gingko Bioworks, Nebula Genomics, Poseida Therapeutics and many more.
The Liu lab is quickly approaching similar levels of prominence over time while riding the wave of the gene editing revolution, based on involvement in the founding of Beam, Editas, Prime Medicine, and more.
Of course, we’d be remiss not to mention recent Nobel Laureate and CRISPR pioneer Jennifer Doudna and her growing family of gene editing co’s, including Caribou, Intellia, Scribe, Editas, CRISPR Therapeutics, Mammoth Biosciences and more.
All are worth watching, and make up a critical mass of new company formation, exciting new modalities that could change the way we handle diseases today, and of course, flow of investment dollars into the space.
Up Next: Shak and I intend to do a few more of these diving into mental models, specific companies, and frameworks for understanding what is happening within the industry. Feedback is very much appreciated.