Founder-Led Biotech Embraces 'Start with the End in Mind': Commercial Strategy as Core to Scientific Innovation

Amid economic cycles fraught with uncertainty, returning to the fundamentals of business has gradually become a mainstream consensus.

As “raising funds with PowerPoint slides” has become the punchline of after-dinner jokes, early-stage companies across all industries must begin to re-examine themselves and face the scrutiny of commercial reality:

These typical commercialization issues are like imaginary opponents in boxing practice when founders write their business plans: they can be easily dodged, allowing you to pummel them head-on.

In most cases, biopharmaceutical startups are built around one or several cutting-edge technologies pioneered by their founders, exhibiting a strong research-oriented character. While founders can effortlessly guide you through the preparation of a compelling grant application for the National Natural Science Foundation of China (NSFC), they often lack the capability and confidence to formulate long-term commercialization strategies.

A biotechnology company’s business model directly determines the trajectory of its long-term success. An exploratory mindset of “crossing the river by feeling the stones” is clearly irresponsible to both the team and investors. This imposes a dual obligation on founders—financial return and personal accountability—to establish a sound plan for future commercialization from the very inception of the company.

If we treat the biopharmaceutical business cases of the past decade or so as a large sample, and then strip away layer by layer the dry data charts, contractual agreements, and patent claims, we find that there are essentially only three types of business models for biotech companies:“I’ll teach you how to do it,” “I’ll make it, you sell it,” “I’ll make and sell it myself”。

Technical Collaboration (I Teach You How to Do It),License your platform to biopharmaceutical companies and provide related technical services, enabling them to leverage your technology to create, develop, and commercialize pharmaceutical products.

Asset Creation and Transfer (I Develop, You Sell),This involves leveraging your platform to establish a pipeline of proprietary assets, ranging from candidate compounds for innovative therapies to prototype formulations for drug delivery. Once an asset has achieved scientific proof of concept, it can be licensed to biopharmaceutical companies, which are then responsible for developing it into a product that secures regulatory approval and reaches the market.

Product Development and Commercialization (We Develop, We Sell),Namely, to create one’s own pharmaceutical assets and take responsibility for the entire development process through to commercialization.

Wristband Sales, remains the most reliable revenue-generating strategy under any economic conditions.(Of course, the prerequisite is having real influence.)

Once your technology matures to the point where it can reliably contribute to pharmaceutical R&D projects, you can generate immediate and substantial cash flow by out-licensing your platform and providing related technical services to projects at larger, better-capitalized biopharmaceutical companies.

This business model is particularly well-suited for founders with relatively limited capital or lower risk tolerance.

What is often overlooked is that the business model of technological collaboration carries an even greater hidden benefit.

Imagine this: at an industry conference, several attendees share the latest insider information during a coffee break.

“Have you heard? XX’s technology platform has been licensed to YY Pharma. It seems quite credible, as the upfront payment ratio is reportedly quite high.”

The speaker meant no harm, but the listener took it to heart. An institutional investor standing nearby immediately pulled out their phone and quickly searched their contacts for the right person to reach out to.

If you can sign a technical collaboration agreement with a well-known biopharmaceutical company in the early stages of your company’s establishment, it will not only help rapidly validate your platform and gain the trust of investors and biopharmaceutical industry professionals, but also significantly enhance your credibility and negotiating leverage.

In 2022,Saiyuan BiowithQilu Pharmaceuticalhas entered into a global strategic collaboration agreement for the development, manufacturing, and commercialization of universal CAR-iMac cell therapy products derived from iPSCs. Under this agreement, Saiyuan Bio will receive an upfront payment, milestone payments, and post-commercialization sales royalties from Qilu Pharmaceutical through technology transfer; in return, Qilu Pharmaceutical will be authorized to leverage Saiyuan Bio’s proprietary technologies to develop cell therapy drugs.

Under a technical collaboration model, your partner will assume all financial risks. Regardless of whether the project ultimately yields an approved pharmaceutical product, you will receive upfront licensing fees, service revenue, and payments for completed preclinical milestones. Although your partner will own all pharmaceutical assets and marketing rights arising from the project, you will still earn a small royalty on future sales of these products.

If you possess not only the expertise but also a team equipped with extensive resources, know-how, and long-term strategic vision, your plan will undoubtedly involve upfront capital investment to develop proprietary assets and grant exclusive licenses to larger biopharmaceutical companies.

Sharing the labor- and channel-intensive tasks of Phase II and III clinical trials, manufacturing scale-up, regulatory approval, and commercialization offers clear, tangible benefits. This business model also provides many profound advantages:

1. Obtain non-dilutive capital through asset divestiture

2. Validate internal technologies through external verification

3. Establish long-term, high-quality, and highly specialized complementary partnerships

A recent notable example isDuality Biologics, the company announced in July 2023 that it would collaborate withBeiGeneReached an agreement on an exclusive option and licensing collaboration. BeiGene will obtain global development and commercialization rights for a preclinical investigational ADC product targeting solid tumors. Duality Biologics will receive an upfront payment and be entitled to option exercise payments. Based on the R&D progress, regulatory approval milestones, and commercialization milestones of the collaborative research projects, Duality Biologics is eligible to receive additional payments of up to $1.3 billion.

Of course, such collaboration can also be carried out between research institutes and the industry.

September 2023,Kelun-BiotechAnnounced the collaboration on the bone-targeting radiopharmaceutical drug conjugate (RDC) TBM-001 withAffiliated Hospital of Southwest Medical UniversityKelun-Biotech has secured an exclusive license agreement, obtaining global exclusive rights to the TBM-001 project developed by the Affiliated Hospital of Southwest Medical University. In return, the hospital will receive a total of RMB 38.5 million in upfront payments and development milestones.

By negotiating appropriate transaction terms, it is possible to recover the majority of the initial cash outlay for asset acquisition through upfront payments. Meanwhile, milestone payments ensure a certain proportion of positive return, even if subsequent commercial performance falls short of expectations.

Compared with technical collaboration, a key advantage of out-licensing is that, if successful, it yields a higher return on investment, along with higher upfront payments and milestone payments. Under such agreement frameworks, the future royalty rates on sales are also typically higher.

"Although this may sound self-evident, there is no reason to assume that the money earned through skill alone would be equal to the money earned through both skill and resources."

Tactics, Resources, Strategy. Favorable Timing, Geographic Advantage, and Human Harmony,

Much like an exciting round of Guandan, if your hand is not only strong but also complete, you stand to maximize your returns. By choosing to independently develop pharmaceutical assets, you retain full ownership of those assets. This business model requires substantial investor support, as well as the stable revenue streams generated from the team’s accumulated technical collaborations and asset out-licensing agreements.

In most cases, such startups establish comprehensive commercialization strategies and secure supporting resources right from their founding stage. Once the first move is made, you have already calculated the probabilities of each subsequent move and devised coordination strategies with your partners.

For example, established in 2017Reindeer Bioin the early stages of its establishment, withInnovent BiologicsCo-developed a fully human BCMA CAR-T therapy for multiple myeloma. The product (Icilucabtagene Autoleucel Injection) advanced rapidly: it was granted “Breakthrough Therapy Designation (BTD)” by the NMPA in February 2021, its New Drug Application was accepted by the NMPA in June 2022, and it received marketing approval in June 2023. Through the collaborative development between Legend Biotech and Innovent, the rapid market launch of Icilucabtagene Autoleucel Injection not only delivered predictable financial returns for both parties but also paved the way for Legend Biotech’s listing on the STAR Market.

Looking back at the six-year development of Caribou Biosciences, it is hard not to believe that every step was carefully mapped out from the very beginning.

Of course, not every biotech founder starts with a “joker, joker, four aces” hand.

Most early-stage biotechnology companies begin their commercialization journey either through technological collaborations or via asset creation and divestiture. Tailoring strategies based on one’s own resources and market dynamics represents the norm within the market’s normal distribution.

The former can generate revenue more quickly and carries lower risk. The latter requires greater investor capital and a higher risk tolerance, but if successful, it can yield better returns. Furthermore, in a highly competitive landscape, you may need to first demonstrate technical superiority through your own pharmaceutical assets.

A hybrid business model that combines two approaches has become the choice of an increasing number of early-stage companies. For example, founded by a team of professors from Peking Union Medical CollegeZhongji Zhiyao, withNaondaandYuanmai CellCollaborate on technologies for the analysis and characterization of viral vectors and the engineering of adenoviral vectors, while applying these technical platforms to its core focus on classical gene therapies mediated by viral vectors.

Once your company operates more maturely, achieves greater success, and secures additional funding, you can gradually transition to a model of independent product development and commercialization.

In addition to having a thorough and objective understanding of their own technology, products, market environment, and competitive landscape at the inception stage, founders’ clear awareness of their team’s capability boundaries also helps the entire team make accurate judgments about the commercialization model from the outset. Beginning with the end in mind is not only a reflection of a founder’s strategic vision but also demonstrates the corporate entity’s unlimited responsibility toward its team, investors, users, and patients.