From CRO to AI drug development: How long can the story of the big platform be told?

Bringing the time back to December 2015, when WuXi AppTec, which was still a Nasdaq Chinese stock company, announced after the close of a certain day that it would complete the privatization for US$3.

After thinking about it, the brokerage elites suddenly discovered that BAT in the vertical field seems to be a good analogy.

Platform: Sexy entrepreneurial story

The platform has become a sexy concept thanks to the blessings of major Internet companies (this term seems to be one of the most frequent black words of major companies).

However, in the biomedical industry, especially in China, the platform concept still seems to have many fans.

A super large platform is born in the biomedical industry? difficult

At present, domestic biopharmaceutical companies can catch up or have built up the concept of platform.

1) R&D companies with various types of small molecule or macromolecule drug discovery technologies.

2) Companies that have the potential to explore and discover new targets.

3) Companies with strong strength or unique technological advantages in pharmaceutical dosage forms, crystals, etc.

The platform is a good story, the business is scarce and sexy, the future income is unlimited, and even the current spending and spending can be more tolerated.

Frankly speaking, it is unlikely.

It can be seen that, regardless of China or the United States, all current Internet platforms are basically to C services: based on the traffic brought by large-scale and massive consumer groups.

Large-scale business cannot be done.

Mainly because the chain of innovative drug research and development is too long.

Focusing on new drug discovery technologies, or discovering new targets based on new omics technologies, can improve the success rate of new drug development, which seems to be a better selling point, but the problem still lies in the lengthy research and development chain and high late-stage investment.

If the scale is not increased, the monopoly cannot be achieved, and the true benefits need to be verified in a long later stage.

Services or products are nothing more than these two roads

Brand-new and scarce technology has its own value, but this value needs to grow with its own matching business model, and it must have rational expectations.
Tencent e-commerce has never been able to play, and Alibaba Social has made a well-known joke.
The Internet giants who took the wrong script cannot go on.
If biomedical companies insist on learning from others to be a platform, the result is bound to be a Handan toddler.
, Dong Shi Xiaofeng.

In view of this, for biopharmaceutical companies, no matter what slogan they shout at the beginning, the realistic path can only return to two in the end: either do service or do product.

If you provide services, you must continue to expand the scale all the way.
This is the path chosen by the CROs who started in the early years.
It should be noted that the scale expansion of these CROs, without exception, is the start of a single business (chemical synthesis, pharmacokinetics, clinical, etc.
), through business types, including customer types, diversification to achieve expansion (WuXi AppTec even The tentacles extend to the clinical business), and the period will inevitably include frequent mergers and acquisitions.
The logic behind this has once again proved that the long and complicated process of biomedicine research and development has a limited value ceiling for a single business.
One trick is impossible to eat everywhere.
If you want to scale up, you have to open up new business.

But if you choose to do services, valuation becomes a problem.
Revenue, profit, growth rate, and market size are all there, and there are so many level-one and two-level benchmarks, and the competitive pressure and industry structure of the first mover are also obvious.
For new companies that are not too large after their establishment, even though they have some exclusive technologies, they still lack the confidence to call out high valuations.
The bigger trouble is that it's okay to say that millions of dollars in revenue can reach tens of millions.
If you are going upward, you will have to grab food from the big guys.
This business is not easy to do.
How to do?

As a result, a new generation of companies that started with services, at a certain stage, have begun to transform into products and develop new drugs by themselves.
This is very understandable.
Once transformed into a new drug research and development company, the applicable valuation logic will be completely different.
You no longer need to stick to tedious financial indicators, but instead judge by the number and progress of pipelines.
The ceiling is opened instantly, and the money can be burned.
No need to manage a huge team.
This may be an important motivation for the new generations such as Tianyan, Pioneer, Biocytometer and others to transform into new drug research and development companies.

Of course, if you have the ability to provide services to a scale of one billion or several billion, you can also set up a huge incubator to make innovative drugs at the same time.
Anyway, the domestic capital market does not take the risk of conflict of interest seriously.

AI drug development: is it a platform or a valuation?

In fact, in the past two years, the domestic biomedical industry's main platform concept startups have indeed fallen a lot, with one exception-AI drug research and development.

AI drug development is actually not a new track.
If it is said that in addition to the step-by-step progress in technology, there have been some new changes in this track in recent years, it may be that Internet giants and TMT funds have been rushing in.
Under the flood of water, companies that have attached AI drug research and development have been energetic all the way, and the limelight is in full swing.

From the perspective of business logic, has AI become a game changer for drug development? I'm afraid not necessarily.
After all, AI drug research and development companies still have to follow the path of making services or making products, or both.
Companies such as Schrodinger, Numerate, and Insilicon Medicine do not.
Despite the addition of the AI ​​concept, the industry's main expectation, or judgment, is still to comply with the standards of all emerging biotechnologies, waiting to see clinical testing.
In terms of business, it seems that there are not many voices that these companies will become platform companies like Google or Amazon in the so-called Biotech industry.

Domestic AI pharmaceutical companies are in a different situation.
It seems that under the aura of AI, these companies have become platform companies in the context of the Internet, and drug research and development capabilities have become omnipotent.
From small molecules to macromolecules, from new targets to neoantigens, from pharmacokinetics to toxicology, from dosage forms to crystalline forms, there is no field that cannot run horizontally and horizontally.
Don't ask about drug R&D data, don't ask about project progress, ask about disruptive innovation.
Now, I haven't seen such a high valuation and such a large amount of financing.
Have traditional biomedical companies seen it? Looking at investors, most of them are TMT funders behind them.
They are used to investing in biomedical funds, and they may not really understand AI pharmaceuticals.

A clinical project has not yet been launched, and occasionally a pharmaceutical company is cooperating, and the amount of water is not known.
This state will support a valuation of several billions.
Unless the story of the Internet platform is told, I am afraid that there are other ways.

Do investors who pay big prices really believe that these companies can grow into BAT? not necessarily.
For some AI drug research and development companies’ high-pitched valuations, if it’s not really stupid and a lot of money, I’m afraid it’s more likely: whether it’s a service or a project license out, the founder knows that he can’t make this money back, investors He also knows that he won't make this money back, and the founder also knows that investors know that he won't make money back.

Since the business can't be earned back, it can only be passed on by drumming.
Ofo made that ghost look, after all, Zhu Xiaohu also cashed out and left.
As long as the story of the platform has not been falsified, there will always be those who are willing to take over.
After all, there will be a capital market and an IPO in the end.

Unfortunately, for unicorns who want to make money through storytelling, whether it is AI or biomedicine, whether it is China's Geling Shentong, Yitu Technology, Megvii Technology, or Theranos and uBiome of the United States, the rollovers Not in the minority.
For some Chinese biopharmaceutical companies, since everyone knows that the feasibility of making a super-large platform is not great, it is better to relax when telling stories in order to support the valuation.