Elliot Hershberg

Learning biotech part 2: Once you understand process of finding drugs, you should study the incentives that drive decisions. Why does someone choose to launch the 200th EGFR program? Inevitably there's a set of incentives, and often data-driven risk analysis, motivating these seemingly silly decisions. While new biotechs often challenge existing assumptions, understanding Chesterton's fence is the smartest way to decide where and why you deviate. I would start by reading AstraZeneca's retrospective on why their programs won or lost: “Lessons learned from the fate of AstraZeneca’s drug pipeline: a five-dimensional framework.” pubmed.ncbi.nlm.nih.gov/2483… The '5Rs' they identified are a good representation of the risks pharma prioritizes: right target, right tissue, right safety, right patient, and right commercial potential. YC tells their companies to talk to users. But who is the 'user' for biotech? - Ultimately, we make medicines for patients to enjoy healthy lives. - The FDA judges whether it works. - But doctors decide what to prescribe. - And insurance and medicare actually pay for the treatment. This makes the situation more confusing for new biotechs. But your product needs to work for all four of those user. (even if you plan to sell to pharma before approval, they have the same users, so you just have one more user to please) I recommend the book 📚 "Her-2" about Genentech's mega-successful drug Herceptin, which includes decisions about which diseases and trials they tried it for first. If those decisions had been wrong, the drug might have died. I'd also recommend (any and all) episodes of 🎧 "Hard Drugs" from @salonium and @JacobTref, especially for examples where the science incentives are stronger than financial ones. harddrugs.worksinprogress.co… After that, try deconstructing decisions you see in the news, like Genentech choosing to exit cancer immunology two years ago or everyone buying 'radiopharmaceutical' biotechs. What got derisked, or saw added risk? One source of 'irrational behavior' might be classic short-term performance goals among executives at public companies. At any given time, pharma's revenue come from a small number of patent-protected drugs. When patents expire on a top product revenue plummets, so you often see acquisitions of mature companies that might get a new big approval before the cliff. Basics of patent cliffs here: biopharmadive.com/news/pharm… and this episode of @alexkesin and Matthew Pech's 🎧 Approved goes deep on that drug, including at ~90m how Merck sought to protect its profits: podcasts.apple.com/us/podcas… Ultimately, incentives all come back to 1) a desire to improve humanity's conditions by scientists who go into biomedicine, and 2) free market competition. When you see something that seems cool (like PCSK9 gene therapy) but isn't super hot, check the incentive stack to understand why (in this case, strong competition with lower risk). And when you see an opportunity nobody is filling, at least find out why. More good content on this topic includes: @alexkesin’s ✍️ “Pharmacopoeia” broadly covers how biopharma behaves, for example in “Pharma Is Hollywood, Roughly”: alexkesin.com/p/pharma-is-ho… @ElliotHershberg’s ✍️ “The Century of Biology” has a series on platform companies, like BridgeBio, that dissects incentives: centuryofbio.com/p/bridgebio Finally, 📚 “The Great American Drug Deal” by @PeterKolchinsky is relevant as big picture context on how healthcare works and how the medicines it pays for flows back into the next generation of drugs. You can also get the short version on this website: nopatientleftbehind.org/fund…