Detailing the biotech life cycle - The Scientist

The inflection points of the drug development process

Phase	Discovery	Preclinical	Phase1	Phase 1b/2a	Phase 2b	Phase 3	FDA Review	Marketed Drug
Typical Cost ($mm)	$5	$5-10	$5-10	$10-15	$15-25	$40-100	$5	$100s
Sources of Capital	Seed Venture	Venture Seed	Venture Seed	Venture Growth	Venture Growth Public	Venture Growth Venture	Public Growth	Public

The capital required for each stage of development varies, escalating significantly as a drug enters large clinical trials in the later stages of development. As a result of this growing demand for capital, different investor populations are generally involved in funding the very early versus very late stages of development.

The percentage of the company owned by founders declines significantly over time, despite significant increases in value with each successive round of financing. This effect is typically offset by the granting of stock options to founders and management in order to maintain their ownership positions at desired levels. (Series valuations based on Recombinant Capital estimates.¹)

References

1. McCully, Michael G. Digging into the Data: The Latest Trends in Alliance Structures and Valuations. Drug Delivery Partnerships 2008. January 23, 2008.