FIVE BASICS

A strong biotech business concept should cover the following bases:

  1. The company must efficiently develop viable products.
  2. The company's intellectual property must be defensible and other patents cannot block the path to commercialization.
  3. There must be a clear business model/strategy for generating a significant profit.
  4. The company should target a large and/or rapidly growing market.
  5. Management should have the skills to implement the business plan.

These five elements may seem self-evident, even redundant, but many business plans neglect to address at least one. Common mistakes include:

  • The technology concept is "cool science" but not commercially useful.
  • The market is so small that the company cannot reach significant profitability.
  • The company must convince customers that they need its product rather than selling one that customers already want. Creating demand is more difficult than catering to an existing need.
  • Customers claim they want a better product, but are not willing to pay for it.
  • The key patents are invalid due to prior art.
  • Patents block the company from doing something essential to the process of making and selling the product, thereby restricting its "freedom to operate."
  • The business strategy does not take into account regulatory and reimbursement issues. E.g. in the case of a novel type of therapeutic, getting FDA approval may take an unusually long time and insurance plans may not extend coverage until the treatment becomes more commonplace.