Patrick Malone, MD PhD

1.1K posts

Patrick Malone, MD PhD

Patrick Malone, MD PhD

@patricksmalone

physician-scientist turned biotech investor @KdT_Ventures | helping founders build science and tech-driven companies | writing at https://t.co/w5M8DV8u92

DC Katılım Mart 2011
1.6K Takip Edilen7.8K Takipçiler
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
on biotech platform strategy in a new essay, @ElliotHershberg and I riff on biotech platform typology and partnering dynamics. we unpack why many biotechs pivot from external partnerships to internal programs, and why that trend might change in the near future. we start with a framework from biotech veteran Steven Holtzman for categorizing biotechs into product and platform companies, and the differences between therapeutic modality platforms and disease insight platforms. the business strategy pursued by each biotech ultimately comes down to the details of the underlying technology, but historically, a vertical focus on internally developed drugs has been the most successful value creation strategy in all of biotech. building a services platform, which exclusively pursues external partnerships with no internal pipeline, is really, really hard. the list of companies that have done this successfully is short, and many end up shifting strategy to developing their own wholly owned assets. a partnership-only business model in biotech has been difficult to scale successfully, but will this trend continue? to address this question, we analyzed data from biopharma partnerships over the last ~15 years. if platform technologies are becoming more proven and validated, average partnership deal value should increase over time. if average deal value continues to increase, at some point it will be feasible (and even preferable) to pursue a services/partnerships-only model as a platform biotech. we found a trend towards increasing average total deal value, average milestone payments, and total number of partnerships over time, effectively increasing the total addressable market for services platforms. there are some important caveats and confounds with these data, but qualitatively, these trends suggest that there may be a shift in pricing power from partners to technology platform developers. if this trend continues, external partnerships as a mechanism of value capture will improve relative to wholly owned internal programs, thus improving the scalability and success-rate of services platforms in biotech. this was a fun one to write. the full piece is packed full of perspective and conjecture worth disagreeing with, so reach out if you want to discuss!
Patrick Malone, MD PhD tweet mediaPatrick Malone, MD PhD tweet mediaPatrick Malone, MD PhD tweet media
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
prediction: AI scientists will eventually devote more compute to forecasting scientific outcomes on prediction markets than producing scientific papers. as AI makes scientific content effectively infinite, publication will stop being a meaningful signal. economic incentives will increasingly reward verifying scientific facts, not simply producing more content and papers.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
a lot of debate about the valuation gap between traditional biotech and AI biotech companies. the simplest explanation: biotech investors see AI as a tool, not a thesis. potentially useful, but not something that fundamentally changes how they underwrite an asset's probability of success. the more fundamental issue is that the AI platform thesis is much harder to falsify, attribute, and underwrite. in traditional biotech, the asset is largely the thesis. a drug reaches a discrete proof-of-concept experiment, and the investment is adjudicated: the biology worked or it did not, and the asset was appropriately valued or it was not. AI biotech is harder. the thesis is distributed across multiple claims and programs: the model performs a task better, that produces better molecules, the advantage repeats, and the learning eventually improves probability of success. no single drug can establish that broader thesis. a success may reflect good biology or luck rather than the platform. a failure can be attributed to the target, the trial, or some other part of development rather than the model. the result is that the platform is difficult to evaluate. successes are often taken as evidence for the platform, while failures are often dismissed as asset-specific. so biotech investors may treat AI as a tool not only because they are less convinced by the technology, but because the industry still lacks a legible, prospective framework of evaluating whether a platform truly improves drug development across programs.
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Tony Kulesa
Tony Kulesa@kulesatony·
@patricksmalone well, the real story here is that none of these median returns are competitive! in my opinion, fund size is the wrong variable to focus on here for producing outsized returns, though I agree that smaller funds are certainly one component of a better strategy.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
there’s a debate in biotech about whether seed investors and smaller funds can make money without large reserves to follow on. it’s hard, but I think it can absolutely work, and often generate more attractive returns. Our experience managing $100–150M funds at KdT: - there is an inverse correlation between fund size and returns in tech, and this is also true in biotech. i analyzed a @statnews dataset of biotech VC funds: median return multiples decline as fund size increases from ~2.1x for funds under $150M to ~1.4x for $1B + funds (figure below). - more follow on capital through bigger funds can be useful, but that trades off against fund returns. a larger fund needs to return more absolute dollars to generate the same fund multiples. - the trend toward much larger funds (and the mega-rounds those funds tend to prefer) can also distort what gets funded: more capital concentrated in fewer “obvious” companies, more overbuilt teams, higher burn/comp, fewer shots on goal for weird or risky science, and less milestone discipline around the next true value inflection. - small funds can absolutely work in biotech, but only if the company is financed around a clear, transactable value inflection. in biotech, value is lumpy, so important to be clear about what value inflection you are funding to (eg DC, IND, FIH, biomarker/PD signal, Ph1b/2a PoC), and what the transactable dataset is. you don't need to fund through Ph3 to generate attractive returns.
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Daphne Zohar@daphnezohar

IRR for angels and seed investors that don’t have large funds to follow/protect investment is mostly negative. That ecosystem has more or less been wiped out in biotech. Tech related thread below but pls respond w biotech stories

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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
@daphnezohar x.com/patricksmalone…
Patrick Malone, MD PhD@patricksmalone

there’s a debate in biotech about whether seed investors and smaller funds can make money without large reserves to follow on. it’s hard, but I think it can absolutely work, and often generate more attractive returns. Our experience managing $100–150M funds at KdT: - there is an inverse correlation between fund size and returns in tech, and this is also true in biotech. i analyzed a @statnews dataset of biotech VC funds: median return multiples decline as fund size increases from ~2.1x for funds under $150M to ~1.4x for $1B + funds (figure below). - more follow on capital through bigger funds can be useful, but that trades off against fund returns. a larger fund needs to return more absolute dollars to generate the same fund multiples. - the trend toward much larger funds (and the mega-rounds those funds tend to prefer) can also distort what gets funded: more capital concentrated in fewer “obvious” companies, more overbuilt teams, higher burn/comp, fewer shots on goal for weird or risky science, and less milestone discipline around the next true value inflection. - small funds can absolutely work in biotech, but only if the company is financed around a clear, transactable value inflection. in biotech, value is lumpy, so important to be clear about what value inflection you are funding to (eg DC, IND, FIH, biomarker/PD signal, Ph1b/2a PoC), and what the transactable dataset is. you don't need to fund through Ph3 to generate attractive returns.

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Daphne Zohar
Daphne Zohar@daphnezohar·
IRR for angels and seed investors that don’t have large funds to follow/protect investment is mostly negative. That ecosystem has more or less been wiped out in biotech. Tech related thread below but pls respond w biotech stories
Matt Paulson@MediaKing

10 years ago, I wanted to become an "angel investor." Signed up for AngelList when syndicates first came out in 2014. Invested about $300K from 2014-2019 across 53 deals. Backed the best names and top syndicates on the platform. IRR: 7.8% 💀💀💀

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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
what has finally made consumer health interesting is that prevention now has a buyer who actually captures the value: the consumer. traditional payers have weak incentives to fund long-horizon prevention because members churn every few years. the plan may pay today, while the future benefit accrues to another payer. but in consumer-pay or consumer-directed models, the person paying for the diagnostic or intervention is the same person who values avoided disease and longer healthspan. but the bigger shift is that the meaning of "prevention" is changing. for payers, prevention is mostly evaluated as cost avoidance: will this reduce future claims? in the consumer’s hands, prevention becomes a way to manage health trajectory. consumers want to know if they are aging well, metabolically healthy, cognitively sharp, or responding to an intervention. that fundamentally changes the role of diagnostics. historically, diagnostics were ordered by physicians to answer narrow clinical questions. in consumer health, diagnostics become recurring self-knowledge products, and, more importantly, interfaces for behavior change and therapeutic routing. where i think this is all headed: 1. consumer diagnostics will create new categories of therapeutic intervention. if consumers are willing to pay for earlier detection, companies can justify building interventions for states traditional medicine has not historically treated aggressively: early cognitive decline, perimenopause, muscle loss, poor sleep architecture, early osteopenia, and more. 2. the boundary between wellness and medicine will continue to blur. consumer health starts in wellness because regulation and reimbursement friction are lowest there. but the incentives push toward medicine: diagnose earlier, intervene earlier, monitor longitudinally, and eventually generate enough evidence to become standard care.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
@MelindaBChu1 very low cost of capital, exceptional talent, less compute constrained than most other labs, buying/partnering actively for lots of proprietary data
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Melinda B. Chu
Melinda B. Chu@MelindaBChu1·
@patricksmalone Why would anyone think Anthropic has a better chance than Isomorphic at making drug candidates? Isomorphic has never reported successful wet lab data in 5 years and Anthropic has no proprietary data. Same data as any of us. They are also compute constrained.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
some thoughts on Claude Science, and Anthropic's ambitions in drug development: 1. i doubt they are developing their own therapeutic pipeline and will become a drug maker. in bio, the key bottleneck is evals and verification, and this is best done by dogfooding their own tools and workflows. in software, ground truth compiles cheaply/instantly. opposite is true in bio. claude code started as an internal tool before it was a product; i expect most of Anthropic's future bio tools to follow the same path. 2. focusing on “neglected diseases” may reflect their PBC status, but it also makes the platform less threatening to pharma/biotech customers. customers are more likely to build on Claude if they don’t think Anthropic will compete with them. 3. one interesting question is what will happen to any assets/molecules they develop internally. i doubt they push them into clinic, but my low-confidence prediction is that they will explore an Isomorphic-style spin out in 12-18 months. 4. the ecosystem / integration strategy is exciting, but creates a platform gatekeeper risk. will be interesting to see if this plays out similarly to the EHR Epic and AI scribes: scribe companies gained distribution by integrating into the EHR, but Epic is now building native scribe functionality, and those partners now risk being blocked or deprioritized. if Anthropic becomes the workflow layer for AI-bio, similar dynamics could emerge. 5. the core bet seems to be that value in AI-bio accrues at the orchestration / workflow layer, not the model/weights. that is a very different bet from other labs like DeepMind (AlphaFold, AlphaMissense, etc).
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
@Gabogonzalez515 IPO / public investors will have much different tolerance for that type of strategy creep, and to earlier point will make customers paranoid that they are giving their data / IP to potential competitor
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Gabe 🧬
Gabe 🧬@Gabogonzalez515·
@patricksmalone can you expand on why #3? Phase I in Australia would be chump change for them
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
@lunarcycling agreed, although not clear to me that "neglected" = rare, it may be indications that few/no commercial companies are working on, even rare disease biotechs
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Nora Kased
Nora Kased@lunarcycling·
@patricksmalone The rare disease market is a lot more lucrative than people realize. Look at it as a percentage of healthcare/pharma revenue and you'll see why this is strategic.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
what scientists/startups are working on therapeutic strategies for sleep compression, ie improving sleep architecture / physiology to achieve the same benefit in a shorter period of sleep? mechanisms relevant to neuropsychiatric disease but also potential enhancement use cases. who is working on this?
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
i appreciate the line of thinking, but this comparison is a bit imperfect because the U.S. is really the only commercial market of consequence for drugs in the world. even if we lost our ability to do early-stage R&D, global biopharma needs to commercialize here, given the proportion of global drug profits contributed to by the U.S. the bigger issue in my mind is the loss of global leadership by the US over which drugs get developed, diseases get treated, ethics around clinical trials, etc. it is still possible that we lose access to medicines, but that is more likely due to geopolitical conflict where supply chains get pulled in the same way that rare diseases and others have.
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Anthony
Anthony@anthonystaj·
It's worth considering the long term implications of patient access to new therapies in countries who *today* don't have domestic R&D engines. Canada is one. No ability to do drug dev and commercialize internally. What happens there when drugs launch? They usually don't get reimbursement for several or more years. Patients suffer. Patients are disconnected from the standard of care. Now the country offers MAID instead of the best therapy available. Carvykti which was approved and reimbursed in the US several years ago remains inaccessible to the Canadian patient and has no ongoing negotiations with reimbursement agencies. Far from the only example. Other countries who lack internal R&D, and who lack purchasing power, similarly do not spend on new drugs. New Zealand in 2026(!!) doesn't have daratumumab/ darzalex . This drug was approved in 2016 and is the front line standard of care in almost all developed nations for multiple myeloma. It is genuinely a travesty to think they don't have dara, today. What do we think will happen if biotech R&D shifts to adversarial nations who monopolize drug development? Do we think prices for drugs go up, stay the same or go down? Do we think patient access to novel medicine goes up, stays the same or goes down? Is the global market a reasonable surrogate for the US market in terms of patient outcomes? I'm not proposing all the answers to this question. But we do have comparators we can use to benchmark what could occur. Serious discussions grounded in current precedent ought to be had instead of asserting unilateral patient benefit via the free market
Brad Loncar@bradloncar

My own opinion now that I am more removed is that I do believe the U.S. needs to act in some way. It’s fine and good to say patients first, but the bigger picture gets dangerous if our country outsources too much science to a country that is, if we are being honest, an adversary.

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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
i mostly agree. the harder question i genuinely struggle with is whether domestic reform alone is enough. china has structural advantages we do not and won't be able to replicate: significant state-directed capital, centralized hospitals, different tolerance for state involvement in industry, etc. so if US investors can take advantage of this arbitrage, won’t that continue pulling capital, talent, and capacity away from the US even if we improve at the margin?
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Peter Kolchinsky
Peter Kolchinsky@PeterKolchinsky·
@patricksmalone And that’s why our state should be supporting our scientific and clinical infrastructure, not dismantling it. FDA pivot is welcome. Political appointees overseeing all US basic science is not. IRA pill penalty not. If China wants to invest in its biotech sector, good.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
much of the US-China biotech debate talks past the core tradeoff: patients are not best served by maximizing the number of near-term in-licenses if doing so weakens America’s domestic capacity to discover, develop, and manufacture future medicines.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
that's not the argument. capital is flowing toward an ecosystem whose advantages are not simply better companies/programs, but state-backed clinical infra, regulatory speed, lower development cost, and US policy failure. yes, in a vacuum stronger programs should beat weaker ones. but if the system increasingly makes the strongest-looking programs easier to generate in China, then this is not a neutral market in which the best data wins. worse, the arbitrage is self-reinforcing: the more US capital and pharma BD outsource de-risking to China, the less capital, talent, and capacity compounds here.
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Peter Kolchinsky
Peter Kolchinsky@PeterKolchinsky·
@patricksmalone Cause and effect is inverted here. Weaker companies lose out to stronger one. Weaker programs lose out to stronger ones. Blocking US investors/companies from accessing stronger tech from China doesn’t strengthen US programs. Money won’t flow to them.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
@SamDavisEsq M&A is a lagging indicator. Pharma is still buying U.S. biotechs built years ago; China in-licensing shows where marginal pipeline sourcing is moving now. the acquisition impact will show up later as those assets mature.
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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
yes. biotech venture has lost its way. we do not need another half-life-extended / deuterated / formulation-tweaked / me-barely-better molecule. the job is not to cosplay pharma BD. the job is to underwrite true risk before anyone else can.
Alex Kesin@alexkesin

American biotech VCs: remember your place in this ecosystem. You are not pharma. A sleepy R&D org with a patent cliff bearing down has every reason to grab a cheap Chinese GLP-1++ and call it a day - *fine*, that's what late-stage capital is for. But you took a different job. Your contract with the people upstream of you is to eat *more* risk than they will, so they never have to wear a loss on their balance sheet. You're their wine taster. You're supposed to be hunting the next Boger/Vertex, the next Kevan Shokat/RevMed - to be the Brook Byers to a Ted Greene who drags the first GLP-1 across the FDA line. The next Cobenfy. The next Casgevy. You are not a house flipper. While ferrying cross-border Kailera-style vehicles is helping you juice your DPI and feels great in the short term, it's eating your seed corn. Yes, some of these Chinese NMEs are truly me-better drugs (ivonescimab beat Keytruda, no need to remind us of that!). But as a *strategy* they're Cheetos - everyone's eating from the same bag, and the day it's stripmined, there will be nothing proprietary left in your orange corn starch stained fingertips. Meanwhile -- uh oh -- looks like nobody planted the seedlings of that next generation of American biotech, and you'll be squarely to blame for neglecting it on short term opportunity cost alone. Perhaps you should've gone for the trail mix. Mostly cashews and almonds, sure. But every so often you get an M&M...

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Patrick Malone, MD PhD
Patrick Malone, MD PhD@patricksmalone·
biotech venture capital has never been more risk-off, consensus-driven, and allergic to the very risk the industry was built on
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