So How Profitable is the Biopharma Industry? Good question! If there’s one thing the public “knows” about biopharma, it’s that these companies rake in sky-high profits, right? Let’s take a look. But first… Let’s talk about Beyoncé.
If you’ve ever jammed on the guitar with friends, you’ve likely dreamed of what it would be like to “make it big” as a musician. Bright lights, big cities, big money — the life of a rock star looks incredible. Musicians who have “made it” are household names. You see pictures of them wearing glitzy clothes on magazine covers, starring in TV ads, or showing off diamonds and private planes on Instagram during sold-out tours.
Imagine that a teenager saw success like this and told her parents that she wanted to be a rock star too, and that she was thinking about ditching college and leaning into music full time. What might the parents say? They’d likely tell her that though she is a very good guitar player, music isn’t a particularly reliable or financially sustainable career path.
What might she say back? “Well, Beyoncé made $580M from her Renaissance World Tour!”
But unfortunately, you can’t assess the music industry based on the Beyoncés of the world. For every Beyoncé or Taylor Swift, there are literally hundreds of thousands of other musicians living gig to gig, busking in the subway or playing boring background muzak at a 40th high school reunion. And it’s way, way more common to be one of those musicians than it is to be Beyoncé.
If someone asked you, “How profitable is music as a career path?”, would you look up the ten most famous artists you can name off the top of your head and average their yearly earnings? Probably not. That wouldn’t be accurate or appropriate. It’s cherry-picking unrepresentative data. But we often make this exact mistake when thinking about biopharma.
The hundreds of biotech companies you’ve never heard of that are out there every day attempting to discover solutions for big, ambitious problems are pre-revenue (that is, not generating any income), almost as a rule. You can’t make money when you don’t have anything to sell, and selling something isn’t even on these people’s minds — they’re years (sometimes decades!) away from that.
There’s a massive chasm between “Does this protein bind the target we think it does?” and “Buy our safe, effective drug for Alzheimer’s disease.” Not only are the former companies not making money, but they’re burning through large sums of cash, since everything that research and development requires is seriously expensive (if you’ve ever worked in sterile conditions under a tissue culture hood, you know!).
So where does this money come from? Who would just *hand over* this kind of cash?
The answer is… Investors!