Detailing the biotech life cycle.

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...


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


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