Molecule Trader: 85% drugs from startups

Drug innovation now starts small. That is the real story behind the “85% from startups” line making the rounds. The number is directionally right, but the important part is what it actually measures. IQVIA’s 2025 R&D trends report says emerging biopharma companies originated 85% of the 48 new active substances launched in 2024. That does not mean tiny companies independently took 85% of drugs all the way to market. It means they created or first advanced the assets that later became approved medicines. ### What does “85% from startups” actually mean? Basically, it means the invention engine has moved out of big pharma. The molecule, platform, target, or early program often comes from an emerging biotech, then gets licensed, partnered, or acquired before late-stage trials or launch. McKinsey puts the commercial version of the same point even more bluntly — since 2018, more than 70% of new molecular entity revenue has come from externally sourced products. ### Are small biotechs really dominating approvals? They are dominating origin, and they are taking a bigger share of approvals too — but those are different claims. BIO’s approval tracker is built to sort novel first-indication approvals by originating company size, and outside tallies for 2024 show 36 of 50 CDER new-drug approvals categorized to company categories. The spread tells you the metric changes with definitions, but the direction is the same. ### Why did the center of gravity move? Because startups are better at taking scientific risk. Small teams can build around one mechanism, one modality, one weird manufacturing trick, or one disease niche that would be too narrow for a large portfolio review committee. Big pharma still matters, but more as a scale machine — capital, global trials, regulatory muscle, manufacturing, and commercialization. The handoff is the business model. ### So why don’t startups keep everything? Because the clinic eats cash. BIO’s 2011–2020 success-rate report says the chance of a drug going from Phase I to approval is under 10%. Citeline’s more recent tracking says that benchmark has slipped further, to 6.7%. And Deloitte’s 2024 estimate for large-pharma R&D the next Genentech” usually ends up signing a partnership term sheet instead. ### Where does synthetic biology fit? This is where the math gets brutal. Synthetic-biology founders often pitch a platform — not just one drug, but a repeatable way to make many. The appeal is obvious: if one asset fails, the company still has a machine. The catch is that investors eventually want proof the machine makes real medicines, not just elegant demos. bridge across related products, especially in programmable modalities. ### Why do so many synbio companies become service businesses? Because services generate revenue now, while therapeutics burn cash for years. A tools, CRO, or partnership model can fund the platform, build data, and keep the team alive through a bad financing market. But there is a tradeoff — service revenue can also signal biotech strategy right now. ### What changed in the market around this? The financing backdrop got harsher after the pandemic boom. Deal counts fell sharply from 2020 to 2023, even as deal value rose and buyers became more selective. In plain English — fewer shots, bigger prizes, more pressure to show clean data early. That environment favors startups that can either derisk quickly or make themselves obviously partnerable. ### Bottom line? The 85% figure is less a victory lap than a map of who does what now. Startups invent. Big pharma scales. And every biotech founder has to decide, early, whether they are building a drug company, a platform company, or a services company wearing one of those costumes.