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Biotech startups are usually formed around a drug or biological to hedge the risk of preclinical and early trial work. These are usually developed with some kind of novel process. Usually you get a small early IPO if things work out at that stage to raise working capital. This happens because most traditional VCs won’t fund this type of biotech. That’s changing somewhat. Then the company sells to a major pharma or biotech if the product works out.


Also sometimes these biotechs, if they have novel approaches, are sought by big pharma because they’re more agile. So they buy them out as their R&D labs or invest in them for their IP.


The "big bet" is on the phase 3.




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