Elliot Hershberg unpacked

So there is a lot to unpack in Elliot's latest post. To be clear, I am not trying to unpack Elliot but his post 🪠.

TL;DR: disruption is here, commoditization is coming and the nexus (or nexi, nexuses?) of value creation will migrate.

Now the longer version: new moats will emerge in biotech as traditional drug discovery modalities become commoditized. Instead of relying on platform technologies, Elliott suggests the following key differentiators for biotech companies (I've added some company names that I think play to these):

1️⃣ Deep Biological Understanding

Exclusive knowledge of novel disease biology will become more valuable than just having a cutting-edge platform. Companies that discover and understand unique targets before others will have an edge, as they can develop first-in-class drugs with less competition. (Insilico Medicine, Recursion)

2️⃣ Proprietary Datasets

High-quality, proprietary biological and patient data can serve as a strong competitive advantage. With AI playing a growing role in drug discovery, companies with exclusive datasets will have a unique advantage in training models and identifying targets. (OWKIN)

3️⃣ Superior Execution and Clinical Development

As drug discovery becomes more accessible, clinical execution (i.e., regulatory strategy, trial design, patient recruitment) will become a major differentiator. The ability to efficiently navigate regulatory pathways and conduct trials with precision will set winners apart. (Formation Bio)

4️⃣ Vertical Integration and End-to-End Capabilities

Companies that control the entire drug discovery-to-commercialization pipeline will have an edge. Instead of relying on external partners for different stages of development, having in-house expertise across multiple domains can help biotech firms stay competitive. (In the drug business, that kind of sounds like Big Pharma)

5️⃣ AI and Computational Models for Proprietary Discovery

While AI itself may become commoditized, firms that apply AI to novel, proprietary biological insights can maintain an edge. The combination of machine learning with exclusive data and biological expertise will create new moats. (Xaira Therapeutics?)

6️⃣ First-Mover Advantage in Undiscovered Therapeutic Areas

Rather than chasing known, validated targets, biotech firms may need to pioneer completely new areas of medicine where there is little to no competition. This could include novel protein families, emerging disease mechanisms, or next-gen delivery systems. (Insilico Medicine, Recursion, ...)

I am keen to have more company examples for each of these "moats".