Synnovation's deal structure allows it to sell a single oncology asset for a large return to VCs, while the core drug discovery team remains to advance the rest of the pipeline. This 'hive-off' model offers a compelling alternative to traditional M&A or IPO exits.

Contrary to seeking fully de-risked assets, pharmaceutical companies often prefer acquiring companies with some remaining clinical risk. This strategy allows them to leverage unique insights on early data to acquire assets at a better valuation, creating an opportunity for outsized returns before the value is obvious to others.

With no initial funding, CDR Life leveraged its team's expertise to develop and out-license an ophthalmology program. This non-dilutive deal with Boehringer Ingelheim provided the capital and validation needed to fund its primary mission in oncology and later secure a Series A round.

Roivant's early success came from identifying and building companies around promising drug assets that were deemed non-strategic by large pharmaceutical firms. This approach capitalized on undervalued IP and focused execution, pre-dating the now-common trend of pharma spin-outs.

To prepare for its internally discovered drugs, Eikon Therapeutics first in-licensed external programs. This allowed their newly-formed clinical team, led by a Merck veteran, to build cohesion and processes on existing assets, avoiding the risk of testing their teamwork for the first time on novel, internally-developed molecules.

Discontinued drugs aren't hard to identify; the real challenge is navigating the out-licensing process inside a large pharma company. Without an internal champion to drive the complex approvals for a non-priority asset, promising drugs can languish on the shelf due to corporate inertia, not a desire to hide them.

As large pharmaceutical companies shift focus to acquiring clinically validated assets, a gap has emerged in early-stage development. Smaller and mid-sized pharmas, unable to compete on price for late-stage assets, are now incentivized to take on more risk and partner earlier, driving innovation.

Terry Rosen saw an opportunity as big pharma culturally shifted from deep R&D towards an asset-management model. He founded Arcus to fill this gap, building a company focused on the small molecule drug discovery expertise that the industry was starting to abandon, creating a counter-cyclical advantage.

With patent cliffs looming and mature assets acquired, large pharmaceutical companies are increasingly paying billion-dollar prices for early-stage and even preclinical companies. This marks a significant strategic shift in M&A towards accepting higher risk for earlier innovation.