To counter the inevitable patent expiration of its blockbuster drug Jakafi, Incyte's long-term strategy involved developing superior internal products to replace it. This approach aims to cannibalize its own revenue stream before competitors can.

Notion's funding history reveals its valuation significantly outpaced revenue, reaching $10B on just $31M ARR in 2021. However, the company subsequently grew revenue almost 20x to $600M while its valuation only increased 10%, demonstrating how outlier companies can eventually grow into seemingly inflated valuations.

A founder who grows from $2M ARR at 100% to $4M ARR at 10% has likely destroyed massive value. The slowdown triggers a shift from growth-oriented buyers willing to pay high multiples to value-focused buyers offering low multiples, drastically reducing the sale price despite higher revenue.

The biotech industry recently endured its own "dot-com bust." Post-COVID hype gave way to investor impatience with the sector's fundamental realities: it takes over 10 years and massive capital ($200B/year industry-wide) to get a drug approved, leading to a sharp market correction.

Public market investors systematically underestimate sustained high growth (e.g., 60%+), defaulting to models that assume rapid deceleration. This creates an opportunity for private investors with longer time horizons to more accurately value these companies.

Instead of forecasting growth to justify a valuation, take a company's current market cap and work backward to find the implied revenue growth. This makes the market's embedded expectations explicit and easier to scrutinize.

Unlike tech, the pharma business model is defined by a patent cliff. As blockbuster drugs go generic, companies must find entirely new ones to survive, forcing a complete business reinvention every 10-15 years—a fundamental flaw that deters long-term investors.

Despite significant stock price increases (e.g., 3-4x for some names), the current biotech rally is not a sign of an overheated market. Many small-cap companies are still trading at a fraction of their potential value based on their pipelines, suggesting the rally is a recovery from deeply distressed, sub-cash valuations.

The acquisition of Amicus Therapeutics illustrates a harsh biotech reality: a company can grow its market cap 15-fold over 16 years, but IPO investors can still lose money. The immense, sustained dilution required for drug development erodes early shareholder value, even in a long-term "success" story.