Mirum views the retreat of large pharmaceutical companies from the rare disease space as a strategic opportunity. This creates a less competitive environment for acquisitions, allowing Mirum to acquire assets that are often overlooked by larger players and serve patient populations others leave behind.

While large pharmaceutical companies are filled with a wide breadth of smart people, smaller biotech firms offer a different kind of intellectual environment. They feature the same degree of brilliance, but it's concentrated in a much more focused organization, creating a unique depth of talent.

Arcus's strategy isn't to find novel targets, but to leverage its small-molecule expertise on validated targets that are difficult to drug. This de-risks the biology and creates a competitive moat based on technical execution, allowing them to develop a clearly better molecule against incumbents like Merck.

The transition from a resource-rich environment like Novartis to an early-stage biotech reveals a stark contrast. The unlimited access to a global organization is replaced by a total reliance on a small, nimble team where everyone must be multi-skilled and hands-on, a change even experienced executives find jarring.

Responding to Wall Street pressure to de-risk, large pharmaceutical firms cut internal early-stage research. This led to an exodus of talent and the rise of contract research organizations (CROs), creating an infrastructure that, like cloud computing for tech, lowered the barrier for new biotech startups.

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.

Arcus navigated its capital-intensive early years by using strategic collaborations to bring in over $1 billion in largely non-dilutive funding. This approach allowed the company to reach late-stage clinical milestones and generate valuable data, bridging the gap to a point where public market investors could see tangible value.

Unlike most pharmaceutical companies that focus on specific therapeutic areas, Astellas employs a 'biology-first' approach. By focusing on a biological pathway with a link to disease, rather than the disease itself, the company creates opportunities for novel discoveries outside of pre-defined, and often crowded, research fields.

ProPhet was founded through Ion Labs, a venture studio created by AstraZeneca, Merck, Pfizer, and Teva. This model allows established pharmaceutical giants to identify acute internal challenges and recruit external talent to build dedicated startups aimed at solving them.