Where do you see Alto fitting into this model, if at all? Do you think their recent data readout suggest it's their platform/approach that needs work, or just that the specific compound might just not be effective?
I'd say Alto is very much a traditional platform, where the value of the company is predominantly in it's first asset. The drop in share price from the latest readout is a reflection of that.
I haven't gone deep enough into Alto's program/platform to have a particularly nuanced view on their latest data.
In the latter case, it’s harder to argue that the model has been a success -trading around cash, despite the sale of Karuna (to BMS) for $14bn. However, the company has raised $200m in an attempt to repeat its success in Neuroscience.
My personal take is that whichever model you choose, as an emerging biotech, it remains extremely rare to successfully develop & commercialise a NAS. It seems much of the effort is focussed on attempts to de-risk the biology but there has to be a commensurate attempt to disrupt the clinical trial business as the inexorable rise in costs is killing biotech.
Awesome read, Elliott! Interesting to think about valuation of these hub-and-spoke model companies as development programs in subsidiaries are separated from the core team and other central assets of the parent company that acquirers may typically factor into their calculations.
Thoughtful piece. However, out of at least 50+ hub-and-spoke biotechs that have tried over the years (I'm guessing here, I personally know of about 30-40, there are probably hundreds), only couple, including Roivant, have been successful. The success rate isn't much higher than a traditional model, and ROI doesn't seem higher either. If anything, possibly lower.
I don't know if either model is better, but I do know hub-and-spoke is much harder, because out of 3 things that a biotech needs (money, talent, and tech), the amount of money and talent you need for HaS is an order of magnitude higher. The management team need to be monster fund raiser (like Roivant) or have strong and steady backing of a major VC (in this case Atlas). And most biotechs struggle with building even one strong management team, building multiple ones is an Herculean task. And forget about one management team managing more than one spoke - that is guaranteed failure.
This is why HaS is generally greeted with skepticism by most investors - the track record is not great, and the challenge is pretty great. It's been tried and tried over and over and never really caught on.
Elliot, awesome analysis as usual. Thank you.
Where do you see Alto fitting into this model, if at all? Do you think their recent data readout suggest it's their platform/approach that needs work, or just that the specific compound might just not be effective?
Thanks, Naveen!
I'd say Alto is very much a traditional platform, where the value of the company is predominantly in it's first asset. The drop in share price from the latest readout is a reflection of that.
I haven't gone deep enough into Alto's program/platform to have a particularly nuanced view on their latest data.
Super interesting thanks for going deep. I love the Book of Nimbus concept will dive deep on that!
Thanks, Colin! Enjoy the Book of Nimbus—there are some gems in there.
Awesome piece, thank you for this!!!
Thanks, Kayla!
It’s interesting you published this article on the same day that Pure tech (another hub and spoke company) was featured in an in-depth piece in Biopharma Dive. https://www.biopharmadive.com/news/puretech-biotech-incubator-startup-chowrira-elenko/730058/
In the latter case, it’s harder to argue that the model has been a success -trading around cash, despite the sale of Karuna (to BMS) for $14bn. However, the company has raised $200m in an attempt to repeat its success in Neuroscience.
My personal take is that whichever model you choose, as an emerging biotech, it remains extremely rare to successfully develop & commercialise a NAS. It seems much of the effort is focussed on attempts to de-risk the biology but there has to be a commensurate attempt to disrupt the clinical trial business as the inexorable rise in costs is killing biotech.
Interesting points—and thanks for sharing this article.
Wow, super interesting article. Thanks!
Thanks, Rick!
Incredibly interesting.
Thanks for reading, Michael. Glad you enjoyed it!
Fantastic article Elliot! I learned a ton!
Thanks, Jessica! I really appreciate it.
Awesome read, Elliott! Interesting to think about valuation of these hub-and-spoke model companies as development programs in subsidiaries are separated from the core team and other central assets of the parent company that acquirers may typically factor into their calculations.
Thoughtful piece. However, out of at least 50+ hub-and-spoke biotechs that have tried over the years (I'm guessing here, I personally know of about 30-40, there are probably hundreds), only couple, including Roivant, have been successful. The success rate isn't much higher than a traditional model, and ROI doesn't seem higher either. If anything, possibly lower.
I don't know if either model is better, but I do know hub-and-spoke is much harder, because out of 3 things that a biotech needs (money, talent, and tech), the amount of money and talent you need for HaS is an order of magnitude higher. The management team need to be monster fund raiser (like Roivant) or have strong and steady backing of a major VC (in this case Atlas). And most biotechs struggle with building even one strong management team, building multiple ones is an Herculean task. And forget about one management team managing more than one spoke - that is guaranteed failure.
This is why HaS is generally greeted with skepticism by most investors - the track record is not great, and the challenge is pretty great. It's been tried and tried over and over and never really caught on.