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The Biotech Development Process

From a financial point of view, the biotech drug-development process can be modeled as shown in the following illustration.

At least three major financial events are common, as shown above the timeline. These incluse the start-up or seed funding to get the project underway, and this round often includes licensing fees to a university or other research organization for their IP on the development target or lead candidate. After the validation of the target and a number of other duties, additional funding is typically needed for the pre-clinical development work, which involves further research and characterization as well as animal testing. Hopefully, at around the time an IND is about to be filed, a larger pharma or biotech partner will license the rights to the drug, resulting in a large up-front payment as a reward for all the hard work and investment. This timing of the licensing event for around the time the IND is filed is intended to avoid the need for the innovator to finance human clinical trials, which can be quite expensive, and is therefore sometimes referred to in biotech financial circles as the "sweet spot" of biotech financing.