Biopharma and Therapeutics Growth Equity

Sector Definition and Market Structure

Regulatory Perimeter

The sector is defined by its federal licensing gates. Section 505(a) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §355(a)) bars any new drug from interstate commerce unless an approved application is in effect, and section 351(a) of the Public Health Service Act (42 U.S.C. §262(a)) requires a biologics license before a biological product may enter interstate commerce. A sponsor may not begin a clinical investigation of an investigational drug until an investigational new drug application is in effect under 21 CFR §312.20. Marketing applications then follow 21 CFR Part 314 for a new drug application (NDA) and 21 CFR Part 601 for a biologics license application (BLA).

Within that perimeter, LeverVenture's sector covers small-molecule drugs, biologics such as antibodies and therapeutic proteins, and cellular and gene therapies, which FDA lists among the licensed products of its Office of Therapeutic Products. It also covers the companies whose revenue depends on those products reaching patients: development and manufacturing partners, specialty pharmaceutical businesses, and platform companies that license their output to larger sponsors.

Approval Volume and Clinical Attrition

FDA's Center for Drug Evaluation and Research approved 46 novel drugs in 2025 and 50 in 2024, according to the agency's annual Novel Drug Approvals pages. Attrition before approval is steep and front-loaded.

The 2021 BIO, Informa Pharma Intelligence and QLS Advisors study of 2011 to 2020 programs found a 7.9 percent likelihood of approval from Phase I and a 28.9 percent Phase II to Phase III transition rate. The same study measured a 57.8 percent Phase III to submission rate and a 90.6 percent probability of approval once an NDA or BLA was filed. In short, risk falls sharply after a positive Phase III readout, and growth capital can then underwrite execution instead of biology.

Exclusivity and Price Negotiation Windows

The commercial life of a therapeutic is bounded by statute. No abbreviated application referencing a drug with a new active moiety may be submitted for five years after its approval under 21 U.S.C. §355(j)(5)(F)(ii). A biosimilar approval cannot take effect until 12 years after the reference product was first licensed under 42 U.S.C. §262(k)(7)(A). A designated orphan drug receives seven years of exclusive approval for the same use under 21 U.S.C. §360cc(a).

The Inflation Reduction Act added a second clock through the Medicare Drug Price Negotiation Program established at 42 U.S.C. §1320f. Under 42 U.S.C. §1320f-1(e)(1), a drug becomes eligible for Medicare price negotiation once at least 7 years have elapsed since approval, and a biological product once at least 11 years have elapsed since licensure.

As of October 2026, the CMS program page shows negotiated prices for 10 Part D drugs in effect from January 1, 2026, and prices for 15 more Part D drugs taking effect on January 1, 2027. CMS announced on March 13, 2026 that the manufacturers of all 15 Part B and Part D drugs selected for the third cycle are participating, with negotiations in 2026 and prices effective beginning in 2028. Public Law 119-21, section 71203, widened the orphan exclusion, for initial price applicability years beginning on or after January 1, 2028, to drugs designated for one or more rare diseases and approved only for those diseases.

Investment Criteria and Underwriting

Stage and Ownership Posture

LeverVenture invests at the commercial inflection, between venture capital and buyout. The thesis page states the condition directly: technical and, where it applies, clinical risk must be substantially retired, because we underwrite execution risk and do not underwrite whether the science works. In this sector that usually means an approved product in early launch, a late-stage asset with positive pivotal data and a defined filing plan, or an enabling business whose revenue already depends on approved products. We take minority positions, lead or co-lead where a company wants an operator at the table, and take a board or observer seat where the position warrants one.

The LeverRating for a Therapeutic

Every opportunity is scored on the six house dimensions published on the thesis page: Team, Market, Product, Traction, Financial and Thesis fit. For a therapeutic, the six dimensions expand to ten so that regulatory position, clinical evidence, reimbursement and freedom to operate each carry their own weight. Both rulers are run, and a rating that holds under only one of them is reported as unresolved.

Regulatory and Reimbursement Gates

Regulatory position is tested against the pathway the company has actually used. FDA's 2014 guidance on expedited programs for serious conditions describes four programs: fast track designation, breakthrough therapy designation, accelerated approval and priority review. Under the PDUFA VII commitment letter for fiscal years 2023 through 2027, FDA's goal is to act on 90 percent of standard new molecular entity NDAs and original BLAs within 10 months of the 60-day filing date, and on priority applications within 6 months. We build the launch plan on those dates and on any confirmatory study an accelerated approval requires.

Clinical evidence is read against the statutory standard. For a drug, 21 U.S.C. §355(d) defines substantial evidence as adequate and well-controlled investigations, including clinical investigations. For a biologic, 42 U.S.C. §262(a)(2)(C) requires a showing that the product is safe, pure and potent and that its manufacturing facility meets standards designed to keep it so. That facility clause makes manufacturing capacity a licensing question for biologics and cellular and gene therapies, and we underwrite it as one.

Reimbursement is underwritten across the full exclusivity window. We model when a product becomes eligible for Medicare negotiation, whether it is paid under Part B or Part D, and whether an orphan designation changes the start of its clock.

A targeted therapy that depends on a companion diagnostic, which FDA defines as a device that provides information essential for the safe and effective use of a corresponding drug or biological product, carries a second regulatory file that we diligence alongside the drug.

Freedom to operate is assessed as one stack of patents and regulatory exclusivities, dated to the same calendar. Where a program began in publicly funded research, NIH RePORTER, which indexes NIH-funded research projects and the publications and patents resulting from that funding, is the starting point for tracing the chain of title.

ROI² in Therapeutics

The second return is named at entry. Each company carries one impact measure with a baseline, an owner and a reporting cadence, drawn from the three ROI² outcomes on the thesis page: access to care, healthy life extended and system cost removed. The thesis page also states that a company whose growth and good come apart under stress fails the second half of the thesis.

Crossing sectors is the thesis. A healthcare-driven company that is also deep tech in its manufacturing, that is also digital in its endpoints, or that carries a clean tech dimension, with an artificial intelligence layer that makes it work, is the company we look for, and we underwrite the whole company as a single object.

Artificial Intelligence as the Accelerant

Artificial intelligence is the accelerant across all five LeverVenture sectors and is never treated as a separate one. FDA's draft guidance on artificial intelligence to support regulatory decision-making for drug and biological products, issued in January 2025 under docket FDA-2024-D-4689 and still marked draft on FDA's page as of October 2026, covers models used in the nonclinical, clinical, postmarketing and manufacturing phases of a drug's life cycle and sets a risk-based credibility framework for their outputs on safety, effectiveness or quality. It places drug discovery and operational efficiency uses outside its scope.

For a discovery claim, we therefore test whether laboratory work confirmed the model's predictions and whether a model-generated candidate has reached an investigational new drug application. For a submission claim, we test the model against the credibility framework for its stated context of use.

Reference Entries

• Growth Equitythe minority strategy for established, fast-growing companies that sits between venture capital and buyout.
• AI Diligence in Life Scienceshow artificial intelligence claims are tested against FDA drug and device guidance, change control plans and the underlying data.
• Laboratory-Developed Tests and CLIAhow laboratory tests are regulated under CLIA after the 2025 vacatur of FDA's rule, and where companion diagnostics still require FDA premarket review.

Related Analysis

• Growth EquityGrowth Equity in Life Sciences: 2026 Market Studythe capital flows, the five sectors in play and the mid-market financing gap in life sciences and healthcare.
• Life Sciences and HealthcareGene Therapy Commercial Viability: From Approval to Patient Accesswhy manufacturing, site of care, payment design and durability remain separate commercial risks after approval.
• Life Sciences and HealthcareBiotech Funding Environment: Post-IPO Window Analysishow crossover rounds, royalty monetization, reverse mergers and partnering replace public equity, and what each choice signals in diligence.

Governing Authority and Sources

• 21 U.S.C. §355, Federal Food, Drug, and Cosmetic Act §505: new drugs
• 42 U.S.C. §262, Public Health Service Act §351: regulation of biological products
• 21 U.S.C. §356: expedited approval of drugs for serious or life-threatening diseases or conditions
• 21 U.S.C. §360cc: protection for drugs for rare diseases or conditions
• 21 CFR Part 312: investigational new drug application
• 21 CFR Part 314: applications for FDA approval to market a new drug
• 21 CFR Part 601: licensing of biological products
• FDA, Expedited Programs for Serious Conditions: Drugs and Biologics (2014)
• FDA, PDUFA Reauthorization Performance Goals and Procedures, Fiscal Years 2023 Through 2027 (PDUFA VII commitment letter, 2022)
• FDA, Novel Drug Approvals for 2025
• FDA, Novel Drug Approvals for 2024
• FDA, Approved Cellular and Gene Therapy Products (2026)
• FDA, Companion Diagnostics
• FDA, Considerations for the Use of Artificial Intelligence to Support Regulatory Decision-Making for Drug and Biological Products, draft guidance (2025)
• 42 U.S.C. §1320f: Medicare Drug Price Negotiation Program
• 42 U.S.C. §1320f-1: selection of negotiation-eligible drugs, as amended by Pub. L. 119-21, §71203 (2025)
• CMS, Selected Drugs and Negotiated Prices (2026)
• BIO, Informa Pharma Intelligence and QLS Advisors, Clinical Development Success Rates and Contributing Factors 2011–2020 (2021)
• NIH, Research Portfolio Online Reporting Tools (RePORT and RePORTER)