Promising to Make Drugs Cheaper is Making EQRx Very Rich

Yesterday a pharmaceutical startup called EQRx announced a $500 million Series B funding round, bringing the company’s total haul to a whopping $750 million in its first twelve months of existence.

In a pharma landscape where pushing for higher prices is the norm – EQRx is leaning into a contrarian business model – attempting to undercut the competition with cheap, alternative drugs.

Imitation is the Sincerest Form of Market Disruption

Playing copy-cat is old hat in the world of healthcare. Generic and “biosimilar” drugs typically enter the market immediately after a branded drug loses its patent protection.

The EQRx model is different. Instead of waiting until a branded drug loses IP protection, EQRx is developing entirely new drugs that leapfrog off validated clinical research from other companies.

In essence, EQRx will tweak the biological mechanisms of other drugs and go through their own set of clinical trials to develop what they call “equivalars.” By doing so, CEO Alexis Borisy says they can get through clinical and regulatory approval more quickly and for a fraction of the cost (they predict 1/3 to 1/5 the cost of the competition).

The Players: CEO Alexis Borisy’s bold promise to undercut the entire pharma industry has drawn skepticism from some, but the company’s fundraising haul and top-class investors — including Alphabet subsidiary GV and life sciences investment firm Casdin Capital — suggest this is no Theranos redux.

Pharma Realities In The USA

Unlike other industries where lower prices often equates to more demand, the same reality may not be true in the U.S. EQRx has acknowledged it will face steep competition from the massive marketing budgets of branded drugs.

Large pharma companies have a significant market to defend, which for the healthcare system – means massive cost. Americans pay more for prescription drugs — about $1,200 per person per year — than any other nationality in the world.

The Flip Side: At the same time, the U.S. brings (by far) the most innovative therapies to market.