Thinking Small: A Counterintuitive Strategy For Biopharma Startups

By Bennett Smith

Biopharma startups are conditioned to set their sights on blockbuster products, aiming out of the gate for assets that promise billions in annual sales across vast patient populations. The standard playbook is to shoot for the moon, scale up early, and target indications with the largest Total Addressable Market (TAM).

Even as the failure rate with this approach has been punishingly high, with about half of all products failing to reach peak US sales of $250m, it for many is still seen as the only viable way for entrepreneurs to make a compelling case for investment and market access.

But there’s another approach that makes more sense than swinging for the fences, and it’s right in front of our faces. As counterintuitive as it sounds, starting small and thinking more systematically may be the surer path to enduring growth.

Some of today’s most successful companies have quietly used this playbook:

• Vertex Pharmaceuticals began as an oncology business but discovered its anchor in cystic fibrosis, a narrow indication that launched the company to new heights. What began as a niche drug became the foundation for a far broader portfolio and a shift in enterprise direction.
• Celgene’s Revlimid started as a therapy for multiple myeloma, a relatively small market. But that initial win provided commercial revenues and pipeline flexibility, making Celgene a model for incremental expansion.
• With its drug Vyvgart, Argenx also overperformed in a niche indication, generalized myasthenia gravis (gMG), a rare and chronic autoimmune disorder. That instantly elevating the perceived value of its pipeline.

Argenx, Vertex, and Celgene all built thriving businesses slowly and steadily. They de-risked single assets in smaller cohorts of patients, then methodically expanded labels and market reach.

Funding And Regulatory Trends Align With Smaller Starts

Important funding and regulatory shifts in recent years have helped make the go-slow approach more critical and also more viable. For one, the availability of funding for biotech has diminished, making capital efficiency essential. Biotech funding peaked in 2021, with over 934 financings in the U.S. alone, and then dropped sharply the next two years. There was a partial recovery in 2024, but the number of financings was not even half of the 2021 levels, and the focus was on larger megarounds. As a result, companies must deliver proof-of-concept with leaner resources, smaller trials, and less upfront investment.

At the same time, regulators are more receptive to surrogate endpoints and accelerated approval pathways. This allows resource-constrained startups to pursue rare disease markets or niche indications. A trial that once required three years and $100 million can sometimes move forward with a few dozen patients and robust biomarker data.

The net effect: Instead of betting everything on a single, massive indication, startups can carve out manageable wins and expand their reach in phases. They can show a small victory, and then move on to the next battle.

This approach doesn’t just apply to rare diseases. Even in proven markets, like GLP-1 drugs for obesity, companies can strategically enter smaller cohorts, build credibility, and then keep growing outward. Sometimes, a mechanism first tested in one disease reveals broader relevance, as is the case with GLP-1’s application in NASH, Alzheimer’s, and substance cessation.

Obstacles Remain: Investors, Competitors

This incremental strategy is not without obstacles. Investors often resist it, preferring “pattern-matching” investments that follow established blockbusters with clear TAM precedents. They’re trained to reject products with more modest aspirations.

Convincing stakeholders that a focused launch can unlock greater long-term value requires vision and evidence.

Second, small indications present their own risks. A niche market may not scale as hoped; and competitive threats in seemingly tiny spaces can be fierce. Sometimes companies fail not because of the size of the TAM, but because they misunderstand market dynamics, as in the case of Bluebird Bio’s sickle cell effort, which stumbled on market penetration.

Finally, identifying ‘adjacent’ opportunities, where a potential platform technology can expand beyond its initial use, can require not just strategic foresight but luck as well. Most  mechanisms aren’t nearly as extendable as the GLP-1 class.

Here are a few guidelines that can help with this go-slow approach:

Be Patient:  Success comes from using “manageable successes” as stepping-stones. Companies must commit to the process, even when investors clamor for accelerated returns.

Choose the Right First Indication: De-risk the asset by targeting a patient group with severe unmet need, high regulatory visibility, and clear biomarkers. This boosts the chance of both approval and commercial traction.

Think Beyond the Obvious: Consider the full platform potential, and keep exploring adjacent indications where the mechanism may apply.

Roadmap Needed

To overcome this investor resistance, leadership must articulate a compelling narrative that reframes the niche indication not as a final destination, but as a strategic beachhead. Convincing stakeholders requires more than just promising science; it demands a clear vision supported by credible evidence. This involves presenting the focused launch as the most capital-efficient path to validating a novel technology platform and achieving commercial proof-of-concept.

The argument must pivot from the constraints of a small initial market to the long-term value unlocked by dominating that space and securing foundational revenue that can de-risk future expansion. Ultimately, a clear, evidence-based roadmap is critical, showing precisely how this initial win will be leveraged to expand into more lucrative indications, transforming what appears to be a modest aspiration into a scalable and powerful long-term enterprise.

There are different paths to blockbuster status — not just the most obvious, but elusive one. Instead of chasing the largest markets all at once, the odds may improve for those who stack incremental wins and build systematic capabilities.

About The Author:

Bennett Smith is a biopharma commercial leader focused on turning scientific breakthroughs into market successes. He has driven significant growth and revenue for companies including Orchard Therapeutics, Akebia Therapeutics, Regeneron and Novo Nordisk. He is currently SVP of Commercial for a California-based biotech startup in stealth mode.