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But wouldn't the pharmaceutical companies do it themselves in-house then?


They do and they would. This is exactly the argument in tech of startup acquisitions. Sometimes it is just simpler and more efficient to outsource the early bits if there is an ecosystem that supports those early bits. The early stages of development, while cheap, often requires something from the team that is not available in a big company. R&D works this way generally.

Transitioning from “nice idea” to “consumer product” is a vast chasm. Most people that do not actually have experience taking things from research to production grossly under-estimate the amount of effort involved. From a purely economic perspective, the “research” part of the total bill is dwarfed by the activity required to turn it into a salable product.




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