# Speaking the language: the acronyms and vocabulary that separate insiders from outsiders
You are on a partnering call. The other side says, "Our lead NME cleared IND, we outsourced tox to a CROCROConversion Rate Optimization (CRO) is the systematic practice of increasing the percentage of users who complete a desired action, using data, testing, and user research.Voir la définition complète →, and manufacturing goes to a CDMO. ASP is soft because of LoE next year." If half of that sounded like static, you just spent the call nodding instead of negotiating. This lesson decodes the shorthand so you can follow any biotech or medtech conversation without silently googling every third term.
Before the vocabulary, get the geography straight.
Biotech / pharma develops drugs: molecules or biologics that treat disease. Long timelines (10 plus years), heavy regulation, blockbuster economics.
MedTech makes devices, diagnostics, and increasingly software: everything from a hip implant to a glucose sensor to an app that treats insomnia. Shorter development cycles, different regulatory path, lower per-unit margins but faster iteration.
The acronyms below cluster around these two poles.
NME (New Molecular Entity): a drug with an active ingredient never before approved. The FDA (US Food and Drug Administration) approves roughly 40 to 55 NMEs a year (estimate, varies annually). NMEs are the "new news" of pharma.
IND (Investigational New Drug): the application a company files with the FDA to begin testing a drug in humans. "Clearing IND" means you can start Phase 1 trials.
Phase 1 / 2 / 3: the clinical trial ladder. Phase 1 tests safety in a few dozen people, Phase 2 tests whether it works in a few hundred, Phase 3 confirms it in hundreds to thousands. Attrition is brutal: industry data suggests only around 10% of drugs entering Phase 1 eventually reachreachThe number of unique people exposed to your message in a given period. Unlike impressions, reach counts each person once, no matter how often they see it.Voir la définition complète → approval (estimate, BIO/Informa analyses).
NDA / BLA: the New Drug Application (small molecules) or Biologics License Application (biologics) you file for market approval.
LoE (Loss of Exclusivity): the date a drug's patent protection ends and generics or biosimilars enter. This is the "patent cliff." When a drug loses exclusivity, revenue can drop 80% plus within a year or two.
SaMD (Software as a Medical Device): software that performs a medical function on its own, not embedded in a physical device. An AI algorithm reading a retinal scan is SaMD.
DTx (Digital Therapeutics): software that delivers a clinical intervention directly to patients, often app-based, usually evidence-backed and sometimes prescription-only.
510(k) vs PMA: the two main US device pathways. A 510(k) clears a device by showing it is "substantially equivalent" to one already on the market (faster, cheaper). A PMA (Premarket Approval) is the high-bar route for high-risk devices like implantable defibrillators.
In Europe, devices go through CE marking under the MDR (Medical Device Regulation, EU 2017/745), which replaced the older directive and tightened requirements significantly.
Almost no company does everything in-house.
CRO (Contract Research Organization): runs clinical trials for you. Think IQVIA, ICON, Fortrea. They recruit patients, manage sites, handle data.
CDMO (Contract Development and Manufacturing Organization): develops and manufactures the product. Lonza and Catalent are large examples. When a small biotech says "our CDMO," they mean the factory they rent instead of building.
Why this matters commercially: outsourcing turns fixed costs into variable ones, which is how a 30-person biotech can run a global Phase 3.
COGS (Cost of Goods Sold): the direct cost to make each unit. For a small-molecule pill, COGS can be a few percent of price. For a complex biologic or a cell therapy, COGS can be a large chunk of revenue.
ASP (Average Selling Price): the real price after discounts, rebates, and payer negotiations, not the list price. In the US, the gap between list and net can be enormous because of rebates to PBMs (Pharmacy Benefit Managers, the middlemen who negotiate drug prices for insurers).
Round figures you should carry in your head (all approximate, as of 2025 to 2026):
For a reliable free reference on approvals and industry data, the FDA's drug approvals page and the European Medicines Agency (EMA) site are the primary sources professionals cite.
The back-of-envelope revenue forecast:
Eligible patients × treatment rate × ASP × persistence = annual revenue
Worked example (illustrative numbers):
Then discount heavily for competition and probability of success. If your drug is in Phase 2 with a 15% chance of reaching market, the risk-adjusted value is a fraction of that headline.
If ASP is USD 30,000 and COGS is USD 3,000:
Gross marginGross marginGross margin is the share of revenue left after subtracting the direct cost of producing goods or services, expressed as a percentage of revenue.Voir la définition complète → = (30,000, 3,000) / 30,000 = 90%
That 90% is why pharma can fund a decade of failures. A medtech device with 60% to 70% gross margingross marginGross margin is the share of revenue left after subtracting the direct cost of producing goods or services, expressed as a percentage of revenue.Voir la définition complète → lives in a different economic reality and must sell volume.
For a cash-burning biotech:
Cash on hand / monthly burn = months of runway
USD 120 million cash, USD 8 million monthly burn = 15 months. If your next trial readout is 18 months away, you have a financing problem before you have a science problem. This is the single most important number when evaluating a private biotech.
Vérification des acquis
1. A colleague says their biologic drug candidate just cleared IND. What does this tell you about the drug's current stage?
2. Why does the lesson emphasize that only around 10% of drugs entering Phase 1 reach approval?
3. A device company and a pharma company are debating development strategy. Which distinction between MedTech and biotech/pharma best explains why they think differently about timelines and iteration?
4. Select ALL correct answers about how NDA and BLA are used in the approval process.
Sélectionnez toutes les réponses correctes.
5. Select ALL correct answers that correctly characterize the phrase 'ASP is soft because of LoE next year.'
Sélectionnez toutes les réponses correctes.
When you evaluate a biotech or medtech opportunity, run these before anything else.
1. Check the exclusivity clock. When does the lead product lose patent protection or regulatory exclusivity? A great drug with LoE in two years is a very different asset than one with ten years left. Patent status is public via the FDA Orange Book.
2. Verify the regulatory status precisely. "Phase 2" can mean "just started dosing" or "full data next quarter." Ask for the readout date. Confirm the pathway (510(kkThe average number of new users each existing user generates through referrals. Above 1.0, growth compounds on itself and becomes exponential.Voir la définition complète →) vs PMA, NDA vs BLA) because it dictates cost and timeline.
3. Read the trial design. Is the endpoint one regulators accept? A trial that hits a soft endpoint regulators do not recognize is a failed trial commercially. Public trials are searchable on ClinicalTrials.gov.
4. Separate list price from ASP. Ask what the net realized price is after rebates. In the US especially, list price tells you almost nothing about revenue.
5. Confirm reimbursement, not just approval. Approval means you can sell it. Reimbursement means someone will pay. In Europe this is decided country by country through HTA (Health Technology Assessment) bodies like NICE in England. A device can be CE marked and still generate no revenue if no payer covers it.
6. Check who actually manufactures it. A single-source CDMO with no backup is a supply risk. Cell and gene therapies especially can have fragile, hard-to-scale manufacturing.