Virtual biotechs have been around for awhile, but in recent years, there have been an increasing number of companies that have emerged. As the costs associated with performing R&D has continued to rise, the virtual model is very well suited for small startups. Most everything is outsourced as only a few key members form a team to make sure all the operations run smoothly. Since much of the work is contracted out to CROs, this significantly cuts down on overhead costs such as personnel and lab space. This allows them to quickly and more cost effectively advance a drug candidate through the process.
Unlike in the past, easy access to money has been harder to come by as VCs gravitate towards companies who have low fixed costs and an easy exit strategy. As the management of a virtual biotech usually consists of a few people, VC investments in these types of companies are most likely an investment in the management team. In order for the model to be successful, there must be adequate trust and communication between the virtual company and the CROs that it works with. This is why good care is taken to select a CRO that they can work with and trust. Although virtual companies are currently popular, the fate of their existence will still rely on whether they can successfully develop a drug and can coordinate with a good quality CRO who can perform a majority of the work.