Molecule Blog
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Molecule Blog

Paul Kohlhaas

Feb 11, 2019

8 min read

Hello World. Hello Molecules.

Towards an Open Market for Pharmaceutical Innovation: Announcing Molecule Protocol.

At the age of 12, I first learnt that close relatives of mine were taking prescription medication for mental illness. As an adolescent, the concept of medicating the mind seemed strange, and both worried and fascinated me. But these treatments brought more trouble than good for the people closest to me, and over the years, I began researching pharmacology and healthcare economics to understand why these powerful substances were so freely prescribed. What I found shocked and disturbed me: an industry with the goal of curing people seemed at its core to be deeply flawed and paradoxical.

Pharma, Our Problem Child

In 2018, the pharmaceutical industry generated approximately $1.5 trillion in revenue through the sale of prescription medication. While drug development has been one of the most profitable industries over the past decades, it is also among the most expensive, risky and slow businesses. On average, taking a drug to market costs $2.5bn and takes over ten years with a one in 10,000 chance of success. Because of these high risks and costs, large pharmaceutical companies have actually been cutting their core R&D functions, as return on investment from R&D has been in continuous decline. If you look up “Innovation Crisis in Pharma” on Google you’ll find hundreds of articles exploring the problems the industry faces.

The return on investment from pharma R&D is projected to fall to break-even in 2020, which means it makes more sense for large pharmaceutical companies to cut research entirely to maintain profitability.

Fundamentally, modern drug development is both intellectual property and data production. But the R&D chain today is largely closed source and happens in proprietary data silos. Negative data seldom sees the light of day and companies act as monopolies that prioritise drugs that create the most consumers and revenue, sometimes regardless of consequences. In 2017, over 49,000 people died in the US from prescription medication overdoses in a public health crisis largely created by two large pharmaceutical companies. In comparison, this is more than all the civilian lives lost during the 15-year war in Afghanistan. The now famous cases of companies like Valeant or Martin Shkreli’s Turing Pharmaceuticals highlight a distinctive change in how the industry operates by cutting its core research functions, focusing on acquisitions and financial engineering instead. Additionally, huge drug price increases have made essential medications inaccessible for many of the people who need them most. As a result, public trust in pharma is lower than in the weapons industry. Goldman Sachs released an article in early 2018 famously asking “is curing patients a sustainable business model?”. If that is the basic economic premise driving the modern pharmaceutical industry, the system is flawed at its core. Pharmaceutical research needs to return from big to small, and distributed.

Biotech and chemical engineering are among the most innovative and impactful technologies of our century. Molecules have exponential potential.

“We still have some choice about what kind of impact AI and bioengineering will have on the world, but they will change the world, maybe more than anything that happened previously in history” — Yuval Noah Harari

Unsplash © Avantgardeconcept

From healing body and mind to combating ageing to improving perception and physical attributes — chemical structures define our lives. The past 20 years have seen incredible amounts of innovation. We can reprogram stem cells, decipher the human genome, have developed groundbreaking new gene-editing systems like CRISPR and synthesized rare enzymes that can act as neurotrophins for nerve regeneration. The possibilities for innovation, for recombination, for convergence of pharma and biotech are truly exponential. But our legal and financial infrastructure underpinning innovation has barely adapted over the past century. Patents are antiquated legal documentation that need to be replicated across hundreds of jurisdictions and prohibit research. Large scale financing relies on confidential mergers and acquisitions and public offerings that monopolise the success of intellectual property around companies and teams, rather than the innovation itself.

Enter Blockchain + Open Science

In early 2013, I discovered the blockchain and cryptocurrency community. Like many others, I found an entirely new technological ecosystem based on open source principles. Instead of innovation being developed in large closed organizations, technology such as Bitcoin was being openly committed, discussed and innovated on in public forums. This spawned thousands of sub-currencies that continuously innovated on top of each other. As a whole, blockchain networks developed in public and as a result were quicker to adapt, driven by immediate economic feedback loops in the form of currency, the oldest form of scalable coordination. What if we applied similar models to chemical innovation?

In the scientific community, open innovation has for many years been proposed by specialists as an alternative that could accelerate progress. The basic premise is that research data should be available to all levels of society and shared and developed through collaborative networks. If we think about developing pharmaceuticals, wouldn’t it be hugely beneficial if research and data production between organizations was shared, instead of one large organization single-handedly shouldering the high risk and costs? We are looking to work closely with the Open Source Pharma movement, which has been pursuing this goal since 2014, developing cures for rare tropical diseases in open source Github repos, without patents.

Open Source Malaria Research Repo @

Currently, the majority of pharmaceutical scientific research and development is being done closed source and collected in individual organizations. Seldomly is it shared, reproduced or distributed — and only done so under tight legal constraints that prohibit and discourage engagement. Why? Because all motives are geared toward monopolization. Enter blockchain-based incentive networks.

A New Blueprint for Pharmaceutical Innovation

About 2 years ago, curation markets emerged as a relatively new concept in crypto economic incentive primitive. The guiding principle is to stake value and attention into markets that participants believe to be more valuable, thereby revealing and curating information. Think of them as stock-markets, but for a range of assets and objectives, from digital art, to lists, to molecular structures.

Curation markets allow us to harvest the best ideas in an open market — an innovation that pharma desperately needs. This is why we are building Molecule, a software platform to accelerate innovation. At its core, it allows participants to distribute and crowdsource chemical intellectual property, ranging from drugs to delivery methods, to combinations of chemicals. IP owners can relinquish partial ownership of their innovation in exchange for access to liquidity, research and funding in an open market. This creates new markets for research and development, as anyone — academics, corporations, investors, patients — can signal support and allocate resources by purchasing shares in the development of a specific drug.

Owning a share of a compound has two distinct effects: first, it provides an incentive for researchers to create and publish both positive and negative data about compounds out in the open, accelerating innovation. Second, it provides legal rights for anyone to do so. Patents and IP represent a negative right, which means that anyone wanting to research a compound they do not own needs explicit legal permission or runs the risk of being sued. Molecule fixes this with low-friction design.

In our vision, innovation can become self-enabling and sustaining as the original creator distributes ownership of the IP. The IP is owned by an autonomous market maker that distributes ownership based on demand and supply, using a token bonding curve. We first explored this design in mid-2018 in the article below and have since built out a first prototype.

The flavours which these markets can be designed in are extremely broad and create use case specific Schelling points for innovation. From a business perspective, our mechanism distributes the financial risk of drug development by creating an entirely new asset class that brings liquidity to a high-ticket size market that has never seen it. This will reshape businesses. From a behaviour perspective, it addresses the reproducibility crisis in science, as market participants have incentives to publish both positive and negative data in the open, contributing to a research commons.

Hello Molecule

As we started building out Molecule, we realised that the protocol can unlock value and unite stakeholders in a whole ecosystem of marketplaces, exchanges, data producers and innovation drivers. What we need is a safe, open and simple market infrastructure, where incentives for open data could thrive. Incentives for open data also means that other systems and companies can benefit from them. Interoperability. For example, this could mean enabling AI data marketplaces like Ocean Protocol, distributed IP ownership using Aragon governance frameworks, coupled with a flurry of decentralized exchanges, stable currency and the decentralized finance stack currently being built on Ethereum. This interoperability opens up pharmaceuticals as an entirely new asset class.

This is Molecule. Its network handles thousands of marketplaces for IP and connects both creators, contributors, regulators and investors in an open ecosystem. A marketplace for a drug can transact thousands of trades per second or remain largely inactive due to it's small applicability, supported by low-friction design. On top of Molecule, we envision a vast variety of new drug development business models to emerge. Pharma venture capital firms, which fund research to engage more actively in their portfolio, acting like agile hedge funds. Pharma companies easily identifying and funding early-stage compounds using crowd-sourced data. Scientists participating in the value creation around their inventions and openly collaborating across borders and jurisdictions. Clinical trial contractors buying into their research targets and benefitting from the outcomes. Radical transparency. Radical liquidity. Radical innovation.

We’ve just set up new offices in Basel, Switzerland, the birthplace of modern pharma. From Basel, Berlin and Cape Town, we intend to work closely with researchers, academic institutions, biotech hackers, startups and pharmaceutical companies to make our vision a reality. Distributed molecules.

In the coming weeks and months, we’ll be sharing a lot more insights: our whitepaper, blog posts, code base, team, scientific advisors and affiliate organisations. If our quest speaks to your heart, get in touch and join us to build a bright molecular future.

Interested to contribute? Get in touch with our team on Twitter, Gitlab & join our Newsletter for project updates and announcements.

Paul Kohlhaas

Paul Kohlhaas

De-bugging the global economy. Token engineering, IP, identity, pharmaceuticals and Doge. Founder of Molecule and Linum Labs. ConsenSys & uPort Alumni