Only a few years ago, the biotech sector was considered “The Wild West”—both figuratively and literally. Largely based in California (with some presence in Boston), these few biotech companies pursued strange ideas and the likelihood of success seemed doubtful. Companies in this field were seen as renegades, as refugees from Big Pharma, and as playgrounds where crazy scientists could wear shorts and sandals and work on esoteric scientific projects. Commercial success was still a distant dream for those in the biotech industry.

Time travel to today: What a difference 40 or so years make. Today, not only is the biotech industry—or “biopharma” industry—thriving, but also many of its elements are being replicated (with varying success) in the pharmaceutical industry across the U.S. and around the globe.

To be fair, biotech has existed for many years in large pharmaceutical companies. Companies involved in vaccine production (such as Merck and GSK and their recombinant Hepatitis B vaccines), which were launched in the early 1980’s were essentially biotech successes. However, they generally operated within the structures, cultures and processes of their respective Big Pharma machineries and were seen more as “research and business units” than as biotech companies.

Biotech’s Enviable Innovation

Today’s biotechnology companies are transforming the industry in many ways—from the largest ones (Genentech, Amgen, Genzyme, Biogen, etc.), to the smaller and up-and-coming ones (Seattle Genetics, Regeneron, Medivation, Intercept, Relypsa, Tesaro, Portola, ZS Pharma, and many others). Innovation coming from these companies, and often from their business and research partners, is enviable: Their aggregate probability of technical success is higher than elsewhere in the industry and shareholder returns are substantial.

Perhaps the most important consequence, though, is that they are delivering remarkable products to meet needs and ultimately provide solutions for very challenging medical problems. Susan Desmond-Hellmann, MD, MPH, former President of Product Development at Genentech and now Chief Executive Officer of the Bill & Melinda Gates Foundation, confirmed that her mission, and that of Genentech, was to perform research that will result in “rewriting medical textbooks.”

I am often asked what the “secret sauce” of companies in this sector is. The distinctive and unique factors that have made this corner of the industry such a success are not something that I, or anyone else for that matter, can likely pinpoint. Nevertheless, I’ll try to outline a few key elements that I believe have made a difference. Of course, these are generalized and some are present to a greater or lesser extent in both biotechnology companies and pure pharma players.

In my experience, success factors fall into three key areas: 1) People, 2) Strategies and Mindsets, and 3) Processes.

1. People

Those who have worked for a biotech company—or any consultants and agencies who provide services to them—tend to describe the companies and their people as optimists who are passionate, flexible, adaptable, comfortable with new and different journeys, and who have a get-it-done attitude. They are also more understanding and expecting of risk. Even when failure strikes, which it invariably does, these companies tend to have an instinct to “fail forward.”

In many cases, these descriptors are often used as contrast to traditional Big Pharma companies. Of course, many of these attributes can be found in those companies as well and the reverse is true too, but they seem to be less descriptive of the overarching, defining principles.

2. Strategies and Mindsets

In relation to the people—but also more holistic in nature—biotech companies tend to have different strategies and mindsets about pursuing their scientific and commercial strategies. Of course, with only one or few assets that could become products and result in the survival of the firm, strategies tend to take a different sense of urgency and criticality, so these companies benefit from an “all hands on deck” mentality. But there are additional nuances worth mentioning.

Biotech companies tend to “follow the science” as opposed to “following the focus.” For example, most Big Pharma companies have developed strong research and commercial strengths in limited therapeutic areas. This dependency inspired a driving force and focus with all research directed to finding follow-up compounds in similar therapeutic areas.

Companies with a large proportion of existing business in cardiovascular areas, for instance, subsequently work to build on that focus and develop more products in the same or adjacent areas. The problem here is that this research approach is arduous. Looking for very specific “needles in a haystack” in the form of specific follow-up successes has proven to be extremely difficult and is the source of many failures, some of them staggering in terms of cost.

Working Across Therapeutic Areas

In contrast, biotech companies (with some exceptions) generally don’t pursue one particular therapeutic area alone but instead research promising, cutting-edge science or technologies, regardless of therapeutic area application. While this approach has its downsides, it opens up many degrees of freedom, allowing companies to pursue more opportunities and be comfortable in making early “no-go” decisions. It is possible that issues may arise when the time comes to support a new therapeutic area of research and build clinical research, medical affairs and commercial teams. However, this slight setback can be a better investment than chasing dead ends with the capabilities already set in place.

Almost every company discusses “meeting unmet medical needs.” When dealing with rare, more difficult-to-treat, or more deadly diseases, one tends to be comfortable with higher-risk pursuits, amplifying our ability to attract and retain great talent, to get the attention of regulators and payers, and to attract scientific and clinical collaborators. There is a sense (perhaps only an illusion) that “patient centricity” is more real in biotechnology than elsewhere. This may be due to the nature of the diseases or the complexity and cost of treatment, which makes these companies appear compelled to do more for patients.

Learning from Failure

Biotech companies tend to depend on relatively few assets, and so when a key study fails, they can feel duty-bound to understand where and how it failed instead of simply discontinuing research efforts. One research executive described this as his obligation to learn from failed experiments. One great example of this phenomenon: How Herceptin came to be such a success for HER-2 positive breast cancer. Initially, the product did not meet study goals in a broader breast cancer population and the product could have been shelved as a failure; however, encouraged by scientists and patient activists, the company continued studies and eventually demonstrated great results among a particular subset of patients that normally suffer some of the worst outcomes. These patients benefit tremendously from this treatment.

Another prominent mindset in biotech research is comfort with “not invented here” innovation. The collaboration, licensing and M&A deals in biotech are frequent and celebrated. It is hard to find one company or one product that has not depended on the discoveries and technologies of others. Biotech companies often have an unrelenting willingness to partner, often in equal or subordinate terms, as opposed to deals with large, established companies who often wanted agreements in their terms only. Stories of this contrast abound among business development folks in small and start-up companies—though there is a general sense that this is changing for the better.

3. Processes

Company processes are all different; some are by design and some are out of necessity. Let’s first focus on decision-making.

Generally speaking, smaller companies tend to have faster and more efficient decision-making processes. There are simply fewer people involved and fewer resources and degrees of freedom from which to choose. Additionally, an increased sense of priority and resource-scarcity favors prioritizing important work instead of bureaucratic activity.

However, it becomes increasingly difficult to maintain that fast and efficient decision-making approach as a company grows—more people, more functions and more politics along with an overall greater complexity exist. One factor of success is the ability to keep such a nimble decision-making culture and process even with company growth. Some biotech companies have been able to do so by attaching the decision-making accountability to those with the responsibility to execute such decisions. This has resulted in speed, clarity and certainly, relevance. As one executive notes, “Committees should not decide because they don’t execute. People should decide because they do.”

How investments are made is something that is also approached differently. As companies grow, the infrastructure grows with them and often becomes bloated. This can become a burden and cause periods of shrinkage in which companies look to “do more with less”—something we have seen occur repeatedly. Although it is difficult to achieve and likely hard on individual workloads, smaller companies try to “do less with less” by choosing their battles, using insourcing and outsourcing strategies and focusing resources.

Ultimately, there is no “secret sauce.” All of these ingredients can be found across companies in all corners of the industry. However, how these components are nurtured and combined has affected the industry’s transformation and, as a result, everyone is learning and transforming.

  • David Davidovic

    David Davidovic is Founder of pathForward LLC. He has over 33 years of experience in commercial functions in the pharmaceutical and biotechnology industries. Most recently, he was Vice President and Global Head of Commercial Services for Roche and Genentech. Prior to joining Genentech in 2005, where he was for almost eight years, he served 24 years at Merck & Co. Follow him on Twitter @pathFW.

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