One June 3rd, 2010 Nature Biotechnology hosted a ‘Meet the Author’ event at the Nature Publishing Group New York City headquarters. The invited speaker was Mark Kessel, Founder and Partner at Symphony Capital, LLC. Mr. Kessel is a world expert in innovative product development, mergers and acquisitions, and has spent the last several decades advising companies and financiers. His goal during this well attended and intimate event was to summarize the challenges facing the drug discovery endeavor and analyze previous and future scenarios in order to distill important lessons which can help the industry produce continued success. Before attending, each participant had each read an interview with Mr. Kessel and other business leaders from Bioentrepreneur entitled ‘Other ways of financing your company‘ which discussed trends in early-stage biotech investment. Currently, Mr. Kessel is composing an article for Nature Biotechnology regarding challenges in the pharmaceutical sector, and the business development initiatives designed to deal with them. This report will attempt to summarize the talk given by Mr. Kessel to a group of ~20 graduate students and young professionals, and the information he shared will be incorporated into his upcoming article.
Current Problems within the Pharmaceutical Industry
In the future, business development functions will hold the key to success for large pharma, which is composed of the top 15-20 largest pharmaceutical companies worldwide. The well worn traditional model, which has focused on short term successes, is limiting new breakthroughs in R&D. The traditional model for big pharma is as follows: identify new blockbuster compounds, conduct large phase III clinical trials, and mass market approved drugs to the developed world. However, Mr. Kessel asks if this model can really address the world’s current unmet need for new drugs and continued to describe hurdles facing the industry today and in the future. With pipelines becoming depleted, development costs increasing and a timeline of 10-15 years to market, the US pharma industry is encountering strong earning constraints. Unfortunately, Wall Street evaluates companies based primarily on their short term gains and punishes them for not meeting quarterly expectations. This is in contrast to investment in China which is following a controlled and purposeful ten year plan. From 2009-2014 there will be $130b lost in sales by big pharma due to products going off patent. Companies such as Pfizer are buying other companies (i.e. Wyeth), not to replenish their pipeline, but to increase their earnings in order to satisfy investors. In fact, parts of their R&D pipeline are actually being shut down. There has been an increase in direct-to-consumer advertising, which should be examined more carefully and may be promoting products inappropriately. There is growing pressure from generic manufacturers. The FDA has been under increasing scrutiny to look more closely at safety, and the regulatory environment is becoming tougher. For example, Mr. Kessel asked the audience a rhetorical question: do you think the FDA would approve an oncology compound that has been demonstrated to extend life for several weeks, but produces horrendous side effects? The FDA is under Congressional oversight, and there are concerns about how the industry is conducting itself. Another question: If the customer is currently paying $0.10/pill, would they pay $1.00/pill next year for a drug which provides marginal benefit? Mr. Kessel suspects that patients might not be willing to pay more for incremental benefits during these times of budgetary constraints. He wonders if consumers will even be able to buy the drugs they have been paying for in the past. In an effort to demonstrate the direction in which the healthcare industry is moving, Mr. Kessel shares the example of HUMANA. This is an example of an insurance provider and payer, which is currently collaborating with another company BG Medicines to discover and implement biomarkers for patients. One of the overarching problems with non-personalized medicine is that drugs will often benefit only a minority of patients afflicted with an illness. It would be ideal to target those who will respond to therapy and identify them with biomarkers, and avoid dosing patients who will be non-responders. Insurance companies are willing to pay for the test, and patients who don’t carry the markers will not get the drugs, increasing efficiency while reducing side effects and costs.
Mr. Kessel foresees a convergence of the FDA and EMA (European Medicines Agency), with a greater focus on safety which will slow down the approval process. All drugs have a safety/toxicity trade off. In the US, we are looking for perfect safety. However, in some fields, we have deemed side effects acceptable, such as oncology. The future will show an increased focus on longevity. However, big pharma is not prepared to capture new innovation, due to their corporate structure and administrative weaknesses. Their strength lies in their ability to recognize and capture external breakthroughs. There is a need to bolster drug discovery. Cutting costs to maintain earnings is not the panacea. The use of outdated business models and flip-flopping strategies i.e. diversifying pipelines/focusing on core competencies is showing inefficient and non-optimal strategic business development.
The Role of Biotech and Generics
Biotech is viewed as a collective of small and nimble companies capable of performing high level R&D. What’s happening in biotech? There are major capital shortages. Programs are being cut and slowed down. Small companies without a year of cash reserves are being unduly punished by the market. There were 17 bankruptcies in the biotech sector last year, which is more than Mr. Kessel had seen in any year since he began practicing law several decades ago. VC’s have moved their interest to late stage compounds. Biotech is looking to big pharma for capital. The biotech industry is trying to distinguish themselves from large pharma - they don’t want to be “tainted” and need to retain their image and ability to charge as much as possible for their products.
China, Brazil, India, and Russia are viewed as rapidly growing global markets. Consumers in those nations will be frequently purchasing from primary generics producers - Pfizer, Teva, Sanofi. They are willing to pay more for name brand generics, which have increased perceived safety assurances. They are frequently opposed to generics produced in their home country. Most new compounds in development are coming out of the US. China will soon have a robust pipeline, as well. Their is a diminishing pack of Phase III compounds to pursue, creating a very small universe for pharma. There are many in-licensing deals occurring. The number of new compounds produced has been cut in half, while the budget spent on bringing them to market has doubled. Compounds which are in-licensed should be deployed. The need to maintain earnings is the most pressing issue for management. Pharma has the cash on hand, this is not the problem. However, that cash is only generating 2% interest sitting in the bank. For example, pharma is engaging in share buyback programs and purchasing outstanding shares with cash in order to control their per share income (less shares creates more revenue per share when revenue is held constant). Shareholders expect their investment to go towards innovation, instead of buying a financial instrument.
Approaches to Addressing Cutting Edge Science
Companies are assessing the cutting edge science being produced at academic institutions. VC is focusing less on early state companies. Pharma has set up their own VC wing. Sometimes they outsource their VC arm to third parties. They are investing in companies that have new platforms. Accelerator programs, such as Lilly’s Chorus have been developed as independent divisions to carry out drug development until Phase III, independent of corporate management. These divisions are sometimes spun out as new companies. There are new partnering deals occurring, drugs are becoming pre-partnered. Other companies are even experiencing foreign take overs.
How did Big Pharma Become the Partner of Choice?
The ultimate solution would be to combine the best of biotech with the best of pharma. Biotech has the entrepreneurial spirit, which can move fast and make quick decisions. Pharma has a global sales force in place, are experts with large clinical trials, regulatory affairs and has cash on hand. Pfizer has attempted a hybrid approach by creating a unique business development unit for each of its therapeutic areas, independent of each other. However, to change big pharma there needs to be a mandate from the top which awards risk taking. These companies are not taking on great compounds in order to avoid risk. Mr. Kessel suggests a change in compensation which allows leaders to shed their “risk avoidance” behavior. He mentions that “no one has ever been fired for not taking on a great compound”, but one can sure be fired for not getting their compound to pass FDA approval. Management consultants, such as McKinsey could be used to help change the corporate culture, though this often takes 5-10 years. There needs to be a creative approach to deal making which helps support innovation on the drug development side. The one size fits all approach needs to be dismissed, and the industry needs to consider new areas of opportunity. For example, the healthcare IT industry is developing databases on how patients respond to various compounds based on previous clinical trials. This could be used in the future to predict the human response to new drugs and streamline the regulatory pathway.
Final Comments
Biotech traditionally suffers from poor management, in that they don’t abandon their failing compounds early enough. Many opportunities still remain for large in-licensing deals (20-90 deals next year). Biosimilars will play an important role, though there will be less of them with more focus on generics. In the future, diversification will be key. Productivity will get worse and we will look to biotech for compounds. The Novartis Model will become more common, as big pharma purchases branded generics, consolidates, and acquires.
Tags: · biotech, Education, pharma
On Oct. 25, 2009 the Fundamentals of the Bioscience Program Alumni Organization launched its official alumni website: fobip.org/alumni. The Fundamentals of the Bioscience Industry Program is a semester long collaborative course covering information critical for students to prevail in the biotechnology, pharmaceutical, and business worlds. Graduate students are able to hear and watch seasoned professionals from both start-up and established companies describe their career paths and discuss their business models. The program has an excellent reputation for producing bright, motivated students who have been extremely successful in their careers.
The target audience for the alumni website is professionals working in the biotech and pharma industries. I wanted to create a resource that would feature useful articles from alumni and guest authors with experience relevant to program graduates. One of my goals was to put a spotlight on the alumni and draw attention to the high caliber of its course instructors, graduates, and applicants. We hope to feature articles covering the the financial industry, venture capital, intellectual property, technology transfer, recruiting, and academia in relation to biotechnology. We want to provide information that will be useful to the start-up entrepreneur, industry veteran, and job seeker. Without any advertising we have had already 1,000’s of page views and hundreds of unique visitors. I am hoping that the content we generate will be a useful resource and we are aiming to add interviews and new articles approximately every 2 weeks.
I dreamed up this concept in early Summer 2009 and discussed it with Kate Posnanski, Manager of Programs at the Center for Biotechnology. With the help of many program alumni such as Jenne Relucio and Banke Fagbemi, we were able to bring the project to fruition and launch the website this Fall. I decided to use my experience creating websites use Wordpress to generate the blog format with some additional features. We have an alumni page we are trying to build on every day featuring over a dozen of our graduates.
On the techie side, I used Wordpress as my publishing platform with the Red Evo News Blue theme from Red Evolution installed. This theme evens offers a modest support forum which was able to answer some of my questions about theme customizations about controlling the length of the except. The except is the text displayed on the homepage describing the content of an article in brief. Also, I took advantage of using custom fields for the first time. Before creating this site, custom fields were a complete mystery to me. I found this video tutorial EXTREMELY helpful, and now I use the custom field to display images on the homepage for each post. There are both thumbnail and featured image custom fields available, built into the Red Evo News Blue theme. This was also the first time I embedded a Google Calendar into a website. That part was extremely simple, and if you want to know how to do that check here.
In summary, I hope to continue building this special website, which I hold dear to my heart and hope it will bring alot of benefit to the Fundamentals Program and its graduates. Cheers!
Tags: · biotech, internet, jobs
By Mathew A. Engel
Day 1 Summary: Venture Capital Financing, Intellectual Property Management, and Emerging Business Models
The 2009 Life Science Summit took place from September 23 to 24, 2009 at the Hyatt Regency Hotel in Happauge, NY. There were hundreds of attendees representing the biotech industry and academia from all over the state. The industry attendees showed a diverse segmentation with strong representation from university technology transfer offices, law firms, venture capital firms, medicine, privately held biotech companies, mid and large-cap pharmaceutical companies. As a graduate student and alumni of the Fundamentals of the Bioscience Industry Program, I spent most of my time talking with accomplished professionals from successful companies who had experience commercializing technology, raising capital, or evaluating new ventures. Below I will summarize my findings from the most interesting sessions throughout the first day of the summit. Hopefully, in the near future I will publish a follow-up covering day 2.
What Does it Take to Build a Biotechnology Company in Today’s Environment
The opening plenary session was a great way to spark the crowd’s interest and attention. In the back of my mind, I am always thinking about starting a biotechnology company and therefore always eager to hear advice from seasoned industry veterans. These individuals, especially those who volunteer as panelists or speakers are often willing to share their knowledge and offer some deep insight to beginners. In this session the speakers focused on how to raise capital. Those who are evaluating your proposal will be thinking “where is the technology” and “where is the project”. It is suggested that you network and these connections will lead you to investors who can also guide you into small collaborations. Their role is to keep these smaller companies on track. Currently, most of the demand is for products in late stage clinical trials, in this space demand remains high. Pharma is limiting their investment to certain therapeutic areas. The days of massive deal for a new platform technology are behind us. The huge investment in genomics with no products to show for it was cited. Most deals come about because someone knew someone. It’s not just writing a business plan and patents (though that is still required!). Venture capital (VC) will only stay in for a very short time. Pharma will only jump in Phase II. VC largely invests in people they know. Mailing the best business plan in the world to VCs will get you nothing. You have to meet people some way that might invest. For example, some of the people on the panels today are Angel investors. Remember to “pick your partners”. The entrepreneur better be prepared to invest. Are there other options besides start-up? Many of the panelists, knowing what they do now, would not have chosen to start their own company. “Got to be ignorant to go do it”. Today, businesses are focusing on staying extremely lean - infrastructure is reduced. Reducing the amount of money necessary to operate. However, a company can only “be so lean” and achieve their business goals. VC is not going to be the “sugar baby” that’s going to take the company all the way through. There are drug discovery and medical chemistry labs on campus. The university should have a funding pool designated for small companies coming out of academia. One of the panelists spent time describing the experience of his friend who was trying to raise capital. His friend took no as just another opportunity to go back to him. However, it’s good to get someone with more experience and put together a team of people. “Build a culture and your company”. Medical devices is a great area to get into now. Diagnostics tools is a “neat area to be going into”. Get management in - VC looks at management team. Get help and advice from VC. Donald L. Drakeman, Venture Partner at Advent Ventures had previously ran a company and was now a VC. His motto is “management, management, management”. What makes great management? Management that will step aside.
Is the VC funding Model Broken?
Mary C. Tanner, Managing Director at Peter J. Solomon & Co. and Maggie Flanagan LeFlore, Managing Director at MedImmune Venture Inc. were two of the most outspoken panelists during this business workshop. The panel delivered an overview of the VC industry covering current trends in their investment strategies. VC’s are adaptable and clever. They are in the business of building private companies to be sold. Their goal is to reach a deal with your company, in which payments are made as milestones are met. LeFlore covered 18 deals in the last year. Private companies are easier to sell. Fewer and fewer big pharma are in the market for these investments. Their has been a fundamentals shift in exit strategy. Survival has followed those most adaptable to change. There are many exit strategies. How to get the VCs interest? Early stage risk is notorious, your goal should be to find little pockets of money to move things forward. Your faculty members better be well known (i.e. published in Nature, Science, Cell..). One of the panelists, E. Jonathan Soderstrom, Managing Director of the Office of Cooperative Research at Yale University had brought a compound to the attention of Lily. They asked for a proof of concept in humans! He did not even have that in animals. The message is that you cannot expect Lily or Genetech to fund your development costs when the product is highly experimental.
Tags: · biotech, Stony Brook
September 18th, 2009 · No Comments
Tags: · biotech, Science, Stem Cells, Stony Brook
The program remains an outstanding opportunity for academic researchers and students who otherwise may never have had personal interactions or exposure to seasoned professionals and industry veterans. Actively participating in the course gives job seekers many advantages, and as an alumni I can attest from my own experience and from the experiences of others that it can open many doors. However, like any good opportunity, your results will depend on what you make of it. This year I was invited back to give a short talk on a topic of my choice. As a successful job seeker, I have found that one of my personal strengths is the ability to make connections and find work in a field that interests me. Lorrence Green, President and owner of Westbury Diagnostics Inc, was present that day and set to teach the course. Larry and I have worked together, successfully launching his corporate website which has increased his company’s visibility, in addition to retaining and attracting customers.
Therefore, I decided to give a talk on the importance of professional networks and other traits which will give the job seeker an advantage. I began by asking “Who wants to work in industry?” and “Who wants to stay in research?”. These are very important questions to consider when embarking on a scientific, legal or business related career in biotech. Most of the class knew they wanted to go to ‘industry’, though the majority of students don’t know how to make this transition occur. Therefore I focused on three main points: (1) Networking (2) Internships and (3) Skills with an emphasis in their relation to the job search.
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From my experience I have found that meeting new people is the key to finding those covented jobs which may be available, but often unadvertised. For example, at conferences it is to one’s advantage to speak out and ask questions. This is a great way to get noticed, spark conversations and find out some new information about a speaker’s presentation. It also allows you to more comfortably introduce yourself to a speaker after their talk, if you have already addressed them in a public forum. |
I find it helpful to attend any conference I can which is related to my field that has professionals available to rub shoulders with and ask for advice. Here, one should take the opportunity to meet new people and even collect their card, if the situation warrants. Often, I notice the ‘pathological’ networker, moving quickly from one ‘victim’ to the next in an effort to collect as many business cards as possible. I occasionally see this technique in action and find it unsuccessful (by observation only!). I would rather make 3 excellent contacts who I stay connected with, rather than many ‘weak’ contacts with individuals who would not remember my name or face the next day.
With today’s job market being so competitive, companies are often looking for people who mostly have experience. But without experience, how does one gain experience in the new field they are interested in? First of all, there is always demand for great people. Next, there are frequently internships to aid in this transition process. Apply for every job you can. As my father once told me, “if you never apply, you’ll never get the job”. It is important to consider different opportunities, have an open mind and think “I can do this” - meaning that you are motivated and interested in learning new skills which will make you more valuable in the market. These skills do not include just hard science skills, or research abilities.
There are a multitude of jobs available in quality assurance, scientific writing, FDA regulatory affairs, and intellectual property. Alot of this work can be found in government agencies themselves, such as the USPTO. Remember to always keep your resume up to date. Mine can be found here. I keep multiple versions available - some for private distribution and others for public distribution. When looking at a job advertisement, keep in mind it is not necessary to meet all their requirements listed in the ad. These are often just desired characteristics, such as “6 years experience”. They may very well end up hiring someone with 4 years experience, if they fit best into the company’s culture.
Once, you are on the job, a whole new set of rules applies. A great tip I heard from Saied Tousi, VP at the Pall Corporation, was to always arrive before the boss. Another is to dress well. It pays dividends to consistently look professional. At conferences I recommend to dress as well as you can. There is a large difference between the what professionals can wear to work in academia and industry. Show people your resume and get feedback. This has been invaluable to me, and has allowed me to adjust my CV frequently with the help of a more experienced eye. Finally, it is important to always be on the look out. I suggested taking advantage of the corporate culture module portion of the class and to network with the course instructors themselves. Coincidently, the main presenter for the day was Bill Liggan - an energetic human resources professional at Icon Laboratories. Bill is an experienced recruiter with great knowledge about cultivating relationships and marketing yourself. It was a great opportunity to meet and share ideas, since our topics were so related.
But most importantly, you are in control of your own destiny. When you finish graduate school, a job is not just thrown at you. Doctoral students have a very specific set of skills in their field. Our strength lies in the ability to leverage our analytical powers and determined nature to complete difficult tasks. So to all the job hunters out there, good luck and best wishes!I hope these little tidbits were helpful and maybe even inspiring. When you land that big job, don’t foget to say hi!
Tags: · biotech, jobs, Stony Brook
