Last year I was asked to make a presentation on how I would approach strategy in my next start up. I’ve founded several life science start-ups in various countries over the years, and I also consult to companies needing assistance with their business development and strategic partnering, but the request gave me pause because there would be many in the room with a lot more experience (and grey hair) than me. I felt surely everything I have to say is common sense. But the conference organizer reassured me and we both agreed that strategy is often handled badly in start-ups, proving that there is room for more common sense.
I’d recently completed ten years of research on corporate strategy, mainly in biotech start-ups, and knew that many companies don’t realise their early decisions shape the options that they have for plugging into the value chain further down the track. In earlier posts I’ve talked about the typical value chain for drug development and the typical business models companies adopt. Corporate strategy is about how we interact with this value chain – ‘what’, ‘where’, ‘how’ we plug in to get a return for our shareholders.
So, if I was starting afresh, how would I approach strategy in my new start-up? I’d begin with the end in mind.
Consider all options upfront
What, when and how are we going to plug into the value chain? I’d consider all the options, implications and trade-offs upfront. The decisions made about ‘what’ our end product will look like has far-reaching implications for when and how we can plug into the value chain. The decisions we make about ‘when’ we want to take money off the table have implications for ‘how’ we can do it. (You can read more here and here.)
Engage in Business Development from day 1
Yes, that’s Business Development with a capital B and a capital D because it’s that important! I’d employ one or two BD execs as part of the initial team. Their first task would be to get a clear understanding of what big pharma and big specialty pharma companies want … on the premise that if we build what they want, they’ll buy it. It’s also important to understand what potential partners would like to see in terms of data before they’d commit to a deal. This is key before designing costly clinical trials. I’d task the BD team with staying close to the field – including competitors and target partners – building relationships that will help the company remain fully informed while validating product concepts that will smooth the partnering process further down the track.
Focus on commercial proof of concept instead of science
It’s important to understand physician and patient needs, the competitive landscape, reimbursement, manufacturability of the product, patent risk etc. Will the product be commercially viable? I’ve actually seen a company in-license a product that cannot be manufactured at a price below what it would be reimbursed for. I suspect it’s not uncommon for biotech start-ups to value their development stage assets by discounting cash flows from future revenue streams and then deducting the development costs. However, if they don’t apply standard industry risk factors for the stage of development of the asset then they are going to greatly overestimate the return that they are expecting to get from licensing or selling the asset. For sure, big pharma will not be so generous in their evaluations!
Establish credibility with potential partners early
How? By publishing science in reputable journals – but of course only after the patents are locked down. By making sure that we communicate our mission widely to all stakeholders. By building an experienced medical team and engaging with key opinion leaders (KOLs). If we inspire the best KOLs in the field, there’s a high chance that they will be the same KOLs that potential partners turn to get opinions on our technology. And most importantly by delivering on our promises – doing what we say we are going to do, and on time.
Dare to drop dead
I believe it’s important to establish a culture and processes in a company where we continually dare to drop dead by testing the critical assumptions that could kill the company. The first step is for a cross-functional team to map out the critical path in getting an asset to the point of partnering or launch. The team would include BD, commercial, regulatory and clinical members. The team would design drop-dead experiments for each point on that path and only the minimum investment would be made to address the information needed. Each juncture would have clearly defined go/no-go criteria. The key is that following the drop dead or crucial activity, the company will make decisions on further investments or returning funds to shareholders.
It’s hard to say how this talk went over. Some told me it was a solid presentation. I overheard one grey-haired gentleman say he didn’t need to sit through Biotech Strategy 101. But a telling moment was when a technology scout from a top ten pharma company said she felt like giving me a standing ovation ….. clearly there was at least one person in my audience who feels strategy can be done better in biotech start-ups.