Biotechnology Management: The science and the business

There are so many definitions of biotechnology exists today that we do not feel inclined to add to them. Not that the definitions are wrong but they do not necessarily convey the very realistic ideas of the subject. Biotechnology is no more just an innovative academic activity, but rather an intense industrial and commercial involvement. This monograph is an attempt to provide you with a variety of issues, their relative importance and their interrelatedness in managing commercial biotechnology. By understanding the factors influencing biotechnology companies it is possible to select opportunities and position for a rewarding career. Examining existing biotechnology firms can reveal desirable credentials for careers. Many companies list the academic qualifications of their senior management. Job postings also describe necessary qualifications for specific positions. The key to a career in biotechnology, regardless of educational background or expertise, is to appreciate the unique challenges faced by biotechnology companies.

Broadly speaking, the path to commercialization of a new technology may be identified by three phases of evolution: phase one (science-driven), where primary emphasis is placed on scientific research; phase two (technology-driven), with primary emphasis on technology development and standardization; and phase three (commercialization), with primary emphasis on commercial development and application. Modern biotechnology perhaps provides an exemplar of a new form of knowledge production where academia-industry collaboration has been evident in all three phases of this evolution since its inception, driven largely by scientific and commercial requirements. Biotechnology management is a model based on multidisciplinary approaches and problem solving in the context of business applications. This model is characterized by the convergence of a diverse set of skills from a variety of disciplines.

The ultimate test of corporate strategy occurs in the marketplace. The biotechnology industry is finally starting to bring products to market. Most of the biotechnology companies are establishing links with larger, more established drug companies to give them the financial and marketing muscle they need for the next stage of their development. Marketing and sales experts are needed to study and develop markets and ultimately enable the delivery of products to consumers. The significant negative impact of patent expirations on sales represents a great opportunity for individuals who can successfully develop strong brand positions for pioneers to help them sustain sales post-expiration. The more you can explain and demonstrate the understanding of the market, the increasing levels of confidence investors have in the concept and ultimately the firm.

Biotechnology is a very capital intensive business. The manager of a biotechnology start-up faces the challenge of fostering a transition within the founding team from science-oriented to commerce-oriented thinking and action. The central role of funding and financial management in biotechnology establishes a demand for individuals with proven financial expertise. Furthermore, the potential for substantial financial returns has attracted great interest for biotechnology in public markets, creating a demand for analysts, venture capitalists, and investment bankers with an understanding of biotechnology-related financial issues. The major challenge for the biotech manager is the timely acquisition of funding to picking up a financial partner in the strategic business.

Likewise, the primary resource of any technology enterprise is its people. Attracting, motivating and retaining these highly trained individuals are the key concerns of the human resource manager. However, keeping those hearts and minds loyal to the cause is no easy feat. Today's biopharmaceutical projects have a high degree of complexity. In order to properly utilize staff and other resources like suppliers and internal groups, a manager must be able to clearly visualize the desired goal. Human resources constitute an increasingly critical function in any biotechnology company, particularly in an industry that's in an increasing state of inflation. Middle managers and human resources experts are needed for their specialized abilities.

All businesses have to keep ahead of the competition and there is no business activity more dependent on innovation than biotechnology. The creation of innovations in a knowledge intensive biotechnology sector had a profound impact on the biopharmaceutical sector. Considering the prospectus of patenting new drugs and diagnostics both the inventor and a manager of an invention-intensive business will need to understand to make meaningful decisions on the subject. Because of the importance of intellectual property protection in biotechnology, the life science graduates with technical and legal expertise are needed to write and defend patents and assist in the collection and evaluation in the competitive biotechnology industries.

Although, an attempt is made to touch upon all the major aspects – marketing, finance, human resource, intellectual property, etc. - that are part of the business, it would be impossible to cover biotechnology management in one such write-up. In such a rapidly changing environment much of the technology and managers will appear very different next year, next month, and even tomorrow. What an exciting industry it is! It is risky and deeply rewarding. It is fascinating and frustrating but never dull. For all that excitement, you must become, like me, part of the experiment.

References:

1. Konde, V. (2007). Biotechnology Management Blog.
   
2. Konde, V. (2008). Biotechnology in India: Public-private partnerships. Journal of Commercial Biotechnology (2008) 14, 43–55. doi:10.1057/palgrave.jcb.3050079; published online 27 November 2007

Crisis Management - A lesson to learn in Corporate Communication

All businesses mess-up on occasion

What to do when it (all) goes wrong?

• Growing Up Is Hard to Do
• Crisis need not strike a company purely as a result of its own negligence or misadventure.
• Often, a situation is created which cannot be blamed on the company - but the company finds out pretty quickly that it takes a huge amount of blame to hit the ball in its response.
• Clearing the Hurdles & Accelerating the Business

High-profile incidents in the bio/pharmaceutical industry

• Product integrity is constantly challenged, from patent infringement to counterfeits to life-threatening side effects during first-in-human clinical trials.
• Each step of the product life cycle, from idea inception to post-marketing surveillance and product retirement, raises potential legal, commercial, financial and ethical risks.
• Product protection risks should be managed through an anticipatory, proactive approach employing mechanisms found to be successful in monitoring, controlling, and correcting vulnerabilities throughout the product’s life cycle.

Johnson & Johnson and Tylenol Poisoning

• In 1982, Tylenol - 35 % of the US over-the-counter analgesic market - represented 15 % of the company's profits.
• Unfortunately, at that point one individual succeeded in lacing the drug with cyanide. Seven people died as a result, and a widespread panic ensued about how widespread the contamination might be.
• By the end of the episode, everyone knew that Tylenol was associated with the scare. The company's market value fell by $1bn as a result.

Cost and benefit analysis

• The cost was a high one. In addition to the impact on the company's share price when the crisis first hit, the lost production (destroyed goods) and public law suits as a result of the recall were considerable.
• Within five months of the disaster, the company had recovered 70% of its market share for the drug - and the fact this went on to improve over time showed that the company had succeeded in preserving the long term value of the brand.
  

What did the company do?

• They acted quickly, with complete openness about what had happened, and immediately ordered recall from every outlet - not waiting for evidence to see whether the contamination might be more widespread
• They showed themselves to be prepared to bear the short term cost in the name of consumer safety. That more than anything else established a basis for trust with their customers
• Developed better product protection- tamperproof packaging that would make it much more difficult for a similar incident to occur in future.
• They achieved the status of consumer champion.

What the company didn't do was to avoid responsibility.

Vital Communications: Internal & External

• On all media interviews, expressed sympathy and regret for all those affected and immediately promised that the company would pay all medical costs.
• Conducted regular company-wide conference calls on a daily basis, giving employees the chance to ask questions and get the latest information. This approach proved so popular that the practice of quarterly calls survived the crisis.
• Within 24 hours, the company had an explanatory web site (its first) that received 20,000 hits in 48 hours. The company spoke to the press, appeared on TV and carried out direct advertising with the website address. All possible attempts were made to provide up to the minute, accurate information.
• There were critics who refused to credit the company with any integrity whatsoever - but was considered that as an exercise in crisis management

What can other businesses learn from such a biotech blow-up?

• Could J&J have done anything differently?
• Present-day threats and potential costs associated with recalls have never been higher -- one recall can put you out of business. As companies seek to increase their control and in turn, minimize their risks, they discover that varied activities within and outside the organization must be considered, and operations up and down the supply chain must be addressed.
• When potential issues are identified, you can quickly determine the underlying cause, make the necessary corrections, and provide supporting documentation.

Please share your thoughts over this case!

Crisis Management –Technology competent, product license terminated Biotech Company

There are many examples to quote for the major challenge faced by the world’s most successful as well as start-up biotech companies: how to overcome the crisis of technologically competent, product license terminated situation of biotech companies. The question is with little or no money situation, how to generate the sufficient clinical data for the re-evaluation of the drug by the regulatory bodies and how to stay alive until the supporting clinical data is generated! Here, the three best possible options are addressed to overcome this situation and you are welcome to add more to it!

The ‘Tripod’ business model offers a solution:

1. Seek government funding for the better development of the drug and the technology.

If the public health is a major concern, government would most likely to take initiative to support funding a clinical programme and the associated technology development with the industry in collaboration. This way the company can pursue the government agency as a licensing partner in the similar areas of clinical development and generate revenue.

2. Develop the next-stage technology platform and license it for multiple techno-based applications.

The main interest of this strategic management would be to progress the marketing of products based on the technology platform. It would build future values in the form of royalties and potential royalty payments could generate future profits for the company in question. This would ultimately build the company’s own manufacturing capacity.

3. Drive the revenues by selling the drug-associated research reagents and increase recognition of the company.

The technology-related research reagents could be added to the company’s portfolio. This would generate revenues and create awareness and acceptance of the next-stage technology. In addition to building a strong customer base, it would lead to licensing and partnership opportunities.

All the above strategies could go hand-in-hand by partnering with other biotech companies for a secure and manageable future of the company.

Please drop me a line to have your say on this issue.

Risk-reduced cost management practices (No. 5)

5. Drug-Device hybrid model

The biotech investments are volatile in nature considering the probability that the drug would fail during clinical trials phase II or III, after much of the time and money has been spent. It is characterized by high risk, in terms of capital commitment and probability of success, and high reward, in terms of profit potential and exit scenarios.

For example, in India, the diabetic drug insulin is manufactured by Torrent Pharmaceuticals, under licence from Novo Nordisk India, and distributed by Abbott India verses the blood glucose measuring device called ‘AccuCheck’ is manufactured and marketed by Roche diagnostics alone. In this scenario, although the cost or risk is reduced the profit is also shared.

The best way to describe the drug-device hybrid is to look at one of the most successful examples set forth by Johnson & Johnson, who created the market opportunity for the drug coated stents used in the coronary artery diseases. As a result, start-up device companies have been formed to develop drug coated stents, or are adapting their strategies to do so. The prospective for the biotech market indicates that the drug-device combination products will experience a promising future and this drug-device hybrid companies would impact the investment allocations by decreasing the cost and lowering the risk.

Biotechnology in India: Public-Private Partnerships

My recent article on 'Biotechnology in India: Public-Private Partnerships' has been published by the Journal of Commercial Biotechnology, published from UK. Please take a look at the abstract below.

Abstract

The purpose of the study being a survey of public sector- private industry collaborations of the biotechnology sector in India, an organizational and functional overview of this sector was needed. Therefore, rather than studying a hypothetical biotechnology sector in India, the area of this work confined to study the public-private partnerships (PPP) that are occurring in India in the area of modern biotechnology. The Indian Government has been playing an important role in the development of biotechnology sector from the very beginning and there are large numbers of R&D institutions (Scientific, Medical, Industrial and Agricultural) which have been set up by the Government during the past two-three decades. Indian Biotechnology industry is advancing towards new heights in alignment with the growth and progression observed globally. The past performance of the industry indicates that it has surpassed the growth rate of many other industries. This paper also highlights the favorable national policies undertaken to strengthen the Indian biotechnology industry. It is in this context that the paper shows that these collaborations are an expression of more general trends towards a changing role for the country in economic production.

In case, you are interested reading further on this topic, please send me an email to receive the preprint copy of it.

Risk-reduced cost management practices (No. 4)

4. Outsourcing (CROs)

While most attention is paid for reducing the risk and the cost of drug development, from the clinical perspective, contract research organizations (CROs), in order to manage successfully require flexible and efficient management team. Considering the managerial issues, the ‘Monitor closely, Work closely’ team approach proves to be the most accepted across the globe. The basic principle followed by the FIPCOs is certainly based on ‘Inspect, what you expect’ formula. In order to minimize the cost, what needs to be delivered needs to be expected early in the developmental pipeline. Issues like, the increasing attrition rate in CROs, often indicate that the people you end up with are not the people who started the work. The most important thing for any bio/pharma company is to have their communication channels well equipped in terms of rules and regulations that needs to be followed. The middle level product manages required to be rightly placed at the right time in order to monitor the progress efficiently in the hierarchical manner.

From drug discovery to selling, the bio/pharmaceutical industry needs new solutions. Outsourcing provides the small pharmaceutical company the ability to take new drugs through clinical trials by avoid the investment in infrastructure which would normally be necessary. These companies are mostly looking at collaborative research outsourcing work to be done out of India. Another theme on collaborative research outsourcing (CRO) is likely to become the next big wave after contract research outsourcing.

Risk-reduced cost management practices (No. 3)

3. Consumer-driven models

Consumer-driven healthcare is all about inspiring the consumers to choose and use. More like the philosophical and practical assessment mechanism, where one consumer might choose to buy a fully loaded luxury car verses the consumer, who would prefer a compact car model to his or her everyday basic need. Similarly, in the healthcare industry, one patient might opt for a more expensive drug or treatment that provides better quality of life compared to the one opting for an inexpensive treatment that offers adequate health benefit. Spiraling healthcare costs and consumer demand for greater flexibility are the reasons why many biotech companies are moving to consumer-driven healthcare system, which is defined as a system where consumers, not the company or insurance provider, determine how and where to spend their healthcare allotments.

The only obstacle foresees is the consumer education, if the average consumer is not well informed regarding the health benefits. The basic premise of consumer-driven healthcare is that if users of the healthcare benefit see the true costs of a service, and they are given incentives to help manage these costs, overall healthcare costs will decline rapidly while quality care is maintained. This is going to create a tremendous change in the cost-effective and affordable drug making environment for biotechnology companies, in particular and for all of the bio/pharmaceutical industry, in general.

Risk-reduced cost management practices (No. 2)

2. Risk-free clinical trials

Taking the risk out of the clinical trials has been tried successfully by companies like Avalon by developing a fully-integrated technology platform called AvalonRx in partnerships with Merck, MedImmune, ChemDiv, Medarex, and Novartis which utilize a proprietary drug discovery and development platform. It is based on large-scale biomarker identification and monitoring, to discover and develop therapeutics for pathways that have historically been characterized as "undruggable”. Using biomarker’s biochemical features or facets to measure the progress of a disease or the effects of treatment as applied in DNA Sequencing and fragment analysis. Biomarkers can be used to assist clinicians in disease assessment or researchers in their discovery efforts, thus reducing the cost of conducting clinical trials.

Risk-reduced cost management practices in biotechnology companies

Looking at the most successful large biotech companies like Amgen, Biogen or Genentech, and their FIPCO (Fully integrated bio/pharmaceutical company) model, which has the ability to discover, develop, manufacture and market their own drug; it is evident that the risk-reduced cost management practices plays a significant role in retaining the majority of profits for the company. The newly start-up biotech companies strive for survival in today’s competitive environment. It is a general impression that, as we discover more about the genome, we are closer to finding the causes and treatments for the life-threatening diseases. On the contrary, since we do not know that yet; probably more time-span will be required to arrive at a time and cost-effective treatment for a disease. Rising R&D costs and falling numbers of marketing approvals has been the subject of growing attention. To improve the overall probability of success, there is a growing positive perception within the biotechnology industry to follow the best cost management practices. In general, the most successful entrepreneurs recognize this, and tend to build agile teams that can quickly respond to early market information in order to identify a real business model and minimize risk. Here, we discuss one-by-one the top ten practices either followed by such FIPCOs or could be used as a guideline by the newly start-up biotech companies.

During the meantime, please feel free to share your experiences with reference to risk-reduced cost-effective management practices in biotech companies.

1. Fail early, fail cheaply

Considering from the investment point even for a fairly large biotechnology company, the drug development is a costly affair with a long-term dedication. Finding the data points early in the process leads to speed-up the development of keys therapeutic compounds in the pipeline. Of course, every biotech discovery company would like to bring a novel drug to the market as early as possible, but finding that ‘Critical experiment’ that decides the failure of the tests for a particular drug in the early stage of development could save a lot on investment for any early-stage discovery company. Many promising test compounds fail in development due to unforeseen side-effects or unfavorable pharmacokinetic profiles. Profiling key compounds in the early experimental stage can help avoid these late-term failures. Reduction in the attrition rate of compounds could be tackled by key experiments like ADME-TOX (Absorption, Deposition, Metabolism, and Excretion – Toxicity) screening with the benefit of enhanced success in clinical trials. The data from these studies can select compounds for further development and validate results from other test systems such as animal tissue culture models or animal based systems.

The best model is rapid trial and error. Similar to agile development, a company must rapidly prototype, test, fail, change, repeat or go next in the target identification, validation, lead identification and optimization stages. The early detection of problem aids in faster decision making process, quick quality results and expert analysis to provide detailed feedback and ultimately cost-effectiveness. Early stage companies should raise enough money to allow them to iterate - as long as their initial hypothesis is still valid and they are making demonstrable progress towards lowering risk. Although the aggregate number of failures may seem higher (due to the increased number of companies being launched) the ratio of early stage failures to successes is probably still the same. What has changed is that you can now fail faster and cheaper than ever before. Companies used to waste millions of dollars of venture capitalist’s money – and entrepreneurs used to waste years of their lives – working on a failed hypothesis. Now, the cycle is much shorter.

A View from the Top

Managing biotechnology companies successfully is primarily about following the best management practices like Cost Management, Crisis Management, Quality Management, Strategic Alliance Management, and Intellectual Property Management.

In this series, we'll discuss and analyze the different scenarios faced or handled by the biotechnology companies.

Biotechnology management could also be divided into equally important specialized areas like (without any specific order): Sales/marketing management of biopharmaceuticals, Human resource management, Financing/venture capital funding management, and International business management in biotechnology companies.

The intension is to provide a treat or to define a difference to the life sciences' graduates either aspiring or undertaking a professional course in biotechnology management.

So, Welcome on-board guys!

A Me-Too Career Option

(What is it? Why there is a need? Who needs it? How to accomplish? )

In the year 2000, when I completed PhD in biotechnology with the specialization in molecular biology, even sky was not the limit. I enjoyed working with the best biotechnology institutes in India and aboard. Being a molecular biologist, most of my work was limited to molecular neurobiology or bacteriology. Although everyone is fascinated by the glamour biotechnology research and want a bite of the sweet pie, looks like today, the life sciences graduates have limited career opportunities. Also, limited efforts have been made by different job portals to collect employment statistics in the biotechnology management areas, in particular. However, initiatives from the government agencies and educational institutes and undoubtedly from the web-career sections of biotech/pharma companies are underway to address this and to establish a measurement framework for tomorrow’s industry needs. Looking at the scarcity of career opportunities in basic sciences, probably the ray of hope is biotechnology management as a me-too career option for tomorrows’ life sciences graduates.

The key to a career in biotechnology, regardless of educational background or expertise, is to appreciate the unique challenges faced by biotechnology companies. While a majority of individuals involved in research and development have advanced degrees in the sciences, there are numerous other opportunities for individuals without scientific degrees. For many trained in biotechnology and the life sciences it is this core competency in management that creates entrepreneurial success. It is important to realize that technology entrepreneurship is an attitude towards management and technology that focuses on opportunities, needs fulfillment and controlling resources. It is not only focused on risk management, owning resources, or science for science sake. The history of innovation has demonstrated that science alone or the better technology does not bring a technology to commercial success. By understanding the factors influencing the business of biotechnology companies it is possible to select opportunities and a rewarding career. Although, the biotechnology companies focus on researching and developing new drugs, there is a relatively greater involvement in other areas like marketing and licensing that require managers with business expertise in addition to those with scientific backgrounds.

The purpose of this write-up being the know-how of biotechnology management sector as a career option, a functional overview of this sector is needed. Many students either pursuing or aspiring for an MBA find it difficult to differentiate the biotechnology-related specialized management with the usual business administration. However, a real barrier for successful technology firms (especially biotechnology) is the lack of entrepreneurial management skills. Therefore, rather than explaining a hypothetical biotechnology sector, this monograph is confined to introducing the modern areas of biotechnology management. This includes an assessment of how the need for biotechnology management related education is currently being addressed, mainly in terms of commercialization of biotechnology and industry requirements. Aside from research and development, biotechnology companies perform many of the same operations as other companies. Corporate executives, for example, generally have business or management degrees. The biotechnology management could be divided into equally important specialized areas (without any specific order) like: marketing management of biopharmaceuticals, human resource management in the biotech companies, financing/venture capital funding management and intellectual property management in biotechnology. Failures in the transition from scientists to management occur because they believe that adding supervision skills is simply a learn-as-you-go experience. Science Management is an entirely different career from that of the individual contributor in science.

The biotechnology industry, after years of promises, is finally starting to bring products to market. Most of the biotechnology companies are establishing links with larger, more established drug companies to give them the financial and marketing muscle they need for the next stage of their development. Marketing and sales experts are needed to study and develop markets and ultimately enable the delivery of products to consumers. The significant negative impact of patent expirations on sales represents a great opportunity for individuals who can successfully develop strong brand positions for pioneers to help them sustain sales post-expiration. Marketing is important, but it is the biotechnology company who also needs financial resources to complete the development of technology or become the next Amgen or Biocon or Genentech? The answer is quite simple, the more you can explain and demonstrate your understanding of your market, the increasing levels of confidence investors have in your concept and ultimately your firm.

The manager of a biotechnology start-up faces the challenge of fostering a transition within the founding team from science-oriented to commerce-oriented thinking and action. The central role of funding and financial management in biotechnology establishes a demand for individuals with proven financial expertise. Furthermore, the potential for substantial financial returns has attracted great interest for biotechnology in public markets, creating a demand for analysts, venture capitalists, and investment bankers with an understanding of biotechnology-related financial issues. The challenges include making decisions with either perfect (higher risk, higher return expectation) or imperfect (technology, market, people, intellectual property, etc) information to picking up a financial partner in the strategic business.

Likewise, whatever the changing fortunes of the biotechnology industry are, successful management of human resources is essential. Today's biopharmaceutical projects have a high degree of complexity. In order to properly utilize staff and other resources like suppliers and internal groups, a manager must be able to clearly visualize the desired goal. Human resources constitute an increasingly critical function in any biotechnology company, particularly in an industry that's in an increasing state of inflation. Perhaps the most valuable, but often least recognized, source of a company’s intellectual property is the staff. However, keeping those hearts and minds loyal to the cause is no easy feat. Middle managers and human resources experts are needed for their specialized abilities. The volatile nature of R&D and funding also necessitates carefully crafted communications with a diverse audience.

The creation of innovations in a knowledge intensive sector is essentially a dynamic process. The biotechnology revolution also had a profound impact on the organization of innovation creation, and subsequently, on industrial organization in the biopharmaceutical sector. Considering the prospectus of patenting new drugs and diagnostics both the inventor and a manager of an invention-intensive business will need to understand to make meaningful decisions on the subject. Because of the importance of intellectual property protection in biotechnology, the life science graduates with technical and legal expertise are needed to write and defend patents and assist in the collection and evaluation in the competitive biotechnology industries.

So, you've managed to read this column on biotechnology management. I hope you have enjoyed it. I also had a good time writing it. I welcome your comments and suggestions!