Last month in this blog I discussed the variety of definitions of a successful biotech company. Inspired by a recent Boston Globe article about Mike Gilman’s success with start-up Stromedix, today’s focus will be a snapshot of key criteria for starting a successful life sciences company. The three simple starting points for succeeding in your business are problem, positioning and people.
First, start with a problem, not a platform. This seems obvious, but it is often overlooked. Starting with a problem allows you to search for, refine, and develop the best technology to address the unmet need. Of course, there are always exceptions to the rule. Broad disruptive technologies can spark whole new industries. But in general, technology in search of a problem is a much more difficult beginning than finding a problem that can be solved by technology. And yet in life sciences we see companies being founded based on new discoveries and technology more often than the reverse. These companies burn through cash trying out one business strategy after the next, until something finally strikes a chord or they run out of funding. What to do if you’ve started with a technology platform? Move quickly to sourcing talent, i.e. people.
Next, focus on positioning. Sell a compelling story that de-risks it. Take Avila as an example. It was acquired by Celgene in 2012 for $950 million, $350 million of that in cash. The company was funded at the concept stage because the approach made sense. The company had technology to design and develop targeted covalent drugs, selling the concept that forming a durable “bond” has the potential to achieve better efficacy and reduced side effects. Added to this was compelling data that covalent drugs represent a highly profitable class of drugs, previously discovered through other means, not by intentional design. Aspirin, penicillin, and proton-pump inhibitors are all covalent drugs. A recent Nature Reviews article by Singh points out that three of the top ten blockbusters in 2009 were covalent inhibitors, and the scope of molecular targets is broad.
The story can be de-risking through development. It can be about progress to date, for example starting with a known asset or a known effect. The ischemia and vascular biology company Akebia Therapeutics attracted venture backing based on in-licensed, existing, high-quality drug development programs and assets from P&G. Fecal transplants have been proven to be widely effective for resolving recurrent C. Difficile infections, but has historically been done in a one donor to one recipient manner. MikrobEX, a company discussed earlier here, is positioned to be number one in bringing number two to the market as an approved and widely available product. How much more de-risked can you get?
The compelling story doesn’t have to be about the technology or product. It can be about the individual track records – people like Mike Gilman. Or it can be about the company’s value obtained through effective use of non-dilutive funding. Tetraphase, which has successfully obtained more than $100 million in government grants in the past five years, recently filed registration for an IPO. That’s great value. Whatever your strength is or could be, find it and use it as a lever that makes the pitch attractive.
Most importantly, source talented people. And by this I mean people with deep operational experience in your target market. Experienced executives bring years of successes and failures, knowledge and networks. They will ask the questions you did not know existed and provide solutions before there are problems. They will save you time and money.
This seems obvious, so why is it not always followed? Start-ups and young companies are cash strapped. Their boards are composed of those who have invested, or others willing to donate time. And unless those people are experienced in the same market segment you decide to play in, you won’t have the right internal advisors. Find people with the deep operational experience and insights in your market segment. Put them on your industry advisory board, your scientific advisory board, and your company board. Hire them to advise you. Ask, listen, and learn.
The Boston Globe article I mention at the beginning of this post tells a slice of the story of Mike Gilman’s career path, from researcher to industry, to startup and back. But there is more to learn from this story. It is a blueprint for developing a successful life sciences company, by starting with a problem to solve, getting the positioning right, and most importantly, building a team with the right people.