How do biotech companies form? - mcvsd

drawerbeamerΒιοτεχνολογία

6 Δεκ 2012 (πριν από 4 χρόνια και 8 μήνες)

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Answer these questions…

1.
Name 2 ways that you think biotech
companies get started.

2.
What is a spin
-
off in the business world?

3.
What does technology transfer mean to
you?

4.
Define the major areas or departments in a
vertically integrated biotech company.

5.
What is a virtual company and how do they
exist?

How do biotech companies
form?


Two common ways:


Scientist(s) in an academic
or industrial position form a
company to commercialize a
novel idea


An established company or
university forms a company
to develop a potentially
profitable technology


Start
-
Ups


Independent start
-
ups emerge
from a group of expert scientists
with a vision to commercialize a
new technology and
financiers

(lendors/investors) to fund their
opportunity.


The bulk of initial investment
comes from venture capitalists
and
angel investors
(affluent
individuals who provide capital for
business start
-
up in exchange for
ownership equity)

Genentech Start
-
Up


An independent start
-
up


Founded in 1976 by Robert
Swanson (venture capitalist)
and Herbert Boyer
(biochemist)


Boyer (along with Stanley
Cohen) demonstrated
revolutionary gene
-
splicing
technology in 1973.


The first goal of the company
was to validate the potential of
the technology.

Swanson Boyer

Genentech


Eventually, they produced
recombinant human
insulin.


They were unable to reap
the full benefits and had to
call upon Eli Lilly.


3 years later Protropin
(human growth hormone)
was the first product they
independently
manufactured and
marketed.

Spin
-
Offs


Spin
-
offs

are new
companies start from
a technology or
product from a larger
company.


The new company
has access to other
sources of funding
and they can develop
a team to develop the
technology or
product.

Corporate Spin
-
Offs


Corporate spin
-
offs are more
likely to succeed than university
-
based start
-
ups.



They demonstrate higher
growth rates, lower chance of
failure and produce more
innovations than independent or
university based start
-
ups.


Failure rate for
commercial

spin
-
offs
15%

versus
45%

for
university

spin
-
offs.

Spin
-
Offs


Good qualities include greater
business expertise, better access
to capital and markets.


They result from
restructuring

(when research does not match
core business).


Universities must deal with
bureaucracy and a less
entrepreneurial approach
(pressure of frequent publication


patenting is used differently; not
used to exclude competition).

Technology Transfer


Defined as the transfer of
research results from
universities to the
commercial marketplace for
public benefit.


Many companies are
unwilling to invest in R&D
without exclusive rights.

Bayh
-
Dole Act


Bayh
-
Dole Act

(1980) ensured
that patents resulting from
federally funded research would
be broadly and rapidly available
for all scientific investigation.


It allows individual researchers to
patent inventions and grant
licenses for research supported by
federal funds.


Proceeds from these must be
used for research or education.

Stevenson
-
Wydler Act

Stevenson
-
Wydler Act

(1980) established that
government agencies
should ensure full use of
the results of federal
investment in R&D and
requires federal labs to
take active role in transfer
of fed
-
owned technologies
to state and local
governments and private
firms.

Federal Technology Transfer
Act

Federal Technology
Transfer Act

(1986)
authorizes direct
collaboration between
government labs and
private industry
(previously would have
been considered a conflict
of interest).


Biotech Activities


Biotech firms stand out from
pharmaceuticals and other companies
employing biotech techniques due to
their intense research focus.


There are
5 basic activities

in which
biotech companies engage:

1


Basic research & target
discovery

2


Applied research & lead
refinement

3


Clinical and prototype research

4


Manufacturing

5


Sales and distribution

Specialization


Although vertical integration
is possible, many factors
make it more efficient for
companies to specialize in just
a few elements.


So, most companies focus on
one or two of those activities.


Even large vertically
integrated companies
outsource

activities to smaller
specialized firms.

Specialization


Further division can come
from whether focus is on
selling products or services.


Nearly all biotech companies
sell to other companies (as
opposed to consumers).


Some companies combine
product development and
service offerings in a
hybrid

model.

Drug Development

Drug development is currently the favored application of
biotech. Three main reasons why include:

1


Therapeutic products have potential to treat
large
sustainable markets

with motivated buyers

2


Financial and time investment required (along with
patents) creates a
significant barrier for competitors

3


FDA review process represents a series of milestones
that companies can use to track progress


creating
other
market opportunities

Drug Development


These result in high margins with
minimal pricing pressure (profitable
potential)


Drugs versus non
-
therapeutics:
must consider development costs
and financial rewards


Example: enriched foods have
same regulatory burden as drugs
but profits will in NO WAY
compare.


Therefore, development is
discouraged.

Research Services

Research services include:


development and
refinement of lead
compounds


manufacture of
developed products


product testing

Research Services

Their money comes from:


research fees (payment for
service)


milestone payments (granted
upon completion of phases)


royalties (percentage of sales
stemming from service)


service charges
(manufacturing/testing fees


well defined end products)

Virtual Companies


Biotech companies can
benefit from
outsourcing

elements of their business.


Selecting partners with
expertise may be
cheaper

and
more effective

than using
internal resources.


Virtual company

(extreme
form of outsourcing)
outsources
all or most

business activities.



They own or license
intellectual property

and are run by a
few executives who manage the outsourcing activities.

Advantages of Outsourcing

1.
Flexibility. It
becomes easier to
adapt to industry
changes. Contract
partners may not
be dedicated
though.

2.
Greater speed of
development.
Decision making is
quicker.

Concerns for Outsourcing

1.
Security of intellectual
property. Outsourcing
puts intellectual property
at risk.

2.
Control of research and
business activities. At
mercy of contract partner
price increases or
changes in service
quality.

Trends


Many biotech companies
employ a virtual structure
initially


offering equity in lieu
of cash for
proof
-
of
-
principle
research

(demonstration of the
commercial potential).


The advantage is that a more
developed technology will grant
a company higher valuation
(allowing founders to receive
more money for less equity).

Specialties


Specialty Pharmaceutical referred to
companies that acquired rights to
drugs that had been approved in one
or more countries and sought to gain
approval in additional markets.


No research, development only
(NRDO) models license drug leads
instead of developing them with
internal research.


The two terms have merged.


NRDO approach is semi
-
virtual in
structure: no internal research, may
outsource.

Challenges

1.
Inability to capture other
discoveries that emerge in
the course of research.
Many important
discoveries emerge in the
course of unrelated
research.

2.
Need for especially strong
management team


Biotech Team

Small biotech companies
have 3 basic team
components:

1


Scientists

to conduct
research

2


Management

to provide
direction and administrative
support

3


Scientific Advisory
Board

to provide an
objective assessment of the
company

s progress and
goals.



Larger companies may have
additional components, such as
sales & legal teams, but with R&D
at the forefront, those mentioned
are critical.

Scientists


They represent the primary
producers.


They develop products and
technologies that lead to
commercial success.


3 basic roles performed by
scientists:

1


research support

2


research

3


research management


Scientists


Research support

is performed by lab techs. They clean
glassware, maintain reagents, perform routine tasks.


Research

involves many individuals: assistants,
associates (college degree with lab experience), and
scientists (PhDs with post
-
doctoral training).


Managing research

is left to senior scientists (PhD and
expertise). They plan and manage multiple projects and run
labs.

Management


Responsible for identifying
commercial opportunities and
positioning company to exploit
them.


A company

s management team
is the ultimate source of
leadership in strategy,
implementation, and financing.


They must stay focused on
satisfying customer needs


customers buy useful products
and services, not innovative
research.

Management


It is important that the team include
someone with proven scientific
expertise (chief scientific officer).


Another important member of
management must be the chief financial
officer (CFO) who understands the
various forms of funding available for
biotech development and is able to help
raise funds.



They must also manage the rate at which company
spends its cash reserves (
burn rate
) to ensure
sustainable operations.

Board of Directors


A group of individuals (familiar with scientific, regulatory, &
commercial elements) legally charged with the responsibility
to protect the interests of the company and its shareholders.


This group determines the company

s mission and
purpose, selects a CEO, and monitors performance.

Board of Directors


As employees answer to the
chief executive officer (CEO),
the CEO must answer to the
board of directors.


They exist as a means to
override the CEO in the event of
actions of conflict.


The board maintains the
interest of the shareholders.


They also make important
decisions in setting the direction
of a company.

Scientific Advisory Board


Tasked with guiding the
scientific activities of
biotech companies.


Include academic
scientists who are highly
regarded in their field and
may be well known in
business circles as well.


Scientific Advisory Board

They may join for various
reasons:


desire to contribute
expertise


desire to be involved in
development


interest in licensing
opportunities


desire to have equity in
promising company

Scientific Advisory Board


As a company matures, the board
should adjust to changing needs.


Example


may start off small then
become larger and more diverse as
company grows


SAB members are desired to add
credibility to a startup or who can
attract talent or funding.



Example


inclusion of a Nobel Prize recipient
(may also tap their own labs and personal
networks)