Could Pharma/Biotech Build an Amazon?

Pharma/Biotech Business Model Innovation

When I hear/read about business model innovation in pharma/biotech, the themes generally focus on changes that would improve R&D productivity – moving discoveries from academia to industry more efficiently (some examples of university-related incubators), reproducibility of experiments, venture capital firms creating their own early stage companies, pharma moving R&D innovation external (corporate, biotech and academic).

But what if R&D turns out to be only the tip of the iceberg in the efficiency of bringing new therapies to market? What if to TRULY change the outcomes we have to address the rest of the iceberg – the business of new drugs? Recently Frank David asked where the commercial (pricing, sales, marketing) innovation is in the industry. What about the financials? Again, there has been a focus on the early investment and handoff but what about changing the business model of revenue-generating pharmaceutical companies? What if the norm for reinvestment into a pharma/biotech company changed? What would an “Amazon of pharma/biotech” look like? I’m not suggesting recreating Amazon’s business model (Added after posting: with an eye to their revenue/investment ratio) to focus on therapeutic development but that innovation of that sort in our industry has a long way to go.

iceberg

 

Trail of breadcrumbs…

On Sunday afternoon, I read a blog post by an assistant professor in engineering who systems biology about whether academia is truly broken or just really hard. I suggested the answer is broken – that discussing professors and students is just the part of the iceberg that we can see.

Later in the day, there was an interesting exchange with Michael Gilman, Venture Partner at Atlas Venture and CEO of two of their biotech companies, and Troy Wilson, another biotech CEO. This exchange left me thinking about the pharma industry and the iceberg.

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2 comments on “Could Pharma/Biotech Build an Amazon?

  1. David Miller (@AlpineBV_Miller)
    August 28, 2014 at 2:00 pm #

    Far too few early-stage companies think about commercialization, regulatory risk, or positioning themselves for the public markets. This is partly because founders tend to be scientists/doctors, which makes perfect sense since much of an early biotech’s life is blocking and tackling at the science level.

    The fact top management doesn’t think much about those three areas is really, arguably, a problem with the Board of Directors. While executive management is obsessing about the science, Boards need to be obsessing about the rest and making sure to develop the CEO by exposing him/her to these areas so he/she can talk about it intelligently.

    As to whether biotech “eating its young” is a good thing or not…

    It’s a fact of life and I don’t believe the model will or even should change. One thing we do have to figure out as an industry is to educate public officials on the life cycle of our companies. We work hard to get them excited about our industry, and they have visions of all these little companies growing up to be major employers in their area. This rarely, if ever, happens. So when that little comapny becomes a medium company and gets bought, public officials are disappointed.

    And while we all of us who root for hometown firms end up disappointed, those of us who know that acquisition provides capital and resources for multiple other companies need to communicate that to public officials. We need to explain why the acquisition is a good thing.

    David Miller

    • Laura Strong
      August 28, 2014 at 2:15 pm #

      Thanks David.
      Even when comm & reg have been evaluated, small/early companies are generally focused on executing to get to next tangible milestone to get next influx of cash. Challenging to do more than dream big about how drugs should be integrated into care in that scenario.

      I think your other point gets to the eventual divergence of the goals of financial investors (VC, PE, etc) and economic development professionals (community-oriented investment). In my experience, community funding is generally more limited to short term/tangible deliverables and/or limited by disconnects between what is needed and what has been written into the funding mandate.

      Who can dream big and afford to execute?

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