Title: BIOTECHNOLOGY MANAGEMENT PRACTICES An Introduction Richard Philpott and John Cassells, Progenta LLP
1BIOTECHNOLOGYMANAGEMENT PRACTICESAn
Introduction Richard Philpott and John
Cassells, Progenta LLPApril 2004To order the
report please go tohttp//www.bioportfolio.com/
cgi-bin/acatalog/progenta.html
2The Dilemma for Investors and Executives
- In a relatively new sector a shortage of
available data, analysis and teachings adds to
the difficulty of - Determining which Life Science/Biotech Co Plan to
invest in - Deciding what shape an ongoing company really is
in - Guiding executives on how to build a solid,
efficient and effective operating model - Investors, executives, staff, partners and
clients are very much learning as they go with
little apparent recourse to tried and tested
management tools.
3The Study
- Mardis Aibel have performed a unique study
- the first objective look at the role of
management in the US Biotechnology Industry - views from within, from biotech industry
specialists and the investment community - identifying the practices that work and those
that dont - highlighting the unique management challenges
biotech industry faces -
4The Mardis Aibel Methodology
- Interviewed over 200 executives from 56 North
American Biotech companies (late 2003) - Involved CEOs, COOs, CFOs, CTOs and senior HR
executives - Companies ranged from start-ups to fully
integrated biopharmaceuticals - Sought expert opinion from
- Investors
- Leading consultants
- Industry heads
- Executive recruiters
- Constructed a management life cycle model with
staged focuses and practices - Comparative analysis against typical industrial
best practices
5Study content
- Volume 1 (Survey data)
- Demographics
- Management Life Cycle
- Management Perspectives
- Performance Management
- Financial Management
- People Management
- Managing the Science
- Outsourcing and IT
- Boards of Directors
- Retention and remuneration of Executives
- Managing Transitions
- Volume 2 (Analysis)
- Independent guru introductions
- Management Implications
- The New Biotech Model
- Business Performance Findings
- Company Characteristics
- Crisis and Transition
- Management Tools and Practices
- External views by
- Investors Bankers
- Executive Search Profs
- Facility developers
- Consultants
- Case studies
6Study Output
- 2 volume first of a kind study
- Practical guide for investors, companies and
advisors - Over 100 exhibits
- Data on how top firms make things work
- The role of the Board and Management
- Best practices for all key functions
- Case studies of leading firms and those who
struggled - Candid advice from investment and industry
experts - Outsourcing review and how-to-guide
7The Issues in the Words of the Contributors
More than one executive has been seduced by the
beauty of a novel discovery and overlooked the
importance of business execution.
The strategic vision underlying the biotech
industry remains valid. What we perceive is a
crisis of management.
Because we emphasize the importance of sound
management, we gain confidence that our science
will succeed, not the other way around.
..there is a paucity of guidance on what it
takes to be a successful executive in the unique
world of biotechnology.
There has been too much hit and miss within
the industry, too much re-inventing the wheel,
and too little attention to answering the
question of what really works in biotech and what
doesnt.
8The Study in Context
- The need to understand the issues
- There are few successful Biotech Co.s to date
- Most have struggled to perform to investor
expectations - Investor sentiment is fairly low
- Attention to management usually takes 3rd place
to the science and funding - Management practices are largely individual,
opportunistic and reactionary - Companies typically struggle to adequately grow
their practices as the company transitions from
start-up to commercial enterprise - How can we do it better?
-
9Mardis Aibel found that
- There is a fairly standard life cycle for
Biotechs - Over 80 underwent significant organisational
transformations in recent years - There are management models that are more and
less effective - There are unique characteristics of Biotech
companies against other industries - Best practices from other industries can be
relevant to Biotechs but are mostly unused - The output of the Mardis Aibel study is a
high-level roadmap for executives to assist
them to design workable operational practises. It
is to be used to supplement normal practices and
is not a panacea.
10Growth pains and continual crisis
Ongoing Investor pressure
Expand quickly to try and meet deadlines
Where will the next funds come from?
and on and on.
Investors frustrated
How much help can/does the Board give?
Cut backs
Valuable company
Start-up
The science is tough enough, its a no-brainer to
ensure the management and processes are up to it
Well characterised science
Sound visionary management stands a greater
chance of success
CEO and Board obsessed with funding
Communication issues
Additional functions
Science doesnt progress to plan
Great scientists
Pressure on Management
Management problems grow
People problems
POOR MANAGEMENT CAN FAIL GREAT SCIENCE
Seemingly credible management
More complex organisation
Burn-rate problems
Staff turnover
From science honeymoon through management pains
to maturity and profit
11The Mardis Aibel Life Cycle Model
One transition after another
12Growth and Transition
Original functions become an increasingly
smaller proportion of management attention
13Objective is to Minimise Disruption in Transition
PROACTIVELY MANAGED CHANGE
REACTIVELY MANAGED CHANGE
productivity performance
UNMANAGED CHANGE
time
14Management Profile
Potential problem areas
15Its hard enough making the science work but
inadequate attention to management practices only
compounds the situation
16Evolving Management requirements
Start-up
Maturity
Focus, Integration and Optimisation
Creativity
Efficiency
With Care
Flexibility
Effectiveness
Disciplined Predictable
Collegial Informal
It is vital to keep a balance and not kill
innovation and hybrid vigour.
Timing and method of change are critical.
177 Keys to Top Performance
- Evolve the balance of relevant discipline and
creativity - Anticipate and plan for transitions
- Involve staff in change, prepare them
- Increase emphasis on performance management
- Add formality and structure as needed (just in
time) - Avoid disabling bureaucracy and administrivia
- Hire disciplined leaders
18OVERALL STUDY PERFORMANCE AGAINST THE FIVE
CRITICAL ATTRIBUTES OF SUCCESS
- Success Attributes
- Strategy
- Execution
- Culture
- Organisation
- Leadership
As rated by the operational executives, industry
experts are more pessimistic.
19Brief Conclusions from the Study
- Management structures inevitably need to evolve
as companies develop. - Biotech companies are poorly equipped to deal
with this - Many founders have little or no prior experience
of appropriate management experience - Transition also calls for a change of culture
away from the psuedo-academic RD norm - Companies with good science can and do fail
because they fail to manage transition and adopt
appropriate management structures - How much more successful would Biotech be if
transitions were predicted and managed, and the
right structures put in place?
20How the study will help Companies
- Best practises
- Building better Boards
- Awareness of transitional issues
- Avoiding overstaffing
- Issues of knowledge management
- Common management mistakes that lead to high burn
rates - Problems most encountered by industry execs.
- Appreciation of outsourcing
- Management structure and span of control
21How the study will help Investors
- Help to build and identify appropriately
structured and managed Biotechs - How the investor can assist the investee
(particularly with regard to nominated Board
members) - What tactics work best when faced with high burn
rates or a shortage of finance. - The incentives expected to attract and retain the
best Execs. - Where investor views differ from those of biotech
Execs. - Some pointers to measuring performance of
companies.
22The bottom line
Is of course linked to the technology
Success
But execution is the Critical factor
Different skills are required to
progress companies as they become more complex
Scientists with management flair can keep
start-ups bubbling along