The biotech mindset

IN A RECENT ARTICLE in Nature Biotechnology Protemix founder Garth Cooper posed the question: what is biotech? “Arguably,” he wrote, “it is not only a set of tools and the discoveries they generate, but also an individual mindset and the resulting states of operation and management that permit vision, entrepreneurship and risk taking.”

I think he’s right. The mindset of the biotech industry is quite distinctive because it encompasses many behaviours that are different from traditional industries.

From the outset, biotech startups must consider global markets. They don’t have the luxury of incrementally testing their product on the domestic market and then growing it to a stage where they can test the waters in another country. The high development costs and long lead times associated with biotech projects mean biotech companies require outside investors. And those investors are only interested in intellectual property that can be exported internationally, that stacks up and has global relevance.

Secondly, Kiwi biotechs in particular know from day one they don’t have a snowball’s chance in hell of making it on their own. They must reach out and form any number of complex commercial relationships. There are no set rules on what form those relationships will take and, indeed, the relationships can be quite creative and vary from full partnerships to licensing deals. Consequently, biotech companies must be able to engage and operate with a wide range of organisations and achieve the aims of all the groups involved, as well as satisfy their own interests.

Industry relationships are a key success factor. Having a good track record certainly helps break the ice with outside parties. Garth Cooper is a good example of this: his success with the Amylin therapy for diabetes has provided him with a huge network within the industry that he’s able to leverage for the benefit of his new company, Protemix. These networks are obviously built up over a long period of time but once they’re in place, can help considerably in speeding up the progress of a technology getting to market.

The biotech approach recognises that all companies have gaps in their pipelines — and those gaps can be addressed by small innovative companies developing new technologies. There’s a great synergy between the large enterprises that have networks already in place but are without a constant pipeline of opportunities and with those small companies that have opportunities but lack the infrastructure to exploit them.

Another example of how the biotech mindset is distinctive is the diversity of business models. A lot of companies in the industry never sell their products in their own right: instead their business model revolves around revenue from partnering and licensing arrangements with large established companies or a complete exit. Not selling anything in the early stage of a company’s life is fundamentally different to business models of most other industries. This approach requires confidence that the large amount of money needed upfront and the timeframe for commercialising a product will be worthwhile. The upside, of course, is that if the technology is successful, the deals are in the hundreds of millions of dollars rather than tens of millions.

The biotech mindset also requires living with a high level of uncertainty and risk. Biotech founders know that if they get it right, they will reap enormous rewards. But they also know that some failures are part of enjoying success: within the biotech industry failure is okay.

Investors in the US know that, too. They understand that not every technology will work out as planned, and build in a tolerance for failure. Here in New Zealand I think the situation has been less tolerant, but is evolving.

Because New Zealand has such a small number of these high-risk ventures, people are yet to see the big successes. The Americans understand that failure is an important part of business. But biotech is a numbers game. An ongoing flow of opportunities means that company success is inevitable.

Successful biotech is possible here because of a deep well of creativity; on the commercial side there is an important creative element as well. The fact that biotech allows you to do things differently and adopt a very flexible mindset is one of the elements that makes this industry so exciting.