The biggest challenge facing biotech companies

UnknownKEY TAKEAWAY: Small biotech companies are working to develop new drugs, but the operating structures that give them an advantage are often the first to disappear when they are acquired by big pharma.

Cambridge, Massachusetts has become a hub of biotech startups because of the proximity to MIT, Harvard and other biotech companies.  Late last year we were called to do some consulting for them in areas like drug development and recruiting thought leaders.

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When we arrived, we found an atmosphere of “can do”.  The 175 employees were dressed very casually and some were not even on site.  They used Mac’s and iPhones to stay to stay in touch and I installed a secure company messaging system so employees could talk with one another without the need for meetings.  Their drug was in Phase II development and the results were looking good, but the President wanted outside consultants to help challenge results so they could ensure “all their bases were covered”. The VC group who funded them issued a press release about their promising compound and of course big pharma came calling.  Within three months they were sold to a top ten big pharma company.  That’s when things went South.

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The first thing their new parent company did was require all employees to “work on site”.  Since the cost of living is so high in the Boston area over 30 people chose to resign rather than relocate.  They tried to replace these people with internal people, but their “process driven” culture clashed with what they were trying to do and lead to the departure of more people.

Next to go was their IT person who was replaced with a corporate IT structure.  This meant “goodbye Mac’s and hello Windows”.  It took employees a lot of valuable time to get back to a Windows environment causing more communication and product delays.  Finally the company culture was integrated when the shutdown between Christmas and New Year’s day was eliminated along with the policy of three weeks vacation.  Casual conversations and collaboration were replaced by formal scheduled meetings at HQ which often took hours.

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They had hired a former FDA official as a VP of R&D and by all accounts they were doing everything right, but within a short time she left saying that the parent company was “draining to work with”.  Late last month I received word that the President, and several VP’s had left and the product development was in “limbo”.  But the VC’s made a lot of money.

One of the people in the consulting group I work with, with over 30 years of pharma experience, said he has never seen a “total destruction of a promising product” like we had witnessed.  They went from a small, nimble organization to process driven bureaucracy that killed its innovation.

I wonder how many times this has and will happen moving forward.   A PWC report last year, said the biggest challenge facing pharma was its own organizational bureaucracy.  More and more I find that to be true and frankly, it’s driving good people away.  Will they ever learn?