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This is a guest post by Gerry Langeler, Managing Director with OVP Venture Partners. Do you have a response to Gerry’s post? Respond in the comments section below.

gerry-langelerMany scientists conduct research they believe can have commercial value, and so they fancy themselves as budding entrepreneurs. But a remarkable number stumble over predictable hurdles when they try to make the switch from researcher to start-up founder.

Between academic research and commercial success lie a set of challenges that I discuss in my book “The Success Matrix – Winning in Business and in Life.” It turns out all business endeavors (and for that matter all personal endeavors) consist of three basic elements:

Vision – Process – Output

You have to know where you want to go.
You have to have the skills and resources to get there.
And then you have to execute.

It sounds so simple.
But history shows getting it right is very, very hard.

As a scientist and researcher, you have undoubtedly run this drill many times. The problem is the context changes when you go from academic activities to commercial ones. Regardless of your responsibilities, there are eight possible combinations of presence or absence of Vision, Process and Output, and we can name those combinations as “characters” with predictable strengths and weaknesses.

the-success-matrix

If you have Vision, but no Process or Output, you are a Dreamer.
If you have Vision and Process, but no Output, you’re an Academic.
If you have Vision, no Process, but Output, you’re a Brute.
If you have no Vision, have Process, but no Output, you’re a Bureaucrat.
If you have no Vision, have Process and have Output, you’re a Merchant.
If you have no Vision, no Process, but have Output, you’re a Grunt.
If you have none of the above, you’re a Loser.
And if you have them all, you’re a Success!

When you change from academia to business the definitions change, too

What makes this difficult for scientists is that the definitions of what makes good Vision, Process and Output are different when you change your objective from accepted peer-reviewed research papers to customer accepted commercial products.

Bulletproof experimental results may be required to pass muster with your peers before you can get published in Nature. But, in the world of commerce, you’ll need to blend scientific integrity with effective cost and time-to-market progress toward commercial stages that keep companies afloat.

Now, that doesn’t mean you can trot off to the FDA with just a smile and shoeshine. But it does mean that you’ll need a different Vision, a different Process, and be measuring yourself against different Output if you want to be considered a Success as an entrepreneur or a member of an entrepreneurial team. That presents for you a required change from what made you successful as a researcher. What got you here won’t get you there.

As a board member of biotech companies, I’ve seen this struggle up close. By definition, we only want to invest in world-class researchers who we believe are on the cusp of scientific breakthroughs. But, then we have to get them accept that our money is not infinite, nor our patience, and so they need to “invent to a schedule.” Yet, as we all know, no one can actually schedule inventions, or breakthroughs.

So, what is needed is an appreciation by the scientists that “the perfect is the enemy of the good” and that “good” is often good enough to move forward, even if that feels uncomfortable to those for whom “perfect” (or nearly so) has been their standard.

It is still publish or perish, but with different rules

To be fair, in some ways the commercial world mirrors the academic when one considers the “publish or perish” doctrine. You can’t go on forever doing research without Output (what you publish) or your source of grant funding will dry up, or your tenure will never be approved. The difference is in the commercial world, the “time to publish” is more constrained. And in the commercial world, “publishing” means demonstrating enough progress, to whoever is your audience, so that checks continue to get written.

But those demonstrations of progress are not nearly as constrained as a peer reviewed research report. Those of us who invest in biotech for a living understand that sometimes your research results are preliminary, or even sketchy, but we need to make informed judgments on imperfect information. What we require from you is your best efforts within the time before we have to make another financial commitment.

And above all, we need the candor that comes from scientific inquiry. Many times your first experiment won’t yield the results you expect. That’s OK. Let’s try to find out why. Is your (and our) hypothesis wrong, or were the experimental conditions wrong, or did you learn something that opens a new avenue of investigation?

Unlike polished documents at the end of the research process, our Process is quite comfortable with the uncertainty that comes with the path to discovery.

So, that might mean for a while you look like a Brute to us. Great Vision and some interesting Output, albeit without a validated, repeatable Process yet. Essentially every start-up we’ve ever backed, not just in biotech but in all technology sectors, has been a Brute when they started out. They understood that to continue to get funding from venture capitalists, and ultimately get products to customers, brute-force was necessary.

Heroes are the stuff of legend, but not of longevity

Heroic efforts are often the difference between success and failure. But what we know is long-term heroes (and Brutes) don’t scale. Long-term, polished, repeatable processes need to be in place for the commercial enterprise to succeed.

Similar things can be said of the other “less than Success-ful” characters. For example, at times you just have to crank out stuff, even if it doesn’t seem to align with the grand Vision, or match up with a sophisticated Process. Welcome the “Grunt.”

Sometimes in a commercial enterprise, some Output is better than none. It keeps the wolf away from the door. Just as with the Brute, you don’t want to rely on Grunt behavior very long. But in the short-term, it can be all you need to fight another day.

What you need to avoid at all costs is to revert into “Academic” behavior, at least as defined in commercial company terms. All Vision and Process with no Output will not keep the lights on.

This is one of the reasons we like to pair up fantastic researchers with others who have already made the leap into commercial companies. Nothing can replace the breakthrough science. But those pragmatists who understand the differences between the two domains can be remarkably helpful in getting the scientists new to the corporate world to understand the different rules of the game.

And instead of failed scientist, the result can be a successful enterprise.

What do you think? Do you know people (or organizations) that fall into the character groups described in the Matrix? How do you deal with them? Sound off in comments below.

For over 20 years, Gerry Langeler has served as a Managing Director with OVP Venture Partners (OVP), the most experienced venture capital firm in the Pacific Northwest. OVP was formed in 1983, and raised seven venture capital funds, the most recent at $250 million. The firm focused on early stage companies in clean tech, digital biology, and information technology. OVP backed over 125 startups and saw over 50 major liquidity events, including 25 IPOs and more than 30 acquisitions by public companies.

google-glassI have been struggling to understand the utility of Google Glass in most of the presented use cases.

The Google Glass homepage features largely recreational consumer-driven uses, such as taping a ballet concert, performing Google searches, and navigation. A regular cellphone or GoPro can readily serve these needs, which leads me to question where the killer app for Google Glass may lie. Just as the Segway was supposed to change the world, its uses now are primarily saving security guards and tourists from too much walking.

Why is Google pushing a bunch of soft ‘wants’ instead of painful ‘needs’?

The life sciences, along with many other technical disciplines, face a substantial challenge both in visualization, and in real-time information delivery. Consider the cases of surgeons using Google Glass here and here, or the US military’s use of augmented reality to speed vehicle repair. Surgeons can use Google Glass to beam images and obtain remote guidance in real-time, and students can gain a first-hand view and ask questions in real-time. Augmented reality can permit fewer mechanics to repair vehicles faster and more effectively, reducing the number of personnel and equipment needed to be stationed in warzones or other dangerous areas.  These applications represent currently pressing, painful, unmet needs.

Google Glass needs to take a lesson from the Segway debacle. Instead of pushing trivial or contrived applications on consumers (which may kill the technology), they would be better served by focusing on strong unmet needs, and letting consumers and hackers develop their own derivatives.

Journal of Commercial Biotechnology This paper is part of the free Open Access archive of the Journal of Commercial Biotechnology

ATMP in practice: Towards a new industry landscape in tissue engineering

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ABSTRACT: Regulatory divergences and market fragmentation across member states have hampered the development of the tissue engineering industry in the EU. Addressing this situation by providing a harmonised and more predictable regulatory regime, the regulation on advanced therapy medicinal products (ATMPs) is based on a regulatory strategy that aims to consolidate the increased activity in the domain of regenerative medicine while maintaining the pace of technical development and innovation in this area...

The Journal of Commercial Biotechnology is a unique forum for all those involved in biotechnology commercialization to present, share, and explore new ideas, latest thinking and best practices, making it an indispensable guide for those developing projects and careers within this fast moving field.

Each issue publishes peer-reviewed, authoritative, cutting-edge articles written by the leading practitioners and researchers in the field, addressing topics such as:

  • Management
  • Policy
  • Finance
  • Law
  • Regulation
  • Bioethics

For more information, see the Journal of Commercial Biotechnology website

Drug Patent Expirations for April 2014

TradenameApplicantGeneric NamePatent NumberPatent Expiration
MAXALT-MLTMerckrizatriptan benzoate5,457,895*PEDApr 1, 2014
FROVAEndo Pharmsfrovatriptan succinate5,616,603Apr 1, 2014
ABELCETSigma Tauamphotericin b5,616,334Apr 1, 2014
BROVANASunovionarformoterol tartrate6,589,508Apr 3, 2014
INCRELEXIpsen Incmecasermin recombinant6,207,640Apr 7, 2014
VIRACEPTAgouronnelfinavir mesylate5,952,343*PEDApr 7, 2014
NIZORAL A-DMcneil Consketoconazole5,456,851Apr 7, 2014
VIRACEPTAgouronnelfinavir mesylate5,484,926*PEDApr 7, 2014
VIRACEPTAgouronnelfinavir mesylate6,162,812*PEDApr 7, 2014
INVEGA SUSTENNAJanssen Pharmspaliperidone palmitate5,254,556*PEDApr 15, 2014
ATELVIAWarner Chilcott Llcrisedronate sodium5,622,721Apr 21, 2014
ALREXBausch And Lombloteprednol etabonate5,540,930*PEDApr 25, 2014
LOTEMAXBausch And Lombloteprednol etabonate5,540,930*PEDApr 25, 2014
ZYLETBausch And Lombloteprednol etabonate; tobramycin5,540,930*PEDApr 25, 2014
ALREXBausch And Lombloteprednol etabonate5,747,061*PEDApr 25, 2014
LOTEMAXBausch And Lombloteprednol etabonate5,747,061*PEDApr 25, 2014
ZYLETBausch And Lombloteprednol etabonate; tobramycin5,747,061*PEDApr 25, 2014
ABREVAGlaxosmithklinedocosanol4,874,794Apr 28, 2014
*Drugs may be covered by multiple patents or regulatory protections. See the DrugPatentWatch database for complete details.

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journal-of-commercial-biotechnology_160The April 1 2014 issue of the Journal of Commercial Biotechnology has just been published, and features the following papers:

Building biotechnology in India – Drugs are not the answer
Yali Friedman
I have had the pleasure of participating in national forums on biotechnology development in diverse countries. A common theme I see is that emerging economies wish to develop ‘a biotechnology industry like the United States.’ I generally temper these ambitions by explaining that the United States does not have a biotechnology industry per se, but rather a handful of states have very strong biotechnology concentrations and many other states are still trying to build their domestic biotechnology industries…
Full details at the Journal of Commercial Biotechnology

Fostering technology transfer in industrial biotechnology by academic spin-offs
Gunter Festel, Philipp Rittershaus
Industrial biotechnology is the commercial application of biotechnology using cells or components of cells, like enzymes, for industrial production processes including consumer goods, bioenergy and biomaterials…
Full details at the Journal of Commercial Biotechnology

Pharmaceutical R&D Productivity: The Role of Alliance
Sarah Kruse, Mark Slomiany, Rema Bitar, Sarah Jeffers, Mahmud Hassan
In recent years, the major research-intensive biopharmaceutical companies (big pharma) have come face to face with a perfect storm of eroding profit margins from blockbuster expiration and generic competition coupled with growing R&D expenses and declining advances in truly novel therapeutics…
Full details at the Journal of Commercial Biotechnology

Deciding between biobetter versus biosimilar development options based on net present value calculations
Kerstin Marie Bode-Greuel, Klaus Nickisch
AbstractThe growing share of biopharmaceuticals is paralleled by an increasing interest in biogenerics, as blockbuster biologics are approaching their patent expiries. Companies need to make decisions whether to invest in biosimilars or in biobetters with enhanced properties, the latter enabling favorable differentiation vis-à-vis the original product on the one hand and biosimilars on the other hand…
Full details at the Journal of Commercial Biotechnology

Market Orientation, Alliance Orientation, and Business Performance in the Biotechnology Industry
Grant Alexander Wilson, Jason Perepelkin, David Di Zhang, Marc-Antoine Vachon
The purpose of this study was to test the unexplored relationship between market orientation (MO), alliance orientation (AO), and business performance (PERF) in the medical/healthcare subsector of the Canadian biotechnology industry.  The study surveyed Canadian biotechnology executives via mail and web-based questionnaires…
Full details at the Journal of Commercial Biotechnology

Bioentrepreneurship Education and Training Trends
Arlen Meyers
Biomedical and health entrepreneurship continues to expand around the world. Driven by global pressures to optimize the allocation of scarce resources, life science bioentrepreneurs are creating innovative products, platforms, service and systems that deliver more value…
Full details at the Journal of Commercial Biotechnology

Where is the eBay for Intellectual Property?
Matthew B Klusas, Raymond H. Cypess, Seth Rosenfield, Adam Gerstein
This paper is an examination of the economics, organizational dynamics and structural factors inhibiting an electronic market for intellectual property.  Several intermediaries exist to facilitate the transition of intellectual property (IP) from sellers to buyers.  Over the past 20 years, a number of companies attempted to create an online “eBay for IP…
Full details at the Journal of Commercial Biotechnology

Biotech IPOs Steam Ahead in 2014
G. Steven Burrill
If you walk into most private biotech company boardrooms today, it is likely that you will hear a discussion about whether to go public. Companies at every stage of development are either getting ready to file for an initial public offering or thinking about it. Although the slowdown in new issues at the end of 2013 gave observers pause that the robust biotech IPO market of 2013 might slow down in 2014, the reality has been just the opposite…
Full details at the Journal of Commercial Biotechnology

Considerations for Start-Up Biotech Company Valuation
Walter Bratic, Justin R Blok, Megan M Gostola
The prospect of government regulation, product liability lawsuits, and customer reliance on third-party payers contribute to the complexity of valuing biotech start-ups. In addition, the inherent complexity of biologic drug manufacturing and storage creates secondary risks that must be considered in a valuation…
Full details at the Journal of Commercial Biotechnology

Canadian Venture Capital – Unlocking the Funding Challenge
Christopher H. Jones
Canada plays a significant role in the global advancement of scientific discoveries and their translation into commercial opportunities, but is viewed as not fully realizing its commercial potential. A significant problem has been a lack of sufficient venture capital to take early-stage companies to the next level…
Full details at the Journal of Commercial Biotechnology

New Books
Yali Friedman
New books from the publisher of the Journal of CommercialBiotechnology
Full details at the Journal of Commercial Biotechnology

Is it Worth it for Generics to Challenge Patented Drugs. Copyright © Building Biotechnology

Is it Worth it for Generics to Challenge Patented Drugs? Copyright © Building Biotechnology

The FTC is reportedly seeking $1 billion from pharmaceutical companies for the role in paying generic companies not to challenge their patents. Despite first appearances, these agreements for a generic company not to challenge a patent, called ‘reverse settlements’, may actually be good for innovation.

The rationale for reverse settlements is discussed in my textbook, Building Biotechnology, and the box “Is it worth it for generics to challenge patented drugs?” summarizes some of the financial considerations behind patent challenge.

Is it too Easy to Challenge a Patent?

Consider the case of Abilify, which had sales in excess of $6 billion last year. Under provisions the Hatch-Waxman Act, the first generic challenger to defeat a patent on a drug is eligible for 180 days of generic exclusivity. In this period, the generic tends to sell for roughly 80% of the price of the branded drug, due to there being no other alternatives.

So, the math for a generic company is pretty clear. In an ideal case, on winning a patent challenge, the generic would get 80% of the revenues (due to the lower sale price) of half the market share of the patented drug for six months, or roughly $2.4 billion dollars (I realize the math is very rough here, but it’s simply to illustrate a point). The cost of litigation may be roughly $10 million dollars (AIPLA Economic Survey). And there are stage-gates along the litigation path that enable a patent challenger to limit their legal expenses, meaning they can ‘test’ their patent challenge before committing to the full amount.

The potential for generic challengers to obtain a better-than 100-fold return-on-investment on patent litigation creates the potential for innovative firms to become mired in potentially frivolous patent litigation. While the cost for each challenger may be $10 million dollars, the innovator could face dozens of lawsuits and therefore face substantial budget drains to reactive patent protection, which would limit their ability to invest in new drug development. Accordingly, innovative firms have been paying generic companies not to challenge their drugs. This effectively changes the financial incentives for the generics. If they feel that they have a particularly strong case, then they should certainly go ahead and challenge a patent to obtain their 100-fold ROI. But if they feel that there is a chance they will not win the challenge, then obtaining a financial settlement to withdraw their challenge may be preferable.

But isn’t this anti-competitive and monopolistic behavior?

Perhaps, but consider that patents themselves are essentially tools that create temporary monopolies. The reason why the government provides these temporary monopolies is to incentivize innovation. To quote Building Biotechnology once more:

…patents provide a means by which the public can gain valuable cutting-edge scientific knowledge and abilities in exchange for a temporary grant of monopoly, which allows innovators to recoup their investments in research and development.

So, while reverse settlements, and patents, may negatively impact competition in the near-term, they are part of a large scheme which drives long-term innovation by providing temporary benefits to innovators. When these benefits expire, society as a whole wins because the innovations become freely available and normal competition can drive down prices and ensure wide-spread adoption.

What do you think? Is there a case for reverse settlements? Sound off in the comments below.

Journal of Commercial Biotechnology This paper is part of the free Open Access archive of the Journal of Commercial Biotechnology

A maturing industry: Strategic patenting trends, US and academic dominance, and the global biotechnology landscape

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ABSTRACT: Patent analytical data has proved itself a key enabler in measuring the commercial focus and activity taking place within highly research and development (R&D) intensive industries such as biotechnology. Marks & Clerk has assessed biotechnology patent application and grant records from a range of international patent office and proprietary databases, with a view to gauging the industry's commitment to R&D and the particular areas of biotechnology that are attracting investment...

The Journal of Commercial Biotechnology is a unique forum for all those involved in biotechnology commercialization to present, share, and explore new ideas, latest thinking and best practices, making it an indispensable guide for those developing projects and careers within this fast moving field.

Each issue publishes peer-reviewed, authoritative, cutting-edge articles written by the leading practitioners and researchers in the field, addressing topics such as:

  • Management
  • Policy
  • Finance
  • Law
  • Regulation
  • Bioethics

For more information, see the Journal of Commercial Biotechnology website

For those who missed the live presentation, here is the discussion of the 2014 Scientific American Worldview scorecard, featuring myself, Mike May (Worldview Editorial Director), David Brancaccio ( public radio’s Marketplace), and Caroline Rugierri (Access Life Sciences).

Some of the themes we discussed were:

  • Innovation’s true “value proposition” and the ways in which investing in science has multilayered societal returns
  • The biggest issues in biotech that continue to “flatten” the world and create common missions among countries
  • The ever-changing landscape of international innovation and the ways government and industry can best support life science development

I hope you enjoy the preview. You can see past issues of Worldview at www.saworldview.com, and the 2014 issue will be launched at the BIO 2014 convention in San Diego.

2013 and 2014 have been very good for biotechnology public markets. 35 biotechnology companies went public in 2013, and well over a dozen have gone public in the first few months of 2014.

nasdaq-biotech-index-1m

Figure 1: Nasdaq Biotech Index since February 1 2014

With the surge in public launches, one must ask the question: “How long can it last?”

Just a few days ago Barrons’s cautioned about a potential bubble, and as Figure 1 (courtesy of MSN Money) shows, recent drops have effectively wiped out NASDAQ biotechnology industry gains since February 1st of this year.

While this quick rise and fall of value may be sobering, long-term value investors should take some comfort in the bigger picture. The recent IPOs enabled many companies which had been sitting on the sidelines for years to raise public cash and to offer exit opportunities to investors — both of which will support future growth in the sector, and the NASDAQ biotechnology index has generally been on a tear for the past five years (Figure 2).

Nasdaq biotechnology index March 2004 - March 2014

Figure 2: Nasdaq biotechnology index March 2004 – March 2014

So, the short-term question remains — is this a short-term correction, a closing of the IPO window, or the start of a larger correction?