Biotech CEOs Discuss the Virtues of Going Virtual

Bruce V. Bigelow3/26/09Comments (2)Follow @bvbigelow

San Diego serial entrepreneur John Dobak got the best quip off right out of the starting gate yesterday when Biocom, the local life sciences trade association, held a panel discussion on the “virtual company” as a new model business model for startups. Dobak, a featured speaker who was late for the breakfast meeting, told the crowd, “We have three kids under the age of 8 at home, and my wife went virtual on me this week. So we outsourced and my babysitter didn’t meet my timeline.”

Such pitfalls of outsourcing seemed to be a common theme as Dobak and three other biotech CEOS talked about the pros and cons of operating “virtually” with only a small staff overseeing the development of new drugs and biomedical technologies. With the economy still languishing and venture deals few and far between, the concept is compelling and the panel discussion attracted drew well over 100 people to the event.

The CEOs who participated all represented San Diego biotech startups at different points along the continuum of business development. Lithera, a two year-old startup headed by Dobak with backing from Domain Associates and Alta Partners, represented the earliest stage venture. At the other end of the spectrum is Ambrx, which was founded in 2003 to develop new amino acid building blocks for new types of protein drugs.

Jeff Stein, a Sofinnova Ventures partner who also serves as chief executive at Trius Therapeutics, told the audience he represents a counterpoint to the case for creating a virtual biotech company. Stein emphasized that Trius has gained key insights by conducting its own research and drug development internally. “There are incredible synergies at a full-fledged company that makes things happen so much faster,” Stein said.

Nevertheless, Stein conceded, “A lot of VCs are looking very hard now—and they have been for a while—at the virtual model. It’s very attractive to get an asset that’s at a later stage with a minimal staff around it, and with the downsizing in Big Pharma, there are some incredible CROs (Contract Research Organizations) available.”

Among the recommendations and warnings the panel provided:

—Maintaining close control over a contract research organization “is absolutely critical,” said Charles Theuer, CEO of Tracon Pharma. He emphasized the importance of selecting a CRO “really carefully.” … Next Page »

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788