Baseball and Biopharma: More Alike Than You Might Realize
This may seem like a surprising observation, but it’s true. Biopharma companies and baseball teams employ similar strategies that they hope will result in either a blockbuster drug or winning the World Series. The challenges each faces are significant. Did you realize that the percentage of drugs that are put into clinical trials and successfully make it onto the market is virtually identical to the percentage of minor leaguers that make it to the Majors? In both cases only 5 to 10 percent of those starting on the first rung of the ladder will make it all the way to the top. The rest will fall by the wayside, eventually to be replaced by new candidates for the open positions they left behind. So what, exactly, do these two businesses have in common?
Experienced Managers Get Fired and Rehired
Many biopharma executives bear a striking resemblance to baseball managers. No, I’ve never seen one kick dirt on an umpire’s shoes, but they face similar challenges. Do you ever wonder why biopharma and baseball executives that get canned (usually because of poor execution under their leadership) are often quickly rehired by other companies/teams? It happens because they share one all-important quality: big league experience. Investors want seasoned executives to fill the corner offices in biopharma and they are willing to overlook past problems to get them. The poster boy for this “experience outweighs other considerations” mindset is Sam Waksal, who achieved infamy as ImClone’s CEO for both screwing up the development of the cancer drug cetuximab (Erbitux) as well as being convicted of securities fraud, bank fraud, obstruction of justice, and perjury. Despite serving over seven years in federal prison on these charges, he managed to find himself a new position heading up another biopharmaceutical company. His bio on their website, not surprisingly, omits his time in the pokey.
Baseball managers know that having a great year or two behind you (like making the playoffs or winning the World Series) will not keep you from getting fired if things go south on your watch. Examples in baseball are too numerous to mention, but it happens in biotech too. Take Mitchell Gold, for example, the former CEO of Dendreon. He won several industry awards for successfully shepherding the company’s first drug, sipuleucel-T (Provenge), through the FDA approval minefield. Everything was great until the next year, when Provenge sales were well below expectations and Gold was forced out. As an experienced CEO, however, he landed on his feet and is now heading up a new immunotherapy start-up. His fruitful efforts at Dendreon led other companies to ramp up the development of their own immunotherapy drugs. This “follow the leader” approach reminds me of Billy Beane’s statistics-based methodology for evaluating baseball players, which was adapted widely by other teams after the Oakland A’s successfully employed it.
I’m not aware of any biopharma executives who’ve held the top job in as many organizations as baseball’s Dick Williams (who managed six clubs) or Billy Martin, who held nine managerial positions in his career (including five separate stints with the Yankees). Deposed CEOs do return to their old companies from time to time, including Steve Jobs at Apple, Larry Page at Google, and Howard Schultz at Starbucks. Any chance that ImClone wants to take Sam Waksal back? I don’t think so.
Prospects in the Pipeline May Not Pan Out
Baseball managers, like biopharma R&D chiefs, have to play the hands they’ve been dealt. If their everyday lineup features a lackluster group of ballplayers, then that’s who they’ll be stuck playing. It can take years to upgrade a team by bringing up talented young players from the minor leagues, and you can never be sure that they will make it in the majors. Many early round draft choices are busts and find themselves out of baseball after struggling for a couple of years in the minors.
The situation is similar in assessing and developing biopharma drug pipelines. Each and every candidate remains a largely unknown quantity, especially the “rookies” (potential drugs in preclinical development or that are about to enter Phase I). Even “can’t miss” prospects in Phase III trials often manage to blow up just when their companies are counting on them to produce. If you’ve been banking on the revenues from these drugs to help resuscitate your bottom line, then your patients, shareholders, and stock analysts are going to be facing some major disappointments. Sadly, the money invested in these biopharma bombs (e.g. torcetrapib and bapineuzumab) is orders of magnitude greater than the bonuses wasted on MLB first round draft choices that don’t make it.
Sometimes failure doesn’t rear its ugly head until after a period of early success has passed. Drugs that succeed in clinical trials and ballplayers who can throw a baseball like nobody’s business sometimes flop after a few years when unexpected toxicity issues crop up. Examples on the medicinal front include rofecoxib (Vioxx) and trovafloxacin (Trovan). In baseball, we can point to relief pitchers such as Steve Howe or John Rocker.
New Prospects Replace Worn Out Veterans
Every year a number of blockbuster drugs go off patent and their sales decline precipitously, even with coupons, promotions, and price cuts. Similarly, every season a number of veteran ballplayers realize that their finely honed skills have faded; many make the difficult decision to hang up their spikes. In both situations, capable replacements need to be found and brought on board. Hot prospects may attract offers from multiple suitors, whether they are drugs being developed by small biotechs or minor leaguers crushing the ball at the triple A level. Strong negotiating skills will come in handy here if you are the one doing the acquisition. The ability to obtain these up-and-comers will depend on the available budget in both biopharma and baseball. Some organizations can spend a lot of money to bring in new blood, but others may be financially constrained in how much they can pay.
Acquisitions: A Key Strategy for Upgrading a Weak Lineup
Baseball managers generally have a good feel for the performance level of their current roster of ballplayers. They know it’s unlikely the .220 career hitter will suddenly raise his batting average by 80 points, and the guy who hit 7 homers last season generally won’t smack 36 dingers this year. Contrast this with the situation in biopharma, where companies can only guesstimate how many of their pipeline drugs might actually get approved and marketed. There are simply too many variables and a hundred different ways things can go wrong.
Baseball managers and biopharma CEOs handle this situation in the same way: they will seek out acquisitions in an attempt to strengthen and bring predictability to their lineups. The fan base doesn’t want to wait 10 years for you to rebuild your club from farm team prospects, and stock analysts and board members have an even shorter time frame for you to turn your company’s prospects around. Bringing in established players or medicines via acquisitions is the quickest way to transform a middling baseball club (at least in theory; ask the Angels and Yankees about it) or a struggling biopharma company. Acquisitions in biopharma, as in baseball, sometimes work out very well (Roche’s acquisition of Genentech and Amgen’s procurement of Immunex), and sometimes they don’t (Bristol-Myers Squibb’s acquisition of Inhibitex and Pfizer’s partnership with Nektar Therapeutics to sell Exubera).
In biopharma, no one company dominates all the others; each holds on to a competitive piece of the entire marketplace. Same in baseball, where even free spending clubs like the Yankees and Dodgers have to deal with injuries and inconsistent player performances. Small market teams like the Oakland A’s can achieve success year after year despite their low payroll if they choose their younger players wisely. The overall correlation between money spent on player (or pipeline) development and results achieved is a mixed bag in both biopharma and baseball. As with many aspects of life, it’s all about making the right choices.
A Team Must be Strong in ALL Areas to Reach the Highest Level
Talented players often owe a measure of their success to the fact that they have equally gifted colleagues surrounding them. You can’t pitch around a guy with two other sluggers batting behind him. Adding one of these guys to your lineup may not help all that much if the support staff that you provide him doesn’t measure up. If you have strong hitting but weak pitching, you’ll often be losing games by big scores like 9-7. Strong pitching but weak hitting will put you on the wrong side of too many 1-0 scores. The same principle is true in biopharma. A weak clinical group or a legal staff that does a poor job of protecting your intellectual property may waste the innovative efforts of a strong research program. You need to be highly competent in all areas if you want to compete against the very best.
Matching Team Strategy to the Talents of the Players
Planning begins at the top of the organization in deciding what type of team to field in both biopharma and baseball. Your lineup will be selected accordingly. Do you focus your efforts on trying to hit “home runs,” or rely instead on a “small ball” approach that is akin to a “low risk, low reward” clinical strategy? Home runs (blockbuster drugs with sales greater than $1 billion/year) are relatively rare, and the effort to develop one or more of these will be both risky and demanding. These medicines often define a new treatment modality, and as such are often chancier than a drug that merely refreshes an existing one in the industry (e.g. a recombinant human protein that replaces one derived from animals).
The baseball analogy extends to the hiring process as well. Does your organization go with a “farm team” strategy that encourages the development of internal scientists hired right out of graduate school or post-doctoral positions? Or do you look to hire seasoned, veteran free agent “sluggers” from other teams (your competitors), hoping that they can repeat their past successes with you? Wealthy organizations have the money to successfully compete for “free agents” (e.g. key executives or scientists with specific skills) who can be brought on board to enhance the quality of the existing lineup.
Bringing in overpaid free agents, however, is a risk that can backfire in both baseball and biopharma. It can cause resentment among the existing players who have already bonded as a team. Adding over-the-hill former stars to your team can be equally problematic (e.g. the return of Ken Griffey, Jr. to the Seattle Mariners in 2009). Individual scientists need to decide whether they want to try to be “home run hitters” (i.e. work on very risky but likely high reward projects), or “hit for average” (work on a variety of project teams that may not put them in the limelight, even if successful).
Post-Game Wrap Up
Keep drug development in mind the next time you’re watching Major League Baseball. The strategies discussed above may not be evident in every game, but they will be in play whether your team is bound for the World Series or destined to get the No. 1 pick in next year’s amateur draft. Baseball and biopharma are both in desperate need of individuals who can successfully identify great players or medicines at the very earliest stages. If you excel in evaluating prospects, consider a career in either field of endeavor. In biopharma, however, you won’t have to worry about running down a sinking line drive or getting hit by a 95 mph fastball.