The most successful biotechs of the past quarter century have been companies that established relatively large, cutting edge research programs, such as Biogen, Immunex, and Genentech. I’ll refer to this as the B.I.G. model. These companies were able to hire young, innovative scientists by promising them a certain degree of intellectual freedom to pursue research projects and build their reputations on the results. While these researchers were well compensated financially for their efforts, I don’t know of a single one who signed on for the money. Their true reward: the ability to make ground-breaking scientific discoveries, publish and present their data in prestigious journals and conferences, and help turn them into breakthrough medicines for treating serious medical problems.
The current VC mantra says that this approach is now outdated, a relic from a time when the sauropods ruled biotech. Investors won’t tolerate a lengthy wait to receive a return on their investment. As a result, biotech business models are unsettled and in flux. The days when startups hoped to become stand alone, vertically integrated drug sellers are clearly on the wane (with a few exceptions). Virtual companies and smaller, focused businesses represent the current flavor-of-the-month for many investors. A senior venture capitalist in Seattle recently stated “For a long time, we in the venture business created the wrong companies for [big companies] to buy. We’d build something with 150 employees and four projects, when what they want are 25 people and one project.”
You can see where this train is heading. VCs (at least the ones that subscribe to this idea) are going to be creating lots of these small, single project startups. While this new model may generate good financial returns for VCs, is there much data to support the idea that this approach will succeed in generating new and useful drugs? Will it siphon money away from other approaches? What effect will adopting this model have on the biotech ecosystem?
An ecosystem is generally defined as a group of interacting organisms and the environment in which they function together. Alterations to one small part of an ecosystem can have detrimental, disproportionate effects that spread across the environment. The field of biology provides numerous examples where a potential solution to an ecological problem resulted in an even bigger predicament. For example, the deliberate introduction of foreign species in Australia, such as rabbits or cane toads, each produced serious environmental repercussions that did not resolve, and in fact worsened, the troubles that they were intended to remedy. The accidental introduction of pythons into the Florida Everglades appears to be wiping out the resident mammal species. The study of ecosystems is not limited to the field of biology, and can provide insights into a number of different disciplines.
The biotech ecosystem includes investors, patent agents, scientists, patients, doctors, and regulators, all of whom interact … Next Page »
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