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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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October 22, 2009

Red Flags in Biotech

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Posted by Derek

Xconomy has a useful two-part interview with Christopher Henney, who helped to found Icos, Dendreon, and Immunex. The part I found most interesting, naturally, was the section entitled "Five Red Flags of Biotech". (Note to the Xconony folks - the article actually has six of them). Here are his warning signs if you're thinking of investing in (or, I should add, working for!) a new company and you're checking them out. Beware of. . .

1. Top management without a scientific background. If the CEO isn't a scientist, Henney says, there had better be some good ones very close to him, and he's not talking about the scientific advisory board, either.

2. Saying that they have no worries. Any small company in this game has plenty to worry about - heck, the huge companies have plenty to worry about. So if they try to tell you otherwise, then you're the one who should be worrying.

3. Hard-to-understand science. Henney says to look out if they can only tell you that it's really hard to explain. I'd agree with that, but I'd also add that you can go too far in the other direction. If they spout a bunch of advertising copy under the impression that they're giving you the science, then you should also flee. (That might be a consequence of Red Flag #1). I honestly think that any concept in this industry can be explained to any reasonably intelligent person. So if someone tells you that they can't do that, you have to worry that they don't understand it very well themselves.

4. Geographic remoteness. This is an interesting one, because ideas can come from all over. But for a viable company, Henney maintains, you need to be somewhere that you can recruit talented and experienced people. That doesn't mean that every company has to be in Cambridge or South San Francisco, because there are plenty of other possibilities. But trying to get a great biotech idea off the ground will definitely be a lot harder in Winnipeg, El Paso, Chattanooga, or Scranton. There are smart people there, but most of the ones who know this business or have a real interest in it will have gone somewhere else. And it'll be tougher to persuade others to move somewhere that could leave them without options if the company doesn't work out.

5. Too many VCs. This goes for just about any industry. A board that's full of venture capital people shows a lack of imagination at the very least, and it makes you wonder why the VCs will even stick around when all they see are their own kind.

6. Family members in key roles. My take is that you can get away with one sibling or the like, preferably as long as they're not like a CEO and CFO team or something. But I agree with Henney's take that if you see a board dominated by a family, you should hit the exits. This stuff hasn't been around long enough to be a family tradition.

I would add a couple of others to be wary of:

7. Breathless hype. Sure, all press releases have some of this. But if a small company is unable to speak in any other terms than "breakthrough, unprecedented, game-changing paradigm shifts" or the like, you should be worried. Either they don't really believe this stuff (in which case they may not be very trustworthy), or they do (in which case they may be delusional). Real breakthroughs in this business don't need all the glitter and spray paint.

8. Too much emphasis on the SAB. Henney addresses this partly in Red Flag #1. But it's worth remembering that a wonderful blue-ribbon scientific advisory board stacked with Nobel Prize winners is also stacked with very busy people who will only be able to give this little company a small portion of their time. These aren't the folks who will be driving the projects forward. If a small company relentlessly promotes the big-name advisors they've signed up, you have to wonder if there's anything else to promote.

Comments (51) + TrackBacks (0) | Category: Business and Markets


1. S Silverstein on October 22, 2009 10:09 AM writes...

I can add that the same applies for many creative industries, not jsut biotech, and perhaps even to major pharma itself. On the healthcare provider side, the presence of these factors usually spells problems like this one.

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2. CMCguy on October 22, 2009 10:16 AM writes...

Derek relative to point three you state "I honestly think that any concept in this industry can be explained to any reasonably intelligent person." While is probably true in many cases a "complex story", which most novel approaches/targets often are, has to fight an uphill battle, particularly when the scientists are not good general communicators. Unfortunately one has to take into account the "short" attention span of the audience and most execs, VCs, Investment bankers, media and public just can't seem to absorb more than "sound bites" (see point seven).

I like point eight however in most cases I see SAB and even Board of Directors do not have much real control/input to strategy and operations, especially with some CEOs where these functions are friends/for show. To me its having experiences people on the Exec team that in a better sign although not full proof as some people with Big Pharma on CVs know less than would expect.

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3. S Silverstein on October 22, 2009 10:19 AM writes...

"I honestly think that any concept in this industry can be explained to any reasonably intelligent person."

... hmmm ... Then how come I could not get across the value of discovery scientists having unfettered access to CAS SciFinder and CrossFire Beilstein to several executives where I once worked?

Remember that definition of "dyscompetence" from the medical licensing boards I posted in an earlier Pipeline thread...

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4. Sili on October 22, 2009 10:20 AM writes...

If they can't explain their work to a job applicant, something's wrong for sure.

9) People tell you how to do your job, but can't do simple arithematic.

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5. Anne on October 22, 2009 10:37 AM writes...

I find it amusing that in calling Xconomy out on mislabeling the number of red flags, you simultaneously misspelled their name. It satisfies my sense of irony!

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6. Aspirin on October 22, 2009 2:06 PM writes...

The first point about managers not having a scientific background is pretty much responsible for many of the evils of Big Pharma. Seriously, top lawyer previously working for McDonald's??

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7. sillypoint on October 22, 2009 3:18 PM writes...

Aspirin : your point well taken..

Speaking of incompetent people I hear that despite good earning not with standing, Merck's "Kublai Khan Koblan" left Rahway site for good. This guy was the hack in the tradation of fierce Mongols, who let go off many hardworking chemists from Rahway and Westpoint. Can someone shed light on this ?

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8. xMrk on October 22, 2009 3:58 PM writes...

re "Merck's "Kublai Khan Koblan" left Rahway site for good. "

You could probably find info about that at the CafePharma site, but caveat emptor. Google "cafepharma Merck".

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9. TAC on October 22, 2009 6:14 PM writes...

I take issue with point one -- it's far more important to have business-savvy management than a group of all Ph.D. scientists at the top. At the end of the day, the biotech industry is simply selling a product. There's a much bigger research and development component in biotech than there is in, for instance, the athletic shoe industry, but the business models are fundamentally similar. I don't mean to imply that non-scientists are better than scientists at running biotech companies, but I also don't see a science background as being essential to a biotech manager.

Of course, I'm premising all of this on having a business-savvy manager. Anyone who has experience managing a company knows that he must surround himself with experts in all fields, including corporate lawyers, accountants, marketing professionals, and people who understand the technology being developed. I would be wary of a biotech company that lacked a CSO with a strong science pedigree, but my concern would stem more from the board's poor judgment than the CEO's lack of technical training.

In running a biotech company, tough decisions have to be made, and it's important to have someone who understands the goal of the company -- profitability -- making them. Balance sheets and productivity reports look the same for pretty much all companies that manufacture goods, so I don't think the CEO's degrees should be a litmus test.

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10. xMrk on October 22, 2009 7:19 PM writes...


all else being relatively equal, I think the CEO who does have expertise in biomedical science stands a far better chance of making the best decisions than the CEO who does not.

I think there are plenty of excellent candidates who do have both competencies, but are passed over due to a loathing of intellectuals by the management class that has evolved over the past few decades.

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11. Hap on October 22, 2009 7:23 PM writes...

The success of small companies, particularly biotech/small pharmas, is predicated on their technology and scientific knowledge, not on being able to sell what they have. The ability to most effectively develop the technology they have is likely to determine their success, and without technical understanding of that technology, no effective decisions on how to optimize efforts towards that end can be made. It isn't sufficient to have technical knowledge of a biotech's product and technology, but it is sure as hell necessary.

In order to sell a product, first you actually have to have one. Most biotechs are trying to find a product and then develop it based on their particular knowledge and skill set. Focusing on product sales and profitability is premature in most cases - it is likely to prevent small companies from having a product at all, and thus ensures that all the investment in them will be wasted.

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12. CMCguy on October 22, 2009 8:41 PM writes...

#9 Tac since the context is Biotech/Pharma I personally think having a CEO with Science/Medical background has higher probability to provide "better" culture and leadership to such an entity than most Business types (or Legal or Marketing). I have experienced both, as a science type I am perhaps prejudiced but since a majority of the staffs were in R&D the understanding and communication with the top was greatly enhanced with Scientist in charge.

However I think you are very correct that there must be good business-savvy component with who ever is in management. Although xMrk comment implies differently competence in the diverse areas required is rarely found in a single person so need balanced mix and likely a team. Scientist in particular can get insulated (by choice) and not gain valuable skills that would help them be effective managers. I believe many Biotechs have been unsuccessful not because of poor science (although that fails frequently enough) but because they either did not have/practice good business sense or sometimes did not have appropriate knowledge or expertise to transition to development.

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13. TAC on October 22, 2009 8:48 PM writes...

You're right -- the key thing for a start-up is developing its product, which does require scientific knowledge. But that's what scientists are for. The CEO is a manager and representative of the company above all else. He must secure financing (at all levels, from angels to VC to private offerings to IPOs), ensure compliance with government regulations, oversee employment and compensation, and allocate the physical, financial, and human resources of the company. It goes without saying that these tasks require a certain degree of familiarity with the technology, but being able to converse fluently about a technology is a far cry from being able to develop it. You must be a scientist to do the latter, but you need only be an intelligent and diligent executive to do the former.

I simply think that it's a misallocation of resources to have a scientist run a company. Business training is crucial for CEOs, and it is sufficient to handle all of the big-picture matters. There's nothing gained by having a brilliant scientist spend 95% of his time in management meetings when that person could be focusing on the technology development as a CSO or division head. Managers manage, researchers research. Adam Smith got that one right a long time ago.

Also, xMrk -- are you implying that the management class is not made up of intellectuals? Just because someone develops proficiency in an area other that science doesn't make them any less intelligent. Bill Gates and Steve Jobs epitomize the "management class" -- would you say that developing operating systems that revolutionized the way we use information is not intellectual?

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14. xMrk on October 22, 2009 11:15 PM writes...

TAC "I simply think that it's a misallocation of resources to have a scientist run a company"

Roy Vagelos.

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15. xMrk on October 22, 2009 11:26 PM writes...

TAC "lso, xMrk -- are you implying that the management class is not made up of intellectuals? Just because someone develops proficiency in an area other that science doesn't make them any less intelligent. Bill Gates and Steve Jobs epitomize the "management class" -- would you say that developing operating systems that revolutionized the way we use information is not intellectual?"

Yes, I do think scientists intellectually outclass most in management. The soft crap MBA's study is like children's material for scientists.

Example: our whole friggin economy is in shambles, major industries in death spirals, and it wasn't the scientists who did it.

As for Bill Gates, he wrote part of MBasic for the Altair with a friend (the floating point and probably even the numerical-equation i.e., "LET a=2*(sin(a/b)+cos(exp(1-x+4*z))) type of statement parsing routines were written by someone else, the hard part); they may have based even what they wrote on DEC PDP Basic, and as far as OS's go, he connived QDOS "quick and dirty dos" out of a company, Seattle Computing, that developed it as a CP/M clone for the Intel 8086 and that became MS-DOS.

As to his direct contributions to Windows, those are probably more at the level of appearance and functionality. Apple did a much better job. Win 1 to Win 3.1 was a joke while MacOS was anything but in the same time frame.

He is a very savvy businessperson and excellent card player, but in terms of pure intellect I do not hold him to an Einstein.

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16. xMrk on October 22, 2009 11:30 PM writes...

and Jobs and Wozniak were world-class hardware and software hackers from the experimental days I recall well. They had no management training.

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17. xMrk on October 23, 2009 12:21 AM writes...

And finally for Gates loving TAC:

Think Windows bugs were a new phenomenon? For years MBASIC-80 had a bug. if you exited a for-next loop prematurely, before the counter had maxed, the execution of later for-next loops got messed up, i.e.,

10 for a=1 to 100
20 b=2*sin(a)
30 if b = -1.08804 then 50
40 next a
50 (perform some calcs)
60 for ...

If the "a" loop exited before "a" had reached 100 (in this case it will exit when a=10), you were screwed...

The big was finally corrected, but the C-64 had it, the TRS-80 up to Mod III had it...

Thanks Bill.

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18. TAC on October 23, 2009 2:12 AM writes...

Bash Gates all you want, but you're the one using the product that he invented and brought to market to make these comments (or at least there's an 88% chance that you are). To be fair, I don't use Windows -- but it's laughable to deny that Windows profoundly changed society.

If you think that the "soft" things that MBAs study is "children's material," walk into a quantitative finance class at any business school. That field may rest on some soft assumptions, but the intellectual rigor of the theories that are built around those assumptions is very real. Sure, there are "soft" things too, but why is that less valuable than something "hard" like, for instance, quantum chemistry? We live in a capitalist society that chooses to compensate expertise in those "soft" fields more than it compensates expertise in the "hard" fields. If you don't believe me, look at the average salaries for first-year investment bankers, consultants, and lawyers -- all are more than double the starting salaries for physical chemistry professors at even the top universities. Let me be clear -- I don't mean to denigrate any particular field or elevate one above the rest. I simply mean to highlight the reality that management skill is highly valued by society. If it truly could be called "children's material," more people would be doing it.

Finally, I'm not disagreeing that there are some scientists who are well prepared to run a company. Roy Vagelos, as you point out, was an excellent chief executive. I'm simply saying that it was his business sense and not his scientific training that made him a good manager (and I define "business sense" loosely -- it could have been his own management expertise, or it could have been his active efforts to surround himself with smart businesspeople). Again, my main point is that I don't believe a science degree is necessary to effectively run a biotech or pharmaceutical company. I'm sure you can come up with many more examples of scientists who have been great CEOs, but that doesn't rebut my point.

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19. Morten G on October 23, 2009 2:59 AM writes...

Funny I went to a Eva Steiness talk recently and her points were almost exactly the same except that she was talking about starting a biotech. And she didn't talk about remoteness.

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20. Koolkat on October 23, 2009 4:14 AM writes...


Quote:We live in a capitalist society that chooses to compensate expertise in those "soft" fields more than it compensates expertise in the "hard" fields.

No We live in a capitalist society where those that have control over salaries decide to give themselves higher salaries. A subtle point. If you were to ask society on a whole which person should be paid more then an investment banker would be very low down on the list. Doctors lawyers would be high, and I suspect that people doing medical research would also be high on the list. It would be an interesting exercise in statistics to compile that list of societal salary levels vs actual salary levels.

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21. processchemist on October 23, 2009 4:39 AM writes...


About how much Bill Gates invented, I suggest "Hackers" by Stephen Levy.
The problem with the classic MBA leadig a tech biz/startup is that often the CSO of choice is an academic type, and this is exactly what a business doesn't need. A business aware scientist with an industrial education, IMHO, is far better than a standard MBA at leading a company/startup. Obviously the competence of a good CFO (MBA) is also essential.

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22. Anonymous on October 23, 2009 6:56 AM writes...

There has been precious little on the quite sudden exit of Koblan from the company. Some shake up?

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23. happydog on October 23, 2009 7:39 AM writes...

I read the comments debating whethor or not a scientific background is necessary in a CEO with great amusement. I worked at a non-profit in grad school because the PI I worked with there had an adjunct professorship at the local university. Several PI's had this arrangement and had grad students from the university working in their labs. While I was there, a new CEO was assigned to the institute. He had no scientific background, but lots of experience as a chief executive of an "import/export company". (Whatever that's supposed to mean.) His first act as the new CEO? Institute a new dress code, of course! Ties, slacks, and button-down dress shirts for all men in the labs, and blouses, skirts, and panyhose (or pant suits) for all the women. He made some bizarre statement about how this would enhance the professionalism of the research, thereby improving profitabilty. So everyone in the labs ignored him. He spent the first three months of his reign trying to impose the new dress code, calling meetings of the senior management, and there were departmental meetings where the VP's reluctantly passed the word on to the individual lab heads. The lab heds ignored their VP's. Someone tried explaining to him that organic solvents melt synthetic fibers, so clothing made from natural fibers is needed in the lab; that the people suiting up for the biohazard lab were already too hot in their suits biosafety gear (partly due to poor environmental controls); loose-fitting clothing (like skirts and ties) are a safety violation, as well as tigh-fitting clothing like panty hose; and that grad students can't afford to wear a suite and tie to work everyday anyway. He still didn't get it. As a result, he took the refusal to adhere to his new dress code as a direct challenge to his authority as the CEO. It was a stupid fight and after almost a year of this nonsense, he finally gave up because his VP's refused to enforce his insane mandate (because none of the lab heads would enforce it (because the people in the lab just ignored it)). Although the policy was never changed, it was never enforced. And the new CEO lost a challenge to his authority that he had created.

And some people still think that experience as an ineffectual-middle-management-suck-up is more valuable than scientific competence? Give me a break. I'm sure an attitude like that has nothing to do with the industry's current troubles . . .

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24. RandDChemist on October 23, 2009 8:12 AM writes...

Good points being made, but everyone has a horror story to support their opinion.

You can have an excellent scientist who cannot run a business (see deCODE), despite some elegant work. You can have an excellent manager/MBA/whatever who cannot understand and execute on the science effectively. There are things you can learn in a class, but then there is the actual application of knowledge, be it in science or management.

It takes all kinds to run a company. The leadership needs to complement each other, but that doesn't mean things are going to run in perfect harmony. Constructive conflict is also part of the equation.

You need a CEO who is a scientist with vision who is business-savvy. Or you need a CEO who is a business-person who is science savvy. These people do exist!

A leader needs to be confident but not arrogant. Assertive, but not a jerk. Secure but not self-righteous. Inspiring but not overwhelming. A good, strong leader needs to be a listener, gathering all the facts and drawing out good debate, discussion, etc. it takes incredible discipline.

I've seen people who are willing to admit what they do not know, have expertise in, etc. and get people to help out with deficiencies. A CEO who tries to do it all will eventually fail. People need to be willing to learn from one another and grow to have a chance at succeeding.

There are even academics who can be effective leaders, I've encountered those as well. It comes down to a capacity to learn and acquire what is needed to succeed (people, knowledge, resources, etc.).

Leaders need to be willing to fail, accept it, admit it and learn from it.

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25. Biotech Analyst on October 23, 2009 9:02 AM writes...

@ xMrk: "Yes, I do think scientists intellectually outclass most in management. The soft crap MBA's study is like children's material for scientists."

As TAC above says, try an MBA course in quantitative finance or decision theory. I think you'll find plenty of hard stuff there (certainly harder than the graduate molecular immunology class I took while also studying for my MBA at Stanford).

And "it wasn't the scientists who did it"? And you know this because of your in-depth knowledge of economics? Who do you think develops all the quantitative trading methods and derivatives? Wall Street hires many, many physicists and mathematicians.

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26. CMCguy on October 23, 2009 9:45 AM writes...

Interesting thread and I think RandDchemist provides nice synopsis of what is required. There is no real "one size fits all" or perfect model to such questions and it takes all kinds. I have observed spectrum of highly intelligent people to idiots in both science and business ranks (I exclude HR or Marketing as would skew the curve) so is silly to argue which has more/importance although in terms of relative compensation Koolkat is on target.

Unfortunately I think many of us have run into "MBAs" that are like happydog's post who are good as canned slogans or promoting style over substance so immediately dismiss such as providing value.

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27. MTK on October 23, 2009 9:54 AM writes...

"Yes, I do think scientists intellectually outclass most in management. The soft crap MBA's study is like children's material for scientists."

Words to describe this statement: self-serving comes to mind, but so does hubristic.

In any field there is a continuum from stellar to incompetent, from talented, smart, and hard-working to dumb and lazy. To get to the top of any field requires exceptional talent and effort.

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28. BigPharmaCasualty on October 23, 2009 10:25 AM writes...

@R&DChemist -"A leader needs to be confident but not arrogant. Assertive, but not a jerk. Secure but not self-righteous. Inspiring but not overwhelming. A good, strong leader needs to be a listener, gathering all the facts and drawing out good debate, discussion, etc. it takes incredible discipline."

I think you just described the antithesis of my former Chemistry VP. Come to think of it, I think you just described the antithesis of the entire R&D management team at that three-lettered company.

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29. xMrk on October 23, 2009 11:43 AM writes...

"As TAC above says, try an MBA course in quantitative finance or decision theory"

Still crap. Only hard for people who lack the brains to be scientists. Puff pieces for anyone who scored 600+ on their math SAT's."

"Words to describe this statement: self-serving comes to mind, but so does hubristic."

Argumentum ad hominem ( ). One problem with nonscientist business "experts" is that they often have little clue about the many ways arguments can become nonsensical through fallacy.

That's why we are at an economic collapse and many industries in death spirals. management by idiot is not a good Darwinian strategy for survival.

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30. xMrk on October 23, 2009 11:58 AM writes...

and...who are the smartest in computers?

Corresponding to drug discovery and other R&D scientists are the engineers who design CPU's. That's where the greatest advances have occurred since the invention of the 4004. They are treated the same way by CPU mfr. management, though, as are pharma scientists.

I'd also lend this accolade to the engineers who designed the Mars rovers...supposed to last 3 months and still rolling at temps often 100 below zero and worse, years later.

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31. xMrk on October 23, 2009 12:00 PM writes...

"To get to the top of any field requires exceptional talent and effort."

In this day of rampant lying and corruption, all it actually requires is good connections and good hair.

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32. Sid on October 23, 2009 12:08 PM writes...

Regarding Point #3, I'm living proof that you don't need to have formal scientific training to understand biomedical research (my academic background is history). I've been working with university-based biomedical researchers since 1993, helping them to establish multi-investigator, multi-site non-profit research organizations (e.g.

Part of what I do is also help them communicate their results in ways in which the general public (patient groups, politicians, etc) can understand it more effectively (as much of the research is tax payer funded, this is important!). This is not a skill set that is normally "taught" to biomedical researchers in their graduate years (although it is getting more common in Canada these days), so it is something that needs to be worked on.

As this is my first "excuse" to post to this blog, I want to take the opportunity to thank Derek and the other frequent contributors for their work. I have really learned a lot about the med chem side of drug development from your interactions as well as some of the "political" sides of the drug industry.

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33. g on October 23, 2009 12:21 PM writes...

Just as the management culture in Wall Street contributed to their (our) financial problems, so has the management culture in Big Pharma/small Pharma/biotech contributed to its failures.

I believe that there are many talented MBA's and scientists who could effectively run a start-up. However, the business culture (including universities, VC's, MBA-types, and science-types) has not effectively adapted to the current pharmaceutical/biotech business environment.

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34. researchfella on October 23, 2009 8:47 PM writes...

Regarding item #1, please also note that MD's are NOT scientists. And maybe worse, they think that they ARE scientists. I've experienced having a CEO and other executive management who are MD's spending a lot of company time and expense filing extensive patents on various wacky ideas with little or no enablement, thinking that this generates value for the organization. And a CSO who was an MD, with no idea how to do research, interpret results or design experiments. Very frustrating, but thankfully I've moved on from that experience and learned an important lesson.

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35. S Silverstein on October 23, 2009 11:25 PM writes...

Researchfella wrote:

please also note that MD's are NOT scientists.

Well, gee, after undergoing pre-med and this completely unscientific training, a number of years of practice, and a post doctoral fellowship in medical informatics, I held the title "Associate Research Scientist" at this organization and conducted research, as did my MD colleagues; still others in the research tract at BU School of Medicine went into academic research careers straight away.

But I guess, just as Fox is not a news network, MD's are not scientists.

Now ... can we drop the stereotypes of MD's on this board, please?

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36. S Silverstein on October 23, 2009 11:27 PM writes...

researchfella, which MD's are you referring to?

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37. researchfella on October 24, 2009 3:26 PM writes...

S Sliverstein: Okay, maybe I'm generalizing from a too small dataset. But the three MD's that I worked for in my past didn't show any sense of scientific experimental design or appropriate interpretation of data. Maybe I just had some bad luck.

But, I also have observed at conferences that are focus on clinical studies and mainly attended by MD's, that it's all about "outcomes", statistics, and empirical suggestions about what to try next. Very little discussion about mechanism of action, mechanism of side-effects, pharmacodynamics, etc. Not very scientific, in my view.

But, all this being said, the head of R&D where I work now is an MD, also a great guy doing a pretty good job. But he also freely admits his limitations when it comes to discovery research.

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38. milkshake on October 24, 2009 4:50 PM writes...

Derek, maybe you should start deleting the most inane gorp from the comment section. Otherwise Pipeline will turn into another Slashdot. Thanks.

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39. Anonymous on October 24, 2009 5:55 PM writes...

Re 33, "the business culture (...) has not effectively adapted to the current pharmaceutical/biotech business environment."

I am not sure that the problem is the business culture being specifically adapted, or not, to anything. I would consider our management style to be generally dysfunctional as a business culture, pretty much regardless of what the business would be.

Much of business, as in life, is about decision loops: Moving from action to consequence and from result back to action, in a logical sequence. At different scales and times, everybody needs to have a decision loop, and probably several ones. If you are a driver moving through traffic, a barkeeper serving drinks, an officer on the battlefield or a worm borrowing through the mud: Almost every living creature and every organisation needs its decision loops.

Except, it seems, big-corporation management. As far as I can tell, it seems to have open-loop decision making, or perhaps infinite loop decision making. In the end it is very much the same. The moment when management will acknowledge the facts on the ground and act accordingly is always said to be somewhere in the future.

Assume for the sake of argument --- not so very hypothetical, alas --- that somebody near the top, Chief-Officer-Of-Something, formulates and starts to execute a bad plan. Not just a controversial idea, but a plainly bad one, which is almost universally recognized as unrealistic and harmful. How long does it take to start to correct that decision? The current answer in my organization, as far as I can tell, is "at least three years." This in an organization of which the CEO is held to be a role model and a coach for other CEOs.

Big corporations are sometimes compared to mammoth oil tankers, slow to respond to the helm and reluctant to change speeds. Wrong. They are much more like subcontinents adrift, heading for the collision that is beyond anyone's control. I haven't kept count of all the times somebody management has told me that "it is inevitable."

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40. Bonkers on October 24, 2009 6:21 PM writes...

You guys are living in a fantasy land.

All you need to know is in the below link. Get a passport and drink the curry flavored cool-aid.

"Pfizer taps Indian drug cos for alliances-report"

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41. Derek Lowe on October 24, 2009 9:23 PM writes...

Milkshake, I delete the very occasional ad hominem comment that has nothing else in it. But otherwise. . .once I started, where would I know how to stop, eh?

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42. S Silverstein on October 24, 2009 9:52 PM writes...

researchfella, thanks. We should all be level headed here as I think we're here for the same reasons.

milkshake, I think most of the threads on this blog are impressive in terms of focus and science, so I hope an occasional indulgence is not a problem. At my blog, I only wish I got a fifth of the superb comments as posted at Pipeline.

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43. milkshake on October 24, 2009 10:28 PM writes...

Derek, who ever needs to stop? - I think the most important thing is to start. Just you look at the Old Testament: even an overbearing incoherent moderator can make positive, lasting impressions

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44. TXChemist on October 25, 2009 10:22 PM writes...

This has been somewhat touched on, but you need to look at the diversity of both the board, CEO and key staff members. You can have the appearance of a good leader with good staff, but if all you hear is "me", "I", "mine", etc. then it is all about the person you are talking to and the rest is just for show. Unilateral control or near unilateral control in a privately held company is very dangerous as well.

You do need business and marketing know-how to sell an idea to the VC's. In a perfect world a VC would fund a great idea they don't understand. Also in a perfect world every scientist would understand the nuances of the business world. Neither situation is true. It is very easy to have tunnel vision regarding your specific career experiences regardless of what side you are on.

Not all scientists are good on the bench or enjoy the bench. A lucky few have the ability to understand the business side of science and they should pursue that career. It would be a greater "misallocation" of resources to pigeon hole people in a career based on their degree.

It is unfortunate that some scientists believe their expertise allows them to reach across into a world that is not always based on logic and reason (who gets laid off, what site to keep open, why a project is funded, etc.) A lot of those decisions are based on complex tax laws and financial issues that require an advanced degree in accounting and tax law. As a researcher it is not easy (and sometimes impossible) to try and rationalize those decisions. If we are lucky we are able to have a reasonable explanation and if we have been around long enough we might receive the "inside" story but those situations are few and far between.

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45. CMCguy on October 26, 2009 3:10 PM writes...

#44 TXChemist although I hear you on the misallocation/pigeon hole statement (with presumption that any persons involved are intelligent and adaptable) I am unsure about how decisions based on complex tax laws and financial issues resonates, especially with the examples you mention. While I have indeed seen some of these points raised in contexts it usually comes off as disingenuous diversion of the "real story", which as you state is rarely known. All to often the inside factors involves one person/group protecting their own ass(ets) or simply retaining the favored "yes-men" culture they have grown accustom too. So there could be logic and reason behind things but the "rules" appear situational and not standardized (perhaps this is fits your suggestive warning in first paragraph).

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46. TXChemist on October 27, 2009 6:07 PM writes...

Most researchers who are outside the business decision loop process believe that they would "do it differently" if they were in-charge. I wholeheartedly disagree with this mentality. IF the researcher were exposed to the full story and trained to think like a CFO, CEO, MBA, etc. I say that we would make the same decisions at least 95% of the time. We like to believe that we would apply the scientific process to those decisions. Unfortunately many of those decisions are not based on the scientific process. They are made based on tax laws (which is why the states with the lowest corporate taxes can attract the new auto manufacturing facilities), politics, EPA requirements, etc. The scientific process and logic fall apart the moment you begin dealing with government (city, county, state and federal).

We are also faced with the complexity of a society that tries to tell us what they want and how to run our business (i.e. they want less pollution but not nuclear power plants, they want the fountain of youth in pill but don't want the risk of side effects). This same society will sue a company if they feel they were wronged or should have been warned (why should a toaster say do not use in the bath tub or a lawn mower warn you that you can have your had cut of if you touch a moving blade).

A prime example of government intervention is the production of gasoline blends. Instead of having to follow the national guidelines refineries are required to follow the state (and even county) guidelines. Because of this we have 400+ gasoline blends (seasonal adjustments included) in the U.S. I have been told by those experienced in the industry this could be distilled down to between 15 and 20 fuel blends. Instead of being able to meet market needs based on climate, altitude and engine manufacturing specifications refineries are required to make blends based on politicians (federal, state and local) deciding what is "best" often without consulting the industry they are imposing the regulations on. This makes no economic sense and periodically requires the closing of small refineries that do not have the equipment or capacity to produce specialty fuels.

My main point is that as researchers we have to be careful as to how we judge the actions of our business leaders. I may disagree with them and their decisions based on the information that I have, but I can not assume I would do things differently if presented with the same financial, political, and societal reprecussions that I hope they are including in their decisions. This is what I mean by the "real story" behind a decision making process. If I truly feel that I can do things better than I need to leave the bench and pursue the appropriate education/experience so that I can make those types of decisions.

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47. Hap on October 27, 2009 6:59 PM writes...

At least for biotechs/small pharma, though, I don't think tax laws determine location - instead the location is likely determined by the availability of people with the appropriate skill sets and knowledge, and particularly by where enough people with those skills are present to not make them hard to find (and expensive to employ). The particular legal and financial constraints of small companies I would think are nontrivial and require specialized knowledge, but without something to sell your company is still DOA even if you can negotiate the legal and financial shoals.

I have to wonder though, after the nth merger, when the previous n-1 have failed to benefit anyone but upper management, why I should take their word on it that it was in fact the right thing to do. I don't know if the sample is big enough to draw meaningful correlation from, but the decision to merge (for example) seems based more on short-term self-interest than on the long-term best interests of the company or its shareholders.

It may be we tend to get the short end of the stick with respect to management decisions, and so tend only to question those that harm our interests (what I complained of above). I can pretty easily see that I don't know enough, and so that (but not necessarily how) my view of the decisions could be altered by additional information. Having better information, though only helps when I can trust the intentions of those with the information. There would have to be a lot of information to show that decisions appearing to be only in the short-term good of a select set of employees were in fact in the companies' best interest to restore that faith.

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48. TXChemist on October 27, 2009 7:31 PM writes...

Hap #47:

I agree with you and that is why I left the pharmaceutical industry. I think a lot of good people begin companies with noble and good intentions to change the world. When they become faced with the unduanting task of meeting FDA, EPA (primarily regarding waste disposal), OSHA and other government entanglements the upper management finds it easier to sell out and start another company where they can fly under the radar once again. Is it short term self interest gains? I am sure that has to do with the decision, but after experiencing the challenges of regulations I believe that has an impact as well. Let a company that knows how to navigate those waters deal with them. The only way researchers benefit is if they manage to negotiate profit sharing or stock options when they sign on. If not they will never benefit.

When VC's keep companies in Boston, SF and other high rent districts ($30 - $50/sq ft of lab space vs. $15 - $20 outside these areas) they are preventing money from being spent on equipment and staff that would advance the science and technology. They could benefit from the tax laws in other states but choose not to. I am sure scientists would be willing to relocate to lower cost of living environments if more start-ups started moving to these areas.

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49. Hap on October 28, 2009 2:29 PM writes...

The problem is that they would have to account for the risk in their finances, and their workers would have to account for the risks of working where they could not change jobs easily. Incubators might help, where lots of similar companies band together (or our helped by a state or local govt) to get a critical mass of workers to move, which would mitigate the future costs of workers and the risks for workers if the companies fail.

Another problem, though, is that low-tax areas can't fund lots of things that make people want to live in them, with the particular problem of education. While you can recruit people with money, if people don't think that their kids will have good opportunities for education (and can't educate them themselves), then they are unlikely to stay. (I figure there's lots of inequity/unevenness in educational opportunities, but even so, states like mine don't seem to be able to keep their college graduates. Since those are the people likely to start businesses, or to work for startups, that seems like a problem.) If the culture of an area doesn't value education, then people's priorities and spending will reflect that, and even if the relative cost of education should be lower than in high-cost areas, the money won't be spent, and the opportunities won't be there. If you're bragging about how you could afford three planes for your football team to mitigate H1N1 issues, that sort of says where you priorities are - but then the people you want to come and raise their kids there and start businesses aren't going to want to do any of those things. A secondary problem is transit, and since newer cities are built less densely (to take advantage of low land costs), mass transit is not likely to be ever viable in those places. (I don't remember the transit in NJ not sucking, though it's better than where I am now.)

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50. Jose on October 28, 2009 11:02 PM writes...

Nice Economist article about management snake oil hucksters-

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51. tax marketing and operations coaching on November 21, 2009 3:51 AM writes...

yeah i think the main problem is that,, is that low-tax areas can't fund lots of things that make people want to live in them, with the particular problem of education.

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