Business Development for the Biotechnology and Pharmaceutical Industry

Martin Austin

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317170587
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Gestión

Business Development in the biotechnology and pharmaceutical industries accounts for over $5 billion in licensing deal value per year and much more than that in the value of mergers and acquisitions. Transactions range from licences to patented academic research, to product developments as licences, joint ventures and acquisition of intellectual property rights, and on to collaborations in development and marketing, locally or across the globe. Asset sales, mergers and corporate takeovers are also a part of the business development remit. The scope of the job can be immense, spanning the life-cycle of products from the earliest levels of research to the disposal of residual marketing rights, involving legal regulatory manufacturing, clinical development, sales and marketing and financial aspects. The knowledge and skills required of practitioners must be similarly broad, yet the availability of information for developing a career in business development is sparse. Martin Austin's highly practical guide spans the complete process and is based on his 30 years of experience in the industry and the well-established training programme that he has developed and delivers to pharmaceutical executives from across the world.

CHAPTER 1
The Role of Business Development

Defining business development

What is ‘business development’? This is usually the first question I have to answer whenever I’m asked what I do for a living by people outside the pharmaceutical industry. The answers I try to give are often tailored to the audience and what they are likely to quickly understand from their own experience. However, as few people have any idea that such a role exists beyond some hazy idea of marketing they usually smile politely and suddenly remember there is someone on the other side of the room to whom they must say hello immediately. So a definition of business development, at least as I have seen it performed since it comes in many different guises, will be useful. I define it as ‘any activity that alters the status quo of the business’. This includes activities such as:

• planning

• adding for growth

• subtracting for profit

• business process improvement

• competitive awareness and advantage.

Planning is a central activity to business development because, as a friend once told me, ‘There is no worse combination than great tactics and a lousy strategy – you just make things worse faster.’ In order to plan well, the business developer will need to have or obtain a number of skills and resources and these will be the subject of later chapters. However, a base set of skills for the business developer include being well organized, having a good breadth of knowledge, imagination, being good at analysis in different forms and having good communications skills, particularly listening and interpretation. Good organization means not just being able to collect information but to collate it, recall it and relate it. I have had the advantage of having worked briefly in IT with database designers and seen how the discipline of having a process for each of these activities creates a systematic approach. These processes can be made into a computer program. Addressing the information needs of planning in a systematic way brings organization to the planner and helps in structuring their communications to their own organization and to their counterparties in any negotiations.

Imagination is required because, while the pharmaceutical industry is at the pinnacle of scientific and technical innovation, bringing this science to market needs creativity and application. Business developers must look beyond the technology and into the future. This requires forecasting: seeing the combination of products or of processes or even of companies to create more value, which is needed to develop the business.

Solid planning enables one to say ‘What if?’ about tomorrow. For instance, if our sales are

100 million today, what might happen next year if: a competitor doubles their promotion or brings a new product to market; perhaps a new surgical technique enters the market; two competitors merge and become more powerful or any number of other potential events? Many businesses have failed, or failed to thrive because they did not plan well, which means looking high and low and far and wide at their situation. It is business development that has this responsibility in both large and small companies. Companies that become bound up in their own technology and so see only their nearest competitors and local markets can limit not just their vision but their potential as well.

Planning offers different choices; choices to add new products or companies to their portfolio for growth, or, if the company is mature, to sometimes ‘subtract for profit’ by dividing products and spinning off activities which are diverting resources or diluting profit or growth. You may ask, ‘Why do large companies sell off product lines which are profitable?’ The reason is that just as gardeners cut off healthy branches which are growing in the wrong direction or making more wood and leaves than fruit, the company must be ‘trimmed’ to produce a better result; particularly if the company is publicly traded. This may involve divesting itself of a slow-growing older brand to concentrate on new fast-growing products. The result will allow the chairman to point to rapid growth and a reduced reliance on products under threat of generic or other competition; shedding lower profit divisions or business units will also focus a company’s activities on what is the heart of its business.

Close analysis of the company’s plans can also reveal deficiencies in business processes. When seeking reasons as to why next year’s growth cannot be more than ‘x’ per cent, or why last year’s growth was only ‘y’ per cent, it may be that there is insufficient manufacturing capacity or that the supply chain cannot perform fast enough. It may also be that orders can’t be processed or shipped fast enough or that orders are not being generated at sufficient speed. In each of these cases the business development function should be taking the lead in identifying the problem and proposing solutions.

With the skills to collate and organize the data required for analysis and the imagination to see why the company is where it is, and what could be done to improve and increase the top and bottom lines, the business developer has an important role in the strategy and direction of the company. There is a further major role for business development: as the company’s champion, someone who monitors competition. Business developers need to be very aware of threat and competition, sources of which include:

• internal constraints

– inertia

– distraction

• age and time

• direct competitors

• indirect competitors

• external constraints

– external inertia

– distraction

• new competitors

• task focusing.

Competition comes in many forms. Perhaps the most galling is the negative effect of internal competition; the inertia in an organization which is best expressed by the old saying, ‘familiarity breeds contempt’. When parts of the organization settle for ‘the way we’ve always done it’, and ‘the easiest way’, then the company is not trying to improve its product. Many parts of an organization can become guilty of this and manufacturing and administration, two of the non-‘frontline’ groups, are particularly prone to it. Administrative functions tend to encourage inertia: the tedium of the task of shifting invoices and processing orders divorces staff from the reality of the market and the older a product is the less attention it gets in the organization. Years ago, as a product manager for older products (a good training ground for business development), I frequently had to go and unblock the system where stacks of orders or dockets or whatever had been sidelined because of some other priority or just through volume of work and ‘not enough resources’. This cry of not enough resources is a favourite among researchers and in manufacturing too. Manufacturing functions are often diverted by minutiae since in any function there is a bewildering array of distracting events which are constantly present. Completion of each part of the project may be delayed because one thing or another has to be fixed first. Of course, all of these problems would be solved if only they had ‘more resources’.

I list these distractions and sublimations as competition because like friction they slow down the business and so require the attention of the business developer every bit as much as does the competition that emanates from the outside world.

Idleness and distraction are also powerful competitive forces in their own right because the variation in peoples’ underlying natures, before they are grouped together as customers, divides them into categories affecting the business development landscape (see Figure 1.1).

In planning, the unseen market competitors are rarely featured as drivers in a market yet as barriers to entry they form sometimes insurmountable hurdles. Distraction, which is given negligible attention when compared to direct competition, occurs in the external market because people are overwhelmed with information.

A company’s business developer needs to be aware of direct and indirect competition as actors and factors in terms of the market as well as in specific product challenges. It may be that the market opportunity can be treated by different modalities such as in the treatment of metabolic diseases like type II diabetes. Modifying someone’s diet so that they lose weight can be an effective way of controlling their diabetic symptoms and, while weight-reducing foods may not seem to be a major component of the market, new functional foods are being developed which are likely to increase in the use of one modality over another, not involving a pharmaceutical product and could reduce the number of patients who should be considered as treatable in a market forecast. Similarly, cellular therapies that introduce new islet cells to the pancreas through various means are in the clinic and could also soon impact the direction of the market.

Figure 1.1 Unseen market competitors

In oncology the introduction and development of new products is quite intense. The number of patients available for treatment will be linked only to those entering therapy once those who have existing disease are treated. Many market models seen at investor conferences fail to take into account the fact that the available market for new biological therapies may be reduced because of advances in other areas such as radiotherapy or surgery.

Even activities of the industry which are not intended as competition can have competitive effects. When a product for thrombolytic therapy was being evaluated it became apparent that the market was being severely depleted by the number of clinical trials being held for different agents, including the US National Institute of Health (NIH), which was attempting to establish the value of the therapeutic approach itself. Since there are only 1.5 million acute myocardial infarctions (heart attacks) per annum in the USA then, after discounting those whose heart attack occurred too far away from major treatment centres to be useful, the number of new patients who would benefit from such therapy was some 250,000 per annum. Seven trials, each of which recruited 10-15,000 patients, were therefore leaving few patients to be treated on a paying basis.

Business developers must therefore learn and apply their skills appropriately.

While they need to be aware of the situation of the company on the basis of historical data, they must also be capable of projecting future scenarios for the company in a multifaceted and multivariate environment with independently moving elements and competitors who will react to any change made by the company. Plans made to change the company must be flexible.

The skills base for business development has three distinct areas: knowledge, analysis and communication.

Knowledge

Industry-specific knowledge is required in six key areas:

• research

• manufacturing

• the supply chain

• development

• sales and marketing

• finance.

RESEARCH

Knowledge of the research process does not mean that the business development person must be either a scientist or have performed this role. Some understanding of the biological basics of a drug’s action – and so the comparative strengths and weaknesses this could bring to a marketed product – is crucial however for evaluating or valuing a product for sale or for licensing.

MANUFACTURING

Manufacturing constraints and processes are a major component of a product’s value. Inherent complexity in a manufacturing process can become a protection if the know-how specific to a process is kept confidential or if it is patented. Such complexities might, however, be constraints and so a barrier to licensing the product. When considering a product, awareness of its ease of manufacturing is a vital component for the business developer.

THE SUPPLY CHAIN

The supply chain, especially logistics management, is another component which affects product value and again is often overlooked. Yet physical barriers have real effects on business. I was once left with no alternative but to fly 10 tonnes of an active ingredient from the US across the Atlantic to the Denmark because of inflexibility in supply chain. My product, a bulk-forming laxative, was selling well and exceeding forecasts, but the bulk-forming agent was being sourced from India by ship, then landed at New Orleans, taken by barge up to be milled in Chicago and shipped back down the Mississippi and then off again by ship to Denmark for irradiation before being transferred to the UK for packaging near Newcastle. To speed up the process when Newcastle began to run out of product for packaging we were forced either to airfreight to Denmark or to lose market share in the middle of the launch – we had no real choice.

DEVELOPMENT

Development also has many different aspects, each with its own nomenclature for the practices and regulations involved. Indeed these regulations are a broad subject in themselves as they must define each step from pre-clinical work in lead identification then optimization, formulation and initial batch creation. Development moves on to follow a list of stages and clinical events such as initial trial design and toxicology, carcinogenicity studies, proof of concept in animals, entry into man, clinical trial design, statistics for the powering of studies, regulatory approval of trial design and processes approval for market. However, the overarching concern is the clinical trial design for it is this which will determine if the product can demonstrate the safety, efficacy and competitive advantage that will permit it to be marketed for the desired disease area, and under what conditions. Only if the design will produce the appropriate evidence can the value of the product to be fully exploited.

SALES AND MARKETING

Business development has a pivotal role in understanding the language and limitations of development methods and translating the needs of the market into a design which can produce data to satisfy the regulators. If the trial end-points are too narrowly defined and produce results which are statistically inconclusive, a valuable product can be withheld from the market while extra trials are performed, or lost entirely if the costs are too high. Part of the knowledge required to create the product labelling therefore must come from a deep knowledge of the market as a sales medium. The process of marketing and selling medicines involves a structured series of events orchestrated in such a way as to introduce each of the players in the market to the new product, demonstrate its place in therapy, encourage first use and then, based on that experience, incorporate the product as a daily therapeutic choice. The market is made up of customers with needs and how to address those needs is the endpoint of the design of the clinical trials. Putting the right evidence in the hands of the salesperson is one of the most critical parts of developing a business. If the product and its message are not well understood and well designed then all other efforts will have been wasted. Products do not sell themselves.

FINANCE

The business developer must understand the financing and financial consequences of all of the elements in the chain, which may start with the conception of a company as the means to commercialize academic research through to its establishment, product developments and commercialization in a market all the way to the distributions of profit and dividends to shareholders. Working with accountants, bankers, financiers, auditors and the rest requires the business developer to have insight and understanding of their methods. The business developer must understand the implications of one choice over another in the execution of licensing deals, the acquisition of companies, capital expenditure and taxation.

All of this may seem a huge amount of knowledge to acquire. Part of the purpose of this book is to provide a route map to some of the as yet unexplored regions you will possibly visit in your next deal.

Analytical skills

The second area of skills required are analytical skills, I have broken these down into four basic areas:

• process

• pattern

• numerical skills

• heuristic skills.

PROCESS ANALYSIS SKILLS

Process analysis looks at the logical sequence in a model where for instance the forecast for a product can be derived from a set of reasonably ‘hard’ data (such as epidemiological data sets, perhaps of disease incidence, prevalence or death rates). Knowing the numbers of patients suffering from ...