Bio By The Bay — Science Means Business

By Wayne Koberstein, Executive Editor, Life Science Leader
Follow Me On Twitter @WayneKoberstein

Somebody better teach these start-up executives how to run a company — and FAST! No clearer rationale was needed for the San Francisco Bay Area industry group, the BayBio Institute, to get moving with its FAST (Fellows All-Star Team) mentoring program to serve the leaders of BayBio’s smallest member companies, or Fellows. FAST began in the fall of 2013, bringing in four to six biotech start-ups for an 8-week course twice a year. A total of 25 biotech company executives have completed the program to date. Steve Karp, FAST’s senior advisor, says his research indicates hundreds of small companies in the Bay Area may benefit from executive mentoring, leaving plenty of room for this program and, by implication, many other initiatives like it.

In general, the U.S. West Coast lags in creating support for biopharma business mentoring comparable to the extensive educational structure that has evolved around Big Pharma in the East. The U.S. Atlantic States have long nurtured the industry through their many universities and businesses with programs dedicated to educating people on the management track. The Wild West has tended to focus more on science and technology, hoping the spirit (and luck) of born-in-the-garage companies like Apple will rub off on the right people in biotech.

At our first Outsourced Pharma West event in San Francisco last November, a number of local attendees told me the Bay Area biotech business spirit was more evocative of the old Barbary Coast — bet everything on blind luck. The specific remedy they recommended was simple: more opportunities for start-up executives, many of them still scientist-founders, to learn how to apply business concepts, models, and best practices in their own companies. I spoke with Karp about FAST and how it serves the widespread need for business mentoring in the entrepreneurial side of life sciences.

WHAT WAS THE SPARK THAT INITIATED THE “FAST” PROGRAM AND WHAT HAS IT ACOMPLISHED TO DATE?

KARP: BayBio has two components: BayBio, the life science trade association, and the BayBio Institute, the educational arm responsible for FAST. We noticed there was relatively little educational support for very early stage development companies in the Bay Area. In the period since we started the program in the fall of 2013, the number of incubators in the area with mentoring programs, such as Lean LaunchPad, probably doubled. To date, we have put 15 companies through the FAST Program, which draws from a group of about 160 companies, the BayBio Fellows, which are members of BayBio at a much reduced rate. To qualify as a BayBio Fellow, a company must be Northern-CA based, have raised no more than $5 million, have no more than 12 employees, and be pre-commercial. Beyond them, I’ve been assembling the names of all small companies in the Bay Area that would be eligible. Counting the BayBio Fellows, I now have about 400 names total, and there are probably more than 500 companies in the Bay Area that would meet the criteria. So it’s a fairly substantial group that is not entirely tapped. The program is very closely modeled on one that has been run in Boston for several years out of MassBIO, MASSConnect, and the people who run it have been very helpful in guiding us.

DOES IT SEEM MANY START-UP FOUNDERS HAVE STILL NOT AWAKENED TO THE NEED FOR LEARNING HOW TO RUN THEIR BUSINESSES?

I think of it as, “You don’t know what you don’t know.” The typical founders are hard-working and completely engrossed in their science. So, the other issues that arise in business, such as how does one achieve funding or comply with various government regulations, impinge upon their immediate interests. Not all of the small-company executives fall into that category; there is a fairly large subset of people who have had substantial experience within the industry, but they are not the people we serve in the FAST Program.

HOW DOES YOUR PROGRAM WORK FROM THE PARTICIPANTS’ PERSPECTIVE?

The application process is straightforward. There is no form to fill out; we merely ask the applicant for a list of items that define what the company is, what it is trying to do, and what resources are available to it — usually found in the materials the company has developed to describe itself, and those materials will vary widely. A solicitation goes to all of the BayBio Fellows, and we also send it out to a much broader list of BayBio contacts. In the past, a number of companies have decided to become BayBio Fellows just so that they can apply to the program. Last time out, we received 30 applications and ultimately we chose six to participate in the last session. Normally I will choose about 12 of the applicants to do a presentation to our reviewers, who select the participants in the program. The review panel consists of about a dozen people with varied skill sets in the industry. There are always a couple of investors on the panel, generally an IP attorney, some bench scientists, and people in business development.

SO THE APPLICANTS CAN ALSO GET SOME USEFUL FEEDBACK ON THEIR COMPANIES EVEN AT THE REVIEW STAGE?

Yes, but it is not like Shark Tank, because everyone is there to help, not issue criticisms couched in difficult or harsh language. It’s always very supportive. And that’s true not only during the selection process, but through the meetings themselves. After we’ve selected the companies to participate, I visit with them at their facilities — if they have one, and not everybody does — and I spend a fair amount of time with them to understand exactly who they are and what they need, their stage of development, the state of their business knowledge, and so on. Then I put together a group of pro bono advisors with the appropriate skill sets to match the company’s needs. I have about 80 people with skills from throughout the industry who have either served as advisors in the past or volunteered for future sessions. I can also use the same group as a networking tool to reach out for skill sets that may not be represented in the group.

WHAT HAPPENS AFTER YOU ASSEMBLE THE ADVISORS FOR A PARTICULAR COMPANY?

Each group meets once a week for eight weeks with the entrepreneur. The object is to identify the company’s needs and address them as much as possible. The needs vary widely. At one extreme, we had a company for which we spent the entire eight weeks working on the presentation they would make to the Wellcome Trust for a potential grant of $5 million. At the other end of the spectrum, one company had yet to identify its clinical candidate; we spent a lot of time laying the groundwork for how they would put together a pre-clinical plan, compute the costs involved for various timelines, and present the company to a potential investor. As you might understand, financing is a commonly required theme. The other activity that applies to almost every company in our program is an examination of their IP status. About a third of the advisors maintain long-term relationships with the companies they advised in the program.

The FAST Program also relies very heavily upon the services of graduate students from San Francisco State University, who act as project managers. SFSU has a program that is a combination of business and biotech, and students in the program benefit greatly from sitting in on our discussions of such topics as reimbursement, regulatory affairs, preclinical plans, company focus — all of the areas that one can only learn by doing, out of school.

WHAT IS THE BREAKDOWN OF COMPANIES IN THE PROGRAM BY PRODUCT TYPE?

Approximately a third of the participating companies are developing therapeutics, about 40 to 50 percent are developing research tools and diagnostics, and the remainder is in devices.

YOU PUT TOOLS — SUCH AS BIOMARKERS OR MORE GENERAL RESEARCH TOOLS AND PLATFORMS — IN THE SAME CATEGORY WITH DIAGNOSTICS?

Yes, because it is common for a company with a platform or technology to come to us with the question of whether it should develop a research tool or a diagnostic. Most often, they initially want to pursue a diagnostic because they see that as being much more important and potentially lucrative. But typically, as they move through the program and learn what it takes to enter the market, how they would generate revenue, and what the timelines the regulatory hurdles look like, they switch to a model where they will only develop the research use at the beginning and turn to diagnostics as a later, Stage 2 development.

DO YOU BELIEVE THOSE COMPANIES WILL EVENTUALLY MOVE BEYOND DIAGNOSTICS, TOWARD THE AIM OF THERAPEUTICS AT SOME POINT?

We will have to see how it works out because that’s a long way down the pike. Many of the companies do intend to develop therapeutics eventually. Whether it will actually happen, no one knows — but I suspect, in many cases, if a company is successful, it will be subsumed by some much larger entity before it ever gets there.

I AM ENCOUNTERING MORE COMPANIES NOT LOOKING FOR THAT EXIT, BUT INSISTING THEY WANT TO GROW ON THEIR OWN, EVEN INTO FULL COMMERCIAL INTEGRATION.

The companies with which we deal are so early on, in many cases, they haven’t yet thought much about exit versus long-term growth. But some of them have. Very occasionally, someone comes in with real clarity, saying, “This is what I want to do.” But many of our companies may not even have a prototype or clinical candidate yet. A company in therapeutics may not have entered into early stage talks, and they just don’t see themselves attempting to raise the money that’s necessary for a Phase 3; they know that’s not going to happen. A tools company may not have thought through whether it wants to continue running as a company or sell their technology. Among the small segment of device companies in our program, most are looking to sell — it is really tough for a device company to make it on its own because device companies may need large distribution networks. Then we get into some substantial discussions of whether the company should simply license the product or sell it through another company’s existing sales force, with the downside of being only one item in its catalogue. But they are early enough in the development phase and have a long time to think this through before they must make any decisions.

IT IS EXCEPTIONAL EVEN NOW FOR COMPANIES TO LOOK SO FAR AHEAD WHEN THEY ARE STILL IN EARLY DEVELOPMENT.

I spent three years at Genentech in Portfolio Management, where we examined the entire competitive landscape for a product, including reimbursement, long before its first-in-human studies. I was trained to consider all of the market issues, to fully understand all of the ramifications of what we were doing and what the real opportunity and potential of the product was before we spent a huge amount of money on development.

Other programs also break in companies that are barely started by having them go out and interview stakeholders. For example, Steve Blank’s Lean LaunchPad requires that the participants interview at least 100 stakeholders to test their suppositions. The exercise is extremely valuable in guiding every development step that follows.