From Consumer Products CEO To Biopharma CEO

By Walter Klemp

"How did you go from being a consumer product CEO to an anti-cancer biopharma CEO?”

I get this question a lot from investors. And, yes, I’d be cautious, too, if I was going to consider placing my money in a pharma R&D venture run by someone who spent half his career in the consumer products sphere.

On the other hand, I’ve been a serial entrepreneur since I was 25, and I have run three public companies. And if there’s one thing I can say, it’s that whether you’re in pharma or baby products, it’s all about business. Being able to raise money on a consistent basis and knowing how to use that money to hit strategic goals are key.

However, the link is not as far removed as it might seem. I started out at accounting firm Coopers & Lybrand, which provided me with a critical understanding of how operations worked — or didn’t work — across many clients. I went on to form a disposable baby diaper company that grew to nearly half a billion dollars in revenue with over 2,500 employees in seven countries. Following that experience, I joined a med device (designed for acne treatment) company that sold over a million units in retail drugstores nationwide. Even though the company focused on a branded consumer product, it was FDA-regulated, and that blending of consumer products and med tech involved a tremendous amount of learning.

To get to my new role, I brought with me several lessons from my consumer-product background. It’s important to note that while these lessons came from the consumer side, many of the challenges of business are not particular to any sector. Additionally, the extremely high volumes associated with the consumer business certainly helped to amplify the importance of problem-solving.

DIFFERENTIATION IS THE KEY TO SUCCESS

First, every company must differentiate itself. You have the choice of differentiating on product, price, or service. At the dermatological company I ran, we chose to lead with our product, a device that helped get rid of pimples through heat. That was an obvious choice as there was nothing else like it on the market. As a small cap biotech company, Moleculin needs to position itself against every other pharma startup as well as the big guys. With our licensing agreement with MD Anderson, we strove to obtain access to multiple promising drug breakthroughs, giving us multiple shots on goal rather than being a one-trick pony.

DON’T GO IT ALONE

It’s hard to go it alone. You need partners with a mutual interest who can often help pave the way for you. In the case of diapers, we needed to establish a beachhead to compete. We partnered with local Houston retailers who were willing to take a gamble with us because they could earn more profit from our lower-cost product compared to almost no profit with the big competitors. At Moleculin, aside from partnerships with research institutions like MD Anderson and Emory University, we are leveraging our primary researcher’s connections with Poland to accelerate clinical trials. Consequently, we have been able to recruit patients faster and more easily than in the U.S., where competition for patients is tough.

STAY LEAN

If you’re in this for the long haul, you want to keep your operations lean. I really learned this in the consumer commodity business. Our diaper differentiator was cost, and to keep our prices more than a dollar under the big players, we needed to constant look for places to streamline. This doesn’t mean that you sacrifice opportunity, but rather you find alternative materials and processes that meet your financial needs while maintaining the quality that consumers expect. At Moleculin, we continue to be a lean organization — initially, our office was a lab with two desks. We only recently secured real office space, and it’s mostly used as a landing pad for our researchers and collaborators when they come to town. Our virtual organization with a distributed staff model is very low in cost, yet it makes us attractive to some of the best and brightest in the industry.

BUILD YOUR FINANCIAL NETWORK EARLY

Being in Houston, we are a bit removed from the biotech investor money you find on either coast. Going through rounds of seed, venture, and eventually public investment in consumer businesses was extraordinarily important in helping bootstrap us in Texas. Not only were those close relationships that we developed critical, but our investor network knew that my past success with consumer products meant I probably had a good handle on maintaining an efficient organization, and they were more confident about placing their money with us.

TAKE THE MONEY WHEN IT’S THERE

A related lesson is taking advantage of raising money when it’s available. When I served at consumer companies, we knew we couldn’t count on corporate valuation or high product pricing to sustain ourselves, so we learned that whenever we hit a milestone or developed a new product feature that caught some attention, we could use the opportunity to solicit additional funding. We are continuing the same practice at Moleculin, which works well because we have some very promising drug candidates that are regularly showing results in the lab and in clinical trials. Such milestones, combined with regulatory developments such as securing orphan-drug designation, have helped us raise additional funds as we move forward.

LEARN TO ADAPT TO THE THINGS YOU CAN’T CONTROL

We all have a tendency to try to plan for all possible contingencies. This thinking can result in complete paralysis, or, at the other extreme, spending money on scenarios that may never happen. The important thing is to build a strong and efficient core operation, keep as much cash in reserve as possible, and be quick to recognize when outside forces have changed the game — and react quickly. When I was running the finances of the diaper company, we hit a perfect storm of bad luck: The Brazilian real crashed, the price of wood pulp skyrocketed, and P&G started a price war. Obviously, we couldn’t control any of these things, and surviving that taught me the value of a solid foundation combined with the ability to rapidly adapt. Now, when confronted by a challenge, such as competing for clinical trial patients, we do our best to think outside of the box and look at other approaches, such as conducting trials in Poland.

DON’T OVERSHOOT

Even if you’re successful in securing funding and even revenue, don’t overshoot. Have a firm grasp of your objectives and don’t spend money on expansion if it’s not strategically necessary. In our diaper business, we saved on marketing and research by letting our big competition do the heavy lifting in these areas. We were then able to “draft” behind them — at a lower price point — while investing in similar technology to keep us even with them. At Moleculin, it’s similar. We keep in mind that our mission is no more than to get these new small molecule drugs into clinical trials so we can prove their effectiveness. After we get the data, it makes sense to let Big Pharma take it from there — there’s no need for us to waste time and money on a sales and marketing infrastructure.

WALTER KLEMP is CEO of Moleculin, a clinical-stage pharmaceutical company focused on highly resistant cancers.