{"id":3254,"date":"2021-01-25T05:51:05","date_gmt":"2021-01-25T05:51:05","guid":{"rendered":"http:\/\/www.ceo-worldwide.com\/blog\/?p=3254"},"modified":"2025-05-08T09:54:45","modified_gmt":"2025-05-08T09:54:45","slug":"business-development-in-biotech-a-competitive-advantage","status":"publish","type":"post","link":"https:\/\/www.ceo-worldwide.com\/blog\/business-development-in-biotech-a-competitive-advantage\/","title":{"rendered":"Business Development in Biotech – a competitive advantage? – by Sancha Salgueiro"},"content":{"rendered":"
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Many biotech companies start as an idea for an idea: a business possibility for some scientific idea, often in embryonic stage. Their survival as companies and growth relies on the quality of the science but to a great extent on the team: the inventiveness of the scientists and other founding members, who, in order to transform the ideas into products, need access to money \u2013 often a lot of money, when it comes to the development of products for human health.<\/p>\n\n\n\n

Out there, there are extraordinary ideas, protected by good patents, fantastic projects to develop those ideas, and excellent CEOs, who know well the finance world, the industry and the investors, and can bring into the company the cash that will feed the advancement of the ideas. While these tasks are being performed, who is creating the relationships with partners or customers that will potentially help develop the company, or have complementary technologies or skills, or complementary IP to that of the company, who is keeping an eye on the world \u201cout-there\u201d to understand early enough what will be the next hot themes or to find out if a large pharmaceutical company is about to start looking for just the type of product your small company got on offer, with a bit more of development work?<\/p>\n\n\n\n

Well, everybody in management is doing it, but these functions are not being done full time, or in an integrated manner, because finding someone who knows how to do them well is expensive and companies in early stages have to watch every cent they spend. So, either there is already a person performing these tasks in the company, or they are not being performed to their best. Are these tasks sufficiently important that they bring the company a competitive advantage? I.e., is the cost of hiring a Business Developer justified by the value that the function brings to the company?<\/p>\n\n\n\n

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In this short paper, we will look at what is the job of a Business Developer in a biotech company: what are they doing, who does it, what can actually be achieved. Using a case study of a successful biotech company, the above questions will be explored.<\/p>\n\n\n\n

Alnylam is a company engaged in the development of therapies based on RNA interference (RNAi). On its website, Alnylam posts that it has 12 programs in development, one of which is in clinical trials phase 1 and two more that are scheduled to enter the clinical this year. Alnylam has no products on the market and its revenue comes from its licensing agreements and from its research collaborations. It is clear that this latter activity, typically a Business Development activity, has an important role to play in the company\u2019s strategy.<\/p>\n\n\n\n

In the 4 years of its existence, Alnylam published over 20 licensing and research collaboration deals. Strategic deal-making has allowed Alnylam to progress from a biotech exploring another \u201ccrazy new idea\u201d, to a successful stock-quoted company, the leader in one of the most exciting and promising areas of development of new molecules, holding patents that control the whole area. One of the first strategic actions from Alnylam was to take control of the patent situation in its area of specialization – the merger with research-based company Ribopharma in Germany, one year after Alnylam’s A&B financing rounds. Investors put in an extra 24.6 million US dollars into the company on this occasion. At this stage, Alnylam hired a VP Business Development.<\/p>\n\n\n\n

In the 3 years that followed the hiring of a VP Business Development, Alnylam put in place a licensing program and published over 15 major alliances, licensing and collaboration deals, while consolidating its IP portfolio. Through these actions, Alnylam became the reference company for all siRNA programs, while the licensing program kept everybody else working and the door open to collaborations. <\/p>\n\n\n\n

Licenses were given for research purposes (Sigma, MWG, Quiagen, Dharmacon, IDT, Invitrogen, for example) or for therapeutic development on specific targets (Genecare, Nastech, Calando) and collaborations agreements on specific therapeutic areas were executed, a couple of them of strategic importance, such as the Merck & Co collaboration, amended and extended three years later, and the Novartis collaboration two years later. These deals contributed $58.9 mil in equity (which corresponds to 19.9% of the company’s value) plus US$10 million in upfront.<\/p>\n\n\n\n

It would be unreasonable to argue that the deals were operated solely by the Business Development team – the whole company team was necessary for the success. But Alnylam is a good example of how value can be brought to a company through a well-thought Business Development strategy implemented through good Business Development licensing and collaboration deals.<\/p>\n\n\n\n

The answer to the question leading to the Case Study above \u201cIs hiring a Business Developer a good investment?\u201d seems to be, as illustrated, a resounding \u201cYes, of course!\u201d: Business Development contributes to company value in a way that goes well beyond straight revenue from sales – it is therefore important to implement the Business Development function early in the life of a company, to realize the potential of its IP and collaboration scope.<\/p>\n\n\n\n

When to start business development?<\/h2>\n\n\n\n

To do good Business Development<\/a> you need someone with experience doing a complex job, to hire such a person you need to pay him well, but you need to hire such a person because…you need money.<\/p>\n\n\n\n

Very early-stage companies are not the typical Business Developer ground. Early deals or early programs are most likely negotiated between the founding team (often scientists and entrepreneurs) and the investors. Typically, companies will start looking for a Business Developer once they have made proof of concept for their technology, have secured their IP position and have raised the funds to ensure continuation of the business.<\/p>\n\n\n\n

The right moment to hire your Business Developer is also a question of momentum and \u201cmode\u201d: as a start-up, the energy and drive that are needed to move forward a company in its early stages, is perhaps not compatible with the planning and distance required to see the company in the wider picture of its competitors and potential clients, and it is difficult to transition from the opportunistic deal-making mode, to defining and operating a strategy of development.<\/p>\n\n\n\n

So perhaps the birds\u2019 eye, long term view typical of Business Development is more often associated with a second stage in the growth of the company, after perhaps a couple of financing rounds and a certain solidity as to the science. Is this the best model for a biotech? Sometime there doesn\u2019t seem to be much choice left to the young companies, but for those that selected to think about Business Development early enough, the bet seems to have paid.<\/p>\n\n\n

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Biotech: Who are the business developers?<\/h2>\n\n\n\n

The fundamental issue with Business Development is that it requires the input of a cross-section of specializations. Strong strategy skills are needed, but in implementing the strategy, negotiation and the ability to build long-term relationships are the most relevant. Attorneys are often found in charge of licensing (which is one of the main activities of the Business Development), because the material translation of a Business Development deal is a legal contract.<\/p>\n\n\n\n

But Biotech deals have strong technological components, and finding licensing opportunities and exploiting them requires a deeper technological knowledge than in other industries (say the recording industry, for example). This is not to say that an attorney with licensing experience can\u2019t best perform the Business Development activity in certain types of structures. Companies such as Cellectis (France) have created huge value off licensing its technology with an attorney as VP Business Development (about 40 licensing deals over 6 years). In their great majority, the job descriptions for business development positions require a double track education: a science degree and a management education, often to MBA level.<\/p>\n\n\n\n

If we go by the description of the people sought in adverts for Business Development positions, one could be tempted to wonder at any such people ever being found, such is the panoply of experience and qualities that these candidates should demonstrate! Here are some of the requests frequently found in adverts for Business Development mid-managerial positions:<\/p>\n\n\n\n