CEOs share lessons learned in biotech

Last week I attended Pennsylvania BIO's CEO Roundtable event, where three local CEOs spoke to a room packed with the biotech industry's rank-and-file. The most notable speaker was Dr. Frank Baldino, Jr. (left), chairman and CEO of Cephalon. Co-founded by Baldino, Cephalon is an international biopharmaceutical company with over 20 years of experience in the field, and a number of products on the market.

The panel also included Warren Cooper (center) and Paul Touhey (right), both of whom provided perspective on what it's like at the helm of smaller companies. Cooper heads Prism Pharmaceuticals, which recently submitted its first NDA. The company develops cardiovascular products and recently raised $68 million to support pipeline development. Touhey, president and CEO of Fujirebio Diagnostics and a former Centocor employee, was on board to represent the medical device side of the industry. Richard Jaffe, a partner in Ballard Spahr's Business and Finance department, moderated the discussions as the panel fielded questions from the audience. Here are the highlights:

Q: What issues should biotech companies keep in mind when launching a first drug?

Warren Cooper observed that the first drug approval is a pivotal event. The best way for a company to survive the process, he said, is to engage the FDA thoroughly by asking direct questions about what needs to be done. Cooper stressed the word direct. "General questions get general answers," he explained. "You want specifics you can execute."

Cooper also emphasized the importance of preparing to manufacture a new drug. In large companies, manufacturing tends to be isolated from clinical development, and clinicians don't get much exposure to the process. Employees at a small company may be shocked by the difficulty of manufacturing a drug. "The details on that end are staggering--that's the critical part. Clinical and commercialization are easy in comparison to that," said Cooper.

Paul Touhey spoke on his experience at J&J's Centocor. The company makes Remicade, a blockbuster biologic that treats a number of immune system diseases. His observation? Science will not save the day. The clinical element is important and companies must keep in mind the regulatory strategy, but the operational package is key. Biotech companies need good processes, documentations and validation in order to make it through the development process.

Dr. Frank Baldino explained that there are no real secrets to success when launching a new drug, but that there are several facts to keep in mind. Fact one: Good drugs get approved by the FDA. "There are few examples of wonderful drugs that don't get approved, but many marginal drugs don't," noted Dr. Baldino. Fact two: Government bodies change all the time. For instance, the FDA of 1989 is not the FDA of today. Since the R&D process can last a decade, drugmakers need to anticipate the future regulatory environment at the FDA. In the end, said Baldino, if you give regulators what they need to make a decision, you'll win.

Q: What impact have the recent developments on Wall Street had on new companies?

Dr. Baldino had a bleak outlook on the funding environment. "It's a tougher and tougher environment no matter how big you are. People trying to raise cash this year are in deep trouble." Jaffe had a brighter outlook, noting that there are still VCs out there looking to put money to work. According to Jaffe, these VCs are most interested in equity and a strong management team.

Q: What's happening with generic biotch drugs?

"They're going to come in some way, shape or form," predicted Cooper. "The big players in generics will get geared up for it." Dr. Baldino agreed with Cooper's prediction: "Follow-on biologics will be a fact in a few years. There's no reason why they shouldn't be, so factor that into your investment plans."

All three CEOs were very aware of the ongoing concerns about drug prices, as well as the increasing push for generic drugs that will inevitably spill over into the biotech industry. The most drastic price-control measures have been taken in the UK, where the National Institute for Clinical Excellence has rejected certain drugs as being too costly and not providing enough benefit versus current treatments. "If an entity like NICE appeared in the US, it would signal a new paradigm that would consider need versus economics," said Cooper. Dr. Baldino noted that the Congressional Budget Office has already had meetings on forming a similar regulatory body in the U.S. If that happens, he said, it will change the business radically, and things could become difficult for drug developers. But he offered this positive though: "This industry has adapted to everything that has befallen it. If that happens, we'll just make drugs that satisfy. The first one will be tough, but after that you'll adapt. Know what the rules are. The earlier you know the rules the more successful you'll be."

Q: Talent management is always a challenge. How do you deal with that issue?

Paul Touhey had excellent advice for small, privately-held biotechs that don't have equity or stock options to give their employees: adopt "employee-centric" policies. Fujirebio offers competitive salaries and bonuses, as well as shorter work weeks, which is a great way to compete with bigger companies for talent, says Touhey. Fujirebio also gave employees a $50 credit for gas when oil prices were at their peak over the summer, and allows employees to leave as soon as the first snowflake falls in a winter storm. "We like people to think of work while at work, and not be worrying about the drive home," Touhey explained.

Prism Pharmaceuticals does have equity options that it can give to its employees. In addition, Cooper's company makes good use of consulting relationships and personal networks in order to hire high-quality workers, which has been such a success that Prism hasn't had to spend a penny on recruitment.

"You're only as good as the people around you," said Cephalon's Baldino, "so hire people smarter than you, because you never want to be the smartest person in the room." He also addressed the issue of knowing when to let someone go, which he said is difficult, but necessary for the health of the company. His final piece of advice? "Don't lose great people over compensation." While your company may lose a great employee because a better opportunity lies elsewhere, it's foolish to lose talent because compensation wasn't good enough.

Want more expert advice? Then check out this article [1] on the top 10 mistakes biotech companies make.