Is bigger better? Highlights from FierceBiotech's Executive Breakfast at JPM

San Francisco (Pixabay)
A discussion at the J.P. Morgan Healthcare Conference on whether bigger is indeed better—big ideas, big capital, big hype—led into a debate on how money, and more of it, affects a company’s behavior.

SAN FRANCISCO—Familiar arguments arose at FierceBiotech’s Executive Breakfast at J.P. Morgan—namely whether smaller biotechs are indeed more innovative and “hungry” than pharma companies, which are seen to be less effective when it comes to cutting-edge R&D and are often found mining smaller companies for their innovative treasures.

Our panel, called simply: “Get good science and the money will follow,” saw our panelists mostly in agreement on what constitutes good science.

“It is asking questions no one else will ask and exploring areas that no one else will explore,” said Jeremy Levin, CEO of Ovid Therapeutics, and formerly of Teva (a company he left because, as he tells us, it wasn't R&D-led enough for him).

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But the question of money, as it so often does, provoked spirited discussion among our speakers, who represent the three pillars of the life sciences: biotech, pharma and venture capitalists. 

A discussion on whether bigger is indeed better—big ideas, big capital, big hype—led into a debate on how money, and more of it, affects a company’s behavior.

Joaquin Duato, executive vice president and worldwide chairman of pharmaceuticals at Johnson & Johnson, thought the characterization of large companies as less hungry for innovation was “patronizing.”

“Our enthusiasm, our drive to do good is not smaller than that of people working at smaller companies,” he argued. And a large company like J&J has the chops, the size and the experience to translate exciting new science into actual medicine for patients, from accelerating development and improving manufacturing to leveraging huge commercialization networks.

His fellow panelists agreed that teams at some pharma companies are truly championing new science and getting it through development, but that it is the pharma ecosystem that stymies innovation.

“We’ve had a huge number of people from large pharma companies who have gotten into biotech companies,” said Alexis Borisy, a partner at Third Rock Ventures, and a man who has been at the helm of some young Third Rock biotechs. “They’re the same people, but all of a sudden, they don’t have the bureaucratic layers of structure […] and can do amazing things in the biotech environment.”

“The benefit in small biotech is the opportunity to really focus. There tend to be distractions in large pharma," said Kathy Bowdish, vice president of global R&D and head of Sunrise Ventures at Sanofi. “If we can work together, give [biotech] the resources they need so they can stay focused, we can help each other.”

With the impending tax reform from the U.S. government, Levin said pharma companies can take the lead on transforming the way they operate.

He urged big companies to take their tax-free dollars from abroad—“and there’s lots of them”—and rather than buying back “a single share,” or paying out dividends, to instead change their compensation structure and make large investments in individual areas, such as Alzheimer’s disease.

“If they do that, it will be a fundamental change in the industry,” he said, to applause from our audience.

The talk pivoted to the trend of major early-stage financing. Borisy acknowledged that what was a large series A three years ago is dwarfed by the large sums brought in today. But each round of financing is just part of a massive amount—between $1 billion and $4 billion, he said—that is needed to bring a company from concept to cash flow positive.

However much a company may raise in individual rounds, whether it’s $15 million or $200 million, it is still a “drop in the bucket of what you need to really take that innovation through to where it is making a difference for patients,” Borisy said.

The critical theme is how one manages the “massive uncertainty” that inevitably comes with innovation, chimed in Andrew Allen, the CEO of 2017 Fierce 15 winner Gritstone Oncology, which followed a $102 million series A with a $93 million series B round. And that involves finding the right people.

Resources are important, but so are leadership, culture and execution, Levin said.

“Money is necessary, but not sufficient,” agreed Alector CEO Arnon Rosenthal.

“There are times that enormous sums of capital deployed enable visionary, truly transformative thinking, and that is utterly compelling,” Borisy said, in closing. “But it can also lead to intellectual sloppiness and disaster. It’s about judgment at the end of the day.”