Startup Biotechs need bigger drug companies for lots of things, including R&D collaborations, investments, non-dilutive funding, and eventual liquidity via M&A. The health of today’s ecosystem depends on biotech and pharma working together. But one of the most important and often overlooked things that Biotech critically needs from Pharma is talent – as these larger firms are primary source of well-trained drug R&D scientists and research leaders. Said another way, Pharma is the lifeblood of Biotech.
Unlike writing code for software or big data company, drug discovery and translational research skills come primarily through on the job osmosis and apprenticeship on interdisciplinary project teams that are pushing drugs toward the clinic. As one of our CEOs wrote to me yesterday: “drug discovery is a tough discipline to learn – need to have at least a 5-10 year apprentice horizon” before you are really good.
Two recent events sparked my interest in this topic of where young talent develops and emerges in our industry. A good friend and “greybeard” med chemist forwarded me a note from a chemistry professor who was trying to find a spot for his “best student”, a new PhD chemist. I said we tended to not hire new graduates into our portfolio, but was saddened to hear of this star pupil’s job challenge. Shortly after that, I had dinner with a senior chemist from Big Pharma. He said the shortest-tenured chemist on his 30+ person team was 15-year veteran. His group had shrunk in the past and had never rehired. Since hiring a “trainee” post-doc chemist “counted” as an FTE on their books, they haven’t even implemented the traditional fellowship programs that exist elsewhere. Stories like these abound.
This is exactly what worries me, as the seeds are being sown for a major talent crisis in our industry.
The short version of the dilemma is this: biotech startups have no margin for error around very tight timelines so can’t really “train” folks in drug discovery, and because of that they rely on bigger companies as the principle source for talent; but, at the same time, bigger firms are cutting back on research hiring and training, in part while offshoring certain science roles to other geographies, and yet are looking “outside” their walls for innovation from biotechs.
While I’d argue this talent flux is fine and maybe a positive right now, it’s a classic “chicken and egg” problem for the future. Without training in bigger pharma, there’s less talent for biotech; without that talent, biotech won’t make good drugs; without good biotech drugs, there’s no innovation for pharma, and then the end is nigh.
It’s worth breaking this topic down further, starting with some reflections on biotech and pharma, and then thinking about possible solutions.
Startups live or die by the talent on its teams – the talent which it most often acquires from Pharma. Given the capital constraints, there is an urgent need to hit the ground running on testing the hypothesis central to the startup’s reason for being. There aren’t a lot of “degrees of freedom” for extra learning loops and on-the-job training in most startups – get the science validated (or not) as quickly as possible, execute against the R&D plan, react fast to the obstacles and challenges thrown in front of you, and don’t waste much time or money with portfolio committees, layers of management, and those suffocating employee handbooks.
Fundamentally, learning “drug discovery” inside a small biotech is a recipe for failure. It’s highly inefficient in a small company, and certainly hampers the research productivity. The cost of capital is too high to enable this “learning the art” process when you are burning equity dollars rather than a well-funded P&L. This is why most biotechs (that are successful) don’t hire extensively out of academia for their scientific bench or R&D leadership.
Hiring a recently-minted PhD biologist or chemist into a new biotech poses a real challenge as there are lots of things to learn – and many are really only learned by doing it inside a drug R&D organization. Chemist-blogger Derek Lowe has written about this before, reflecting on his own learnings (here), and here’s a sampling: chemists learning to appreciate the power of p450 enzymes, seeing first-hand how physiochemical qualities (Ro5) of drugs impact project success, “time is money” and money can buy you time in research, dirty compounds lead to dirty data, error bars grow as you approach animal models, etc… An interesting set to read, and versions of his observations definitely hold true across disciplines (chemistry, biology, biochemistry, pharmacology, etc…).
It’s also certainly true that things like Ro5, structural alerts, and other frameworks can be memorized from classrooms, but knowing when and how to apply them (or break them) is an element of the art itself. It’s the nose you grow as a drug hunter.
In addition to all those “hard” things to learn, there are plenty of soft ones around the collaborative and integrative culture of drug R&D: the “unit of work” in drug R&D is the team, not the individual, and success is less about single expertise and more about how it gets integrated with others. In some ways, your value to the organization begins to correlate with more generalist, integrative skills rather than specialist, academic ones; with a strong R&D grounding, this “utility player” profile across drug discovery becomes increasingly valuable.
And its very hard to learn these hard and soft things, i.e., grow these noses, inside of a startup environment with always-urgent milestones to hit in order to get the next dollop of funding, and little margin of error in the plan to get there. This is true in both bricks-and-mortar startups and virtual ones.
With the former, these lab-based biotechs can spin their wheels inefficiently if they hire too heavily from academia – the “book smart” rather than “research-street smart” folks. It’s easy to keep churning out experiments to “explore” the science – but breaking the prevailing mindset of “writing the Nature paper” versus “making a drug” takes time, and this changes what experiments you do. New modalities (like regulatory RNAs, RNAi) are an area where getting the “experience balance” right is key – often there aren’t people in bigger companies skilled in the art of a new modality because that art has yet to evolve outside of academia. This is one area where “learning by doing” often happens in biotech – and certainly is a contributor to why these types of companies often take longer to develop new medicines.
In virtual biotechs, the talent challenge is even greater as the lean and mean R&D team environment requires not only experience in the art of drug discovery, and a “utility player” mindeset, but also the ability to manage groups of people scattered around the globe. These virtual teams are the biotech version of the “knowledge economy” – the brains behind the discoveries, but with the brawn coming from partners outside the walls of their company – CROs, collaborative partners, academics etc… This magnifies the talent acquisition challenge: these biotechs exclusively rely on hiring highly trained scientist-leaders from bigger companies. These bio-entrepreneurs have to come ready to go, ready to lead and work on new drug projects.
Compounding this challenge is the fact that virtual biotechs in drug discovery are proliferating: my guess is that half of the biotech companies of the future won’t have staff wearing lab coats and doing experiments themselves.
In a rough poll of our biotech portfolio, about half of whom are virtual, the vast majority (90%+) of the ~200+ R&D folks at or closely involved with these companies were trained inside bigger drug companies before joining these startups. In many cases, these folks are on their 2nd or 3rd biotech startup after an “apprentice” decade in a larger company. Here in Boston most of our teams are alumni of Biogen, Novartis, Genzyme, Millennium, Vertex, Pfizer, etc; part of the strength of the cluster is its talent depth and breadth. This diaspora of scientists from big companies – similar to the concept of a post-M&A startup diaspora I’ve described before (here) – is important in the seeding of talent and experience across the industry.
A decade ago pharma would often criticize biotech as not having enough drug discovery experience; today, most biotechs are filled with drug R&D veterans that have served several tours of duty inside larger organizations. Part of this is the proliferation of “biologic” drugs into pipelines, but part is about the natural flow of people. The cultures may be vastly different in small vs big companies, but the talent pools from an “R&D experience” perspective are roughly similar. Maybe that speaks to what’s special about the successful biotechs out there – bringing out the entrepreneur instincts in skilled professionals.
It’s also worth noting that “too much” seasoning inside of Big Pharma might not be a great thing either: it breeds conservatism. When you’ve seen a few hundred programs all die for various reasons, the risk-aversion embedded in your subconscious mental models can become overwhelming. Biotech’s succeed best when they have experienced talent that still has the capacity for risk-taking and rule-breaking.
Shifting gears to the Pharma side of the talent story, it’s well appreciated across the industry that big companies have been shrinking their drug discovery and research footprints. Tens of thousands of R&D jobs have been eliminated over the past 15 years. This by definition means less hiring of “trainees” from graduate and post-doc positions into drug research – so less apprenticeship “in the art” over time.
Another major contributor to the shrinking number of “trainee” positions in drug discovery is the big shift to outsource a number of R&D functions. For our biotech startups, I’ve been a big supporter of leveraging East and South Asian contract research partners in the past, like WuXi, ChemPartner, and Pharmaron, and these partners greatly enable a number of our portfolio companies today. On a more integrated basis, European drug discovery partners like Evotec and Proteros have also proliferated and become great partners for us.
Pharma has similarly been embracing this model, while simultaneously shrinking its internal FTE footprints. For instance, Pfizer announced chemistry changes back in 2011 that involved WuXi and splitting of functions (brains and brawn), as described here. These changes may make a ton of business sense, and since I advocate for virtual drug discovery models (when and where appropriate in our biotech companies), it’s hard to me to criticize moves to do them at greater scale.
It’s interesting to note that the largest drug-focused chemistry R&D organization in the world is no longer a contest amongst Big Pharma: WuXi is hands-down the biggest – more than 50% of its 5500 scientists are chemists. Pfizer is probably one of the pharma industry’s largest, and it has 500 or less discovery chemists, maybe 1000 total chemists (here), and expectations across the industry aren’t thinking that number will go up (here).
Although the above narrative is chemistry-focused, the same can be said about broad swaths of biology, such as neuroscience and cardiovascular disease. Clinical research groups have also been adopting broad, bear-hug style arrangements with Pharma (here). Like chemistry, many of these key biologic and clinical elements of drug research require similar apprentice-like learning loops only really found in bigger organizations.
Furthermore, like our biotechs, many of the skilled team members at our CRO partners were all trained in bigger pharma organizations too: East Asian CROs are filled with “sea turtles” returning with western Pharma experiences, especially in the leadership roles; Evotec’s scientists are largely talented individuals who left Pharma as the those groups downsized in UK and Germany; and, midwestern firms like MPI, Confluence, Cetara and many other CROs have teams with stacks of old Pharmacia, Upjohn, Warner-Lambert, and Parke-Davis business cards, just to name a few examples. Even our academic partners, like the therapeutics groups at the Broad or Scripps, are filled with ex-industry folks. It’s clear that many other parts of the ecosystem, like our startup biotechs, also acquire their talent from Pharma.
So this then raises the prisoner’s dilemma of our industry: in this brave new world, who is going to train the drug hunters of the future?
If no one does it, we’re all in trouble. And like the prisoner’s choice, it’s not clear to me how an easy solution can be found.
All the mega-mergers need “synergies” (which will be great in the near-term for bringing more talent into the biotech and CRO ecosystems). But longer term, as described above, the latter don’t have a realistic capacity for “trainee” programs the way Pharma has. The big firms historically absorbed a large number of newly minted PhDs (and MDs, veterinarians) and brought them into their technical ranks; who is going to absorb this in the future?
Last February, there was a PwC report about the big talent gap in Pharma R&D – not enough smart scientists with the skills of the modern networked research environment – available to fill all the demand in the industry. Luke Timmerman and others discounted much of this as “whining” about talent when there are tons of great folks looking for R&D work. Certainly seems as though many of these skilled individuals could adapt to new models very effectively if given the training.
The question is will Pharma step back up in its role, or do we need to find new ways of creating the apprenticeship model? Pharma is in a tough spot; the markets continue to pressure them to trim “unproductive” R&D, which by nature means closing sites and reducing headcounts. Adding insult to injury, if the Valeant model continues to be rewarded in the markets, its likely to be emulated more broadly, chilling as it is to those of us who want more innovation and not less; but in short, this talent challenge will likely become even more acute over time.
There’s no simple solution to this issue but a few glimmers of hope:
- Academic therapeutic centers, now largely filled with ex-industry trained R&D folks, could become good “apprenticeship centers” in drug discovery for post-doc’s and the like. These centers have been great examples of public-private partnerships: the NIH has played a role in funding these (and steering more towards “translational research” vs “basic research”), as have large philanthropic donations (Broad, Stanley, etc…). Hopefully these initiatives will continue.
- “Mid-cap” pharma/biotech that are focused on innovation, such as UCB, Shire, Vertex, or Alexion, could absorb more new “trainees” as they scale in the future, and provide an interesting “big-small” R&D environment in which to learn: folks at these companies are certainly learning the skill of operating in the “supernetwork” of external partners – a very valuable and transferrable skill into biotech.
- The next crop of newly public but well-capitalized biotechs that are investing in innovative new R&D approaches could also be valuable training grounds: this includes places like Agios, Acceleron, or Ophthotech (all with market cap’s >$1B). But its not clear to me how much “trainee” capacity these firms can absorb until they have real revenues to fund R&D rather than equity capital. They are likely to be “talent acquirers” from Pharma rather than “net contributors” to the ecosystem.
Creative new solutions may also be in the works around career development planning: in the past, I’ve written on the need for bringing the periphery (biotech) into the core of Pharma, and vice versa (here). Talent exchange, including multi-year academic sabbaticals inside of bigger R&D organizations, or of Pharma’s emerging leaders into biotech, might be one, albeit piecemeal, interesting solution.
When business models are in flux, as they are in the drug industry, changes in the cultivation and flow of talent can have long cycle time and ecosystem structure impacts. Not sure anyone has the answer, but for those of us in biotech in particular, we need to work with Pharma to solve it: our lifeblood depends on it.