By Karen Pihl-Carey
BOSTON - As the biotech industry moves into the 21st century, company managers find themselves faced with a slew of challenges they must meet for survival. Those include financing, negative viewpoints of the industry, difficulty seeing ahead, a global marketplace and the need to expand areas of focus.
Five senior company officials spoke on their visions for success in the 21st century on Wednesday at the BIO 2000 conference. Among them were Jacques Lapointe, president and chief operating officer at Laval, Quebec-based BioChem Pharma Inc.; Patrick Gage, president of Radnor, Pa.-based Wyeth-Ayerst Research; Gordon Binder, chairman and CEO of Thousand Oaks, Calif.-based Amgen Inc.; William Haseltine, chairman and CEO of Rockville, Md.-based Human Genome Sciences Inc.; and Ernesto Bertarelli, CEO of Geneva, Switzerland-based Ares-Serono International. The conference ends today.
Avoiding Management Myopia
Lapointe said management needs to see ahead and to build a solid business plan based on sound science and research. It doesn't matter how much effort or money is poured into research and development, he said.
"At the end of the day, people are going to favor the end product," he said, adding that end products represent the measure of real value. The market frenzy may excite some, but it mystifies Lapointe. "The short-term ups and downs of the stock market do not reflect value building."
He suggests four areas on which management must focus for success - efficiency, effectiveness, esprit de corps and change readiness. Sometimes, throwing money at a program can solve many problems, provided a company receives good value for the money, Lapointe said. Effectiveness is measured by the quality of outcome, which is very important to a smaller company, he added. Also, managers need ingenuity and flexibility to keep up with changes, he said. And they need to motivate employees.
"Esprit, spirit, passion, the ability of management to engage and motivate employees . . . while money can often be a motivator, it is rarely the prime motivator," he said.
Lapointe suggests managers work on recruiting and retaining good staff because talent attracts talent, and they will produce more in a stimulating environment.
In the end, it's the "opportunity to make a real difference" - not money - that is the real motivator. To quote Henry Ford, Lapointe said: "A business that makes nothing but money is a poor kind of business."
Facing The Questions
When President Bill Clinton and British Prime Minister Tony Blair made a statement a few weeks ago that information taken from the Human Genome Project should be publicly available, the market responded by selling industry stock, as if the statement were a threat to all biotech intellectual property.
While that may not be the case, and while Blair and Clinton could say that is not what they meant, "the market heard something else" and it is a mistake to ignore that, Haseltine said.
Some think intellectual property rights mean more wealth for the rich and exclusion of the poor. Many believe biotechnology will hurt the environment. But Haseltine said it is the job of management to show these people how the industry can benefit the poor and help the environment.
"We can't ignore these voices. We have to become engaged in the process," he said.
Roger Shamel, president of Consulting Resources Corp., who chaired Wednesday's discussion, said as he went to bed the other night his wife told him their 23-year-old daughter, a Princeton University graduate, was protesting outside BIO 2000 on Sunday.
"She felt that the HMOs, which she felt should be run by people from Harvard Medical School, were more and more being run by the people from Harvard Business School," he said.
Taking Advantage of Financing
The night before Amgen went public, investment bankers said a high demand for the company's stock enabled management to either raise the number of shares offered or raise the price. So at $18 a share, the company went public offering more shares than originally intended, Binder said. The stock quickly dropped to $4, making it back up to $6 two years later.
"Wall Street comes and Wall Street goes, and sometimes it is euphoric about something and sometimes it isn't, so you've got to raise it when you can raise it," Binder said.
Having the money puts biotech companies in a strategic position as far as collaborations are concerned, he added. Managers now must decide whether to use their own resources for projects, setting the company up for greater risk or greater rewards, or to seek partners to share in the risk and rewards. Earlier in the life of the industry, "we didn't have a choice," Binder said.
That is no longer the case.
Human Genome Sciences stands as one company in a good financial position because it took advantage of the market in an upswing. Haseltine describes the market as a large wooden tub in which the water sloshes from side to side. "We raised $800 million in this recent slosh our way, and thank heavens, because now it has sloshed the other way."
Looking Toward A Global Market
As the head of Europe's largest biotechnology company, Bertarelli said success is met by having access worldwide to technologies and resources.
"Our industry needs to be up on government trends and the world," he said. "We need to promote full harmonization between countries and regulatory agencies to avoid duplicative efforts that no longer make sense."
Haseltine added that management always is looking for new ideas, and new ideas are coming out of places like Singapore, China and India. Managers need to understand variations in marketplaces of other countries, he said.
"I truly believe the biotech future is here today," Bertarelli said. In order to capture its potential, he added, companies need to have a presence around the world.
Ares-Serono has global sales of four recombinant products to treat infertility, multiple sclerosis, AIDS wasting and growth retardation.
Expanding Focus Areas
Gage, who worked at the Genetics Institute for nine years before starting with Wyeth-Ayerst, said a major key to success is having a broad range of focus areas. Parent company Madison, N.J.-based American Home Products Corp. (AHP), for instance, focuses on small molecules, vaccines and proteins, a claim other pharmaceutical companies are unable to make, he said.
But AHP got to that point with the help of biotechnology. "It's really transforming our entire industry," he said, adding that any company that does not take advantage of biotech is in "great peril to fail."
Haseltine agreed. "Can a company survive focusing almost exclusively on small-molecule drugs? I think you're going to find that that is no longer viable. We will not see these companies flourish in their current mode."
Management must broaden its horizons, he said. A single vision is not enough because there is now a possibility to rebuild bodies, regenerate parts, from the inside out, eliminating the need for transplants. There is a possibility for surgical devices that can make their way around the body.
But at the same time, management cannot lose sight of the bigger picture, Haseltine said. "We must keep our focus throughout all these challenges to what really matters," he said, "which is that our products ultimately will lead to better health."