Not so long ago, there was a day when biotechnology companies were built to last. They were founded and directed by pioneering scientists who were courageous, true-believers in their respective technologies. Their drive, creative spirit, and dedication to discovery positioned their companies in ways that could create multiple opportunities for success in therapeutic discovery and development. Here in Seattle, companies like Immunex, Icos and Seattle Genetics represented some of the last companies in our area formed with such intentions. Years after the founding of these companies, our industry changed dramatically after the “contraction” of 2001 where virtually all biotechs cut or eliminated discovery in favor of pushing forward late and later stage drugs (a market-induced effect as cash sources mysteriously dried up). The mantra at the time was, “we can always buy the drugs later when we need them.”
There was a also a day when your board of directors was “in it for the long haul.” I can recall George Rathmann, the co-founder of Icos, describing this attribute to a reporter, stressing its importance and necessity for success. The board of directors in those days set the example of investing and growing their companies to profitability – a painful process that can take an average of 10 to 12 years. Upon founding Spaltudaq, this is what I expected because it was all that I knew. I was confused when someone early on in the days of Spaltudaq asked me, “What’s your exit strategy?” I thought it was a trick question. “I’m still working on my entrance,” I responded. My startup carrots were given in the form of milestone achievement. Like the founders of old, my intentions were to spend the time to expand and take advantage of a versatile technology designed to create endless opportunities for creating LONG term value.
But in this decade, the way companies are started is much different. Instead of building the next Amgen, Genentech, or any other company with a long-term minded board of directors, the investors of today want the exact opposite. They want in and out at clearly defined exit points—going public or getting bought out. This is understandable given the number of investors that got burned in the 10 to 12-year plans of the past where about 1 in 10 companies succeeded. But the reflexive overreaction to those days has created a system of growing companies that today is inversely related to the spirit of discovery that got our industry here in the first place. And as a result, this plan is diametrically opposed to the intentions of most scientific founders whose vision is vectorial – and not with an “exit” in mind.
How has this happened?
Just like systems biology, perturbations in the market give rise to new emerging properties and investors react. For the most part in this decade, it has become obvious that biotech companies will give the greatest return for their investors if the company is purchased rather than the prior exit point, “going public”. Antibody companies are a classic example as they have been rapidly taken out for an average price of $500 million, whereas going public would only bring about one-third of that value.
The war on discovery:
Why are companies rapidly getting bought out and how does this affect drug discovery and growth in our industry locally?
