Four Tips to Help Start-Up Biotechs Succeed


Today’s start-up or virtual biotech is faced with an industry that is undergoing enormous transformation.  Within a globally competitive environment – and with big pharma as the predecessor – these companies are confronted with constantly growing FDA regulations causing soaring drug costs, time and resource constraints in bringing ever more complex drugs to market, and the need to work more efficiently and do more with less.

There’s also a tremendous amount of activity involved in a start-up. You need people who are well versed in the science, and who understand the clinical demands of the drug, while also being able to execute on business development. In order to successfully compete against much larger firms, many start-ups are turning to outside consultants along with CROs/CMOs to help with the R&D and the drug substance/product manufacturing. Providing a knowledge base into changing FDA regulations, offering development expertise; and facilities with different technologies, raw materials and equipment to address multiple needs, it’s a popular means of accelerating efforts. In today’s environment if you have been around awhile and have a decent sized portfolio of completed projects, then there is degree of demonstrated competence that can be reassuring. Otherwise they wouldn’t be in the business.

As with any relationship, however, the biotech/CRO/CMO partnership requires mutual respect, understanding and effective communication to succeed. Strong partnerships have enabled many a start-up to quickly lose that status and grow.  Below are proven steps that young biotech firms, as well as their manufacturing and development partners, can leverage to boost their success:

Know your business model.   It’s important to know what category you fall under and to effectively communicate this to your consultant and to the CRO/CMO’s you work with, since it helps define your actual goals.  For example, there’s a vertical model that focuses on a single market; a platform model, which licenses its technology; a fully integrated pharma company, which is focused on developing a finished product and a Proof of Concept firm, which has a virtual model with little funding, yet which hopes to use this work to get fully funded.  The latter type typically has a tight budget with no room for development.  There’s also the company that has received Series A-private funding who wants to do the bare minimum and needs speed above all else.

Know your consultant. To be capital efficient, many startups hire part-time consultants in order to leverage specific expertise throughout a project at key points during the development. The biotech/pharma industries are filled with consultants of all sorts – and they will all tell you they are best suited to meet your needs.  It’s important to properly vet the consultants you bring onto the team by asking key questions, such as are they actual “doers” as opposed to being just managers? Do they truly have the hands on technical expertise that you will need to leverage when needed? If they are part time can they truly multi task? What is their track record of success? The reason: part-time consultants may not be available if something goes wrong, and you need an immediate hands-on solution.

Delays at a CMO/CRO are significantly more costly when your consultant is not available, can’t get up to speed on the latest issue quickly, or doesn’t have the knowledge to help add to the discussion when trying to solve the problem at hand. The fact is most CRO/CMO’s execute more projects in one year than most consultants perform in an entire career. Your CRO/CMO should be your primary consultant and if they can’t provide that service you shouldn’t work with them. The truth is not all of them can. Don’t ask your consultants or CRO/CMO’s for general references (which can be cherry picked) that went well. Anyone can do that. Ask for references for projects that had difficulties but eventually had a successful outcome. Take a deep dive as to how they handled it. That is way more important and will tell you much more about the character of who you’re dealing with.

Be realistic about funding.  Regardless of your business model, there is always a limited pool of money. You need to make sure you have adequate funding for development. Especially with complex science, expect to run into the unexpected, which may require new approaches and solutions.  While the CRO/CMO is a partner, they are not an equity partner, so be realistic about the changes and the need to pay for overages that can occur, which may be due to changing regulations and requirements beyond both parties’ control.

Invest in the relationship with your outsourcing partners. After vetting your outsourcing partners, it’s important to trust them – you should monitor them, of course, but trust them. Second-guessing or micro-managing them can cause unnecessary delays and lead to resentment. That said, it’s important to keep communications open and effective. The best, most effective projects entail the sponsor and the outsourcer working together as true partners. Develop a consulting relationship not a vending relationship. Keep in mind that one way to sour a relationship can occur in the back office, as when some underfunded virtual biotechs treat their outsourcing partners as their unofficial bank, by slowing down payments, even as they expect their partners to meet the original timelines.

Be realistic about projects.  At the outset of the relationship, explain what your drug is to your consultants and to your CRO/CMO’s, and set realistic expectations together, including about working together. Regular progress updates are important – from you, your consultant and outsourcing partners. Each party should be able to communicate their concerns as soon as challenges arise; those challenges may entail a change in direction or realizing you should pull the plug. Recently a managing partner in a Boston based venture capital firm was heard saying, “Trying to save your way to success in this business never works. The best way to save money is to kill bad projects as quickly as possible.”  In other words it takes a lot of investment to do it right and have a good outcome with regulators, investors, and eventually patients.  It’s unrealistic to create millions of dollars of value without making significant investments in the technology and real investors know and expect this. Development is simply too costly to go on with an uncertain outcome.

As the start-up and virtual biotech model continues to grow, a successful partnership with outsourced CROs, CMOs and other consultants can be built based on mutual trust, respect and communication.  By understanding the business model and making sure your team knows it as well, adjusting expectations internally and externally and being as transparent as possible, many a young firm can quickly change its status from start-up to biotech leader.