Why do most biotech startups fail, and what can we do about it?
Preserving the Promise: Improving the Culture of Biotech Investing is a new work that critically examines why most biotech startups fail, as they emerge from universities into an ecosystem that inhibits rather than encourages innovation.
This "Valley of Death" squanders our public investments in medical research and with them, the promise of longer and healthier lives.
It Started When One of Us Didn't Fund the Other's Venture
“We'd like one hundred thousand dollars."
That is where the events leading to this book started, nine years ago. The authors didn't know each other at the time, but had been introduced by a business development guy who knew one of us was a potential investor and the other had a biotech startup that needed money.
The transaction never happened, for a variety of reasons: the ask was too high, one of us wanted to be involved in managing the company and the other just wanted a check, the technology didn’t have a target yet – and yes, we almost forgot, the stock market had experienced the worst crash since 1929 just the day before.
Which got us thinking...what does it mean to make a smart investment?
Fast forward four years to a panel discussion called the Entrepreneur’s On Ramp, when we found ourselves together again at the speaker’s table. We’re both interested in medicine, and we think new product development should be in service to patients, with finance the byproduct rather than the primary driver. We were both frustrated with seeing lousy, worthless (except in a financial sense) ideas get funded, and critical, transformative, life-saving ones get shelved for want of funding.
So we decided to write a book about it.
Preserving the Promise explicates the Translation Gap faced by early stage biotech companies, the result of problematic technology transfer and investment practices, and provide specific prescriptions for improving translation of important discoveries into safe and effective therapies.
In Preserving the Promise, we build on our collective experience as company founders, healthcare investor and physician/scientist. We offer a forward-looking, critical analysis of “conventional wisdom” that encumbers commercialization practices. It exposes the self-defeating habits of drug development in the Valley of Death, that waste money and extinguish innovative technologies through distorted financial incentives.
Why This Book is Different
We know, there are lots of books about “smart” investing. There are self-affirming autobiographies of people who have done really well providing capital for growing companies. And there are books about the arcane technical details of the deal.
But no one has really deconstructed the early-stage, pre-VC commercialization process, to find out what why so many good technologies can’t get the support they need to reach the clinic. Nor has there been a thorough examination of all the friction in the system: why it’s so difficult to get stuff out of the university, why entrepreneurs have to spend a huge amount of their time chasing the next round of funding instead of on development, why at any given time biotech is either the belle du jour or the scary witch everyone runs away from, why a toxic mix of macroeconomics and investor peccadillos determine whether you and I are going to get cured of cancer in 20 years, and why Angels have passively bought into the VC premise that if you throw enough stuff at the wall some of it will stick.
These are some of the difficult questions we’ve wrestled with and tried to answer with this book. We believe in the intrinsic value of innovation, particularly as it relates to health care, and our arguments proceed from that basis. Big dreams should have the opportunity to be realized. The process should be infused with as much adventure as pain. There are good reasons Angels invest in ultra-high-risk propositions like biotech, that transcend simple calculations of ROI. It all comes down to the idea that solving the mysteries of why our bodies malfunction is a worthwhile thing to do.
Not Everyone Will Agree with Everything
But we're going to start a conversation.
We’re sure some of our ideas will be challenged. Capable investors will point to past successes as evidence that the system works, and understate the influence of being in the right place at the right time. The few tech transfer offices that are enjoying the fruits of enormous payoffs will say that all is well in the world of moving technology from the lab to the clinic. Founders with billion dollar enterprises will explain how it’s just a matter of being unremittingly clever and capable.
That’s all true, but to pluck a concept from the political world, these are really the one-percenters. Most investors in therapeutics companies lose their shirts. Most tech transfer offices struggle with restrictive annual budgets and balky faculty, chasing upfront payments and counting the number of executed deals to prove their value to the university. Most founders end up disappointed after a grueling, painful experience, in a development and financing landscape that has come to be known as the Valley of Death because so many innovations die trying to cross it.
It Doesn't Have to Be This Way
There are better ways to make decisions, to align interests, to find common cause in the mutually compelling goals of making people better and making lots of money. The expression “doing well by doing good” comes to mind, and there’s a lot more to it than a rationalization for accumulating wealth. It’s really what this book reaches for. Is it the stars? Maybe, if you’re the one whose illness gets cured a couple of decades from now because something didn’t get shelved for the wrong reasons. More likely, it’s advancing the possibility of everyone in early stage biotech development doing better, in an environment that’s more realistic, more satisfying, and financially and societally more productive. We understand it’s not possible to get there with grandiose prescriptions for doing the “right” thing. We’re all motivated by self-interest and more amenable to change when there’s something in it for us, and we’ve tried to explain what that something is.
So we’ve maintained the vision that prompted our book in the first place, but pulled and tugged and looked under the carpet to figure out why things aren’t working better than they are and to come up with realistic prescriptions for better outcomes – that also happen to be fulfilling for those involved. We invite you to share our journey over these pages, and present Preserving the Promise as a hopeful step in stimulating an important discussion.
Scott Fishman and Scott Dessain, May 2016