Kent Pryor recently explained the Virtues of a Virtual Company to OBR. He is better placed than most to comment on this as he is currently Chief Operating Officer (COO) at ZZ Biotech LLC, a virtual company; and has previously worked at the non-virtual companies SynthRx Inc, Kemia Inc, and Corvas International. Kent has experienced both the bench and the business world, and has an MBA from the Rady School of Management and PhD in organic chemistry from MIT. In this interview, we discussed how the biotech industry works and the pros and cons of getting an MBA.
HOW IMPORTANT IS IT FOR A SCIENTIST TO GET AN MBA?
After I graduated I went to work for a small public pharmaceutical company here in San Diego called Corvas International and I quickly became a group leader. Then I moved to a small startup company, Kemia, Inc. I stayed there for six years, from when the doors opened to when they closed, through three rounds of VC financing. Whilst at Kemia, my position continued to grow. I was brought in to run a drug discovery program but ended up doing a lot of business development work, drug development, and clinical trial management. I was giving presentations to the board of directors and potential investors and corporate partners. A lot of business aspects kept coming up in what I was doing nominally as a scientist. I spoke with my direct supervisor at the time, the Senior VP of clinical development who had an MD and an MBA, the Senior VP of business development who had a PhD and an MBA, and the CEO of company who had an MBA. I asked whether an MBA was a good thing to move forward and be an effective executive in biotech. They all said that with a PhD there is no glass ceiling; you can get to any position up the chain you want. You may be able to get tools to be more effective more quickly if you do the MBA. You may prepare yourself for those upper roles more quickly rather than learning it on the job or picking it up on the side. I think it was very valuable, but it is a commitment of time and money, so I don’t think it is for everyone. It has helped me be more effective. My role now is sometimes very technical, and sometimes I am talking about finance with non-scientists like my investors from the oil and gas industry who just want to talk about the numbers. So I’m able to do both of those things.
DO YOU THINK YOU WOULD HAVE REACHED WHERE YOU ARE NOW WITHOUT THE MBA?
Possibly, but I don’t think I would have all the knowledge and skills I have now without it. However, I couldn’t have a position like mine if I hadn’t spent some time being an active scientist, elbows deep in working inside a laboratory.
DO YOU THINK A GOOD RECIPE FOR A BIOTECH START UP IS A CHEMIST, BIOLOGIST AND SOMEONE WITH BUSINESS KNOWLEDGE?
It depends on what you are trying to start up. If you have a biological target you want to work on and develop small molecules against, it sounds like a good team. Even if the actual lab work is outsourced, this team can make decisions on what’s being done. Not all start ups start up this way. ZZ Biotech started by licensing an existing drug lead from Scripps, and was spun out from another startup as its own entity. We first had to get the assay going and get drug manufacture scaled up following FDA’s good manufacturing practice (GMP) regulations. We are making a biological drug, which is not my area of expertise, but GMP regulations are 80% the same no matter the drug type. The business person is an important part of the mix, no matter what you are working on. You must know how much money you need and where you are going to get the money from. You may not need an MBA, but at least need to know how to speak with investors and your accounting group. Some basic knowledge or getting someone you really trust is paramount.
HOW EARLY SHOULD PEOPLE GET A BUSINESS ADVISOR?
If you are a postdoc and working on something in your PI’s lab, ultimately you need to get that out of the university or institute. So someone will have to work on the contract with the tech transfer office. It is a bit of a chicken and an egg problem. You need someone who can handle those contracts for you to get the money, but that takes money that you probably don’t have. Some law firms will offer delayed payment upon funding. The most effective entrepreneurs tend to be people who have been around the block and done it a few times and tend to have some money in their own pocket that they can use for the new venture. It is more difficult for a postdoc to start something from scratch themselves unless they can get someone who is willing to put in a little bit of money – someone in the industry who wants to champion the project.
HOW OPEN ARE SUCCESSFUL BUSINESS PEOPLE TO HELPING YOUNG SCIENTISTS? HOW CAN YOU FIND THOSE PEOPLE?
CONNECT (in San Diego) a good place to start. They have a whole program designed specifically for this sort of thing. They do require you to go through a process. If you don’t have a team of people around you, they will set you up with entrepreneurs etc. Some business schools are interested in finding case studies to work on. This may be a way to present your problem and get ‘free’ help from business school professors and students. For example, Rady has formal and informal programs: informally any professor can set up an independent study program for students any time to get credit; formally there is the ‘Lab to Market’ Program where students develop a full business plan for a new business concept.
BIG PHARMA SEEMS TO BE CUTTING SPENDING ON RESEARCH AND OUTSOURCING TO ACADEMIA, BUT NOT STREAMLINING THE DRUG DEVELOPMENT PART OF THE PIPELINE. HOW DO YOU THINK BIG PHARMA AND SMALL BIOTECH CAN DO THIS?
Big Pharma has a lot of overhead and maintain large campuses. This is why the virtual model is so popular right now; it is a very efficient way of developing drugs. When small biotech companies develop a drug up to a certain point, they can do that for a lot less money than Big Pharma can today. Big Pharma is willing to pay on the back end to get assets which have already been developed to a certain point. That is the way that small pharma is going these days. Several years ago it was much more common for people to start up a company, with the concept of setting up a complete internal pharmaceutical company, take it all the way and go public, make drugs, sell them ourselves and become a big company like Amgen, Genentech or Amylin. That is far less common today. It is harder to get funding from VCs for that today. VCs now like funding projects not funding fully integrated pharmaceutical companies. That’s a complete paradigm shift.
SO, IS NOW A GOOD TIME TO BE IN SMALL BIOTECH?
I think so. The definition of what small biotechs are has changed. It used to be a small biotech was a very small company trying to become a fully integrated pharmaceutical company; today that’s not part of the plan. With the rise of virtual companies has been a rise of CROs. The really growing area for people with technical skills is in the service organisations that do this work for the biotechs. A company like ZZ Biotech doesn’t have a whole bunch of biologists and chemists, but we use a lot at service organisations. That’s something that people should be thinking about. In fact, setting up a company that offers a particular kind of service to biotech companies is potentially a faster way to becoming profitable than a biotech itself.
HOW INTERESTED ARE ANGELS AND VCS TO FUNDING START UP CROs?
It depends. Some funding sources are more interested than others – you have to find the right funds and the right people, but there definitely is money out there for that. It comes down to having a really good business plan: show how much money you need; when cash flow will be positive; and if there is a particular niche that you can do better, quicker and less expensively than incumbent players. Since the incumbents have been growing and adding services, you need to have something interesting to bring to the table.
DO YOU THINK ACADEMIC INSTITUTIONS WILL EXPAND THEIR CORE FACILITIES AND DO MORE WORK FOR OUTSIDE CLIENTS?
To a small extent that is happening. I think most universities don’t like to think of themselves as service providers, they like to be a place for new ideas and new research. But if you put your business hat on and look at it, they do have a lot of the infrastructure necessary to do this. There a few issues with this, such as the need to have the right accounting processes in place, but ultimately I think it does make sense. Schools are looking for ways to make money. There’s been a greater push in the last 10-20 years to grow tech transfer offices to make money from research, and more and more of a push for professors to work more closely with tech transfer offices to get programs licensed out. Using under-utilised core facilities makes sense to me.
MANY YOUNG SCIENTISTS ARE DISGRUNTLED WITH ACADEMIA AND SEE INDUSTRY AS THE ‘GOLDEN LAND’, IS THAT THE CASE?
The funny thing is that has changed dramatically in the past 20 years or so. It used to be that industry was thought of as only for the losers who couldn’t get an academic appointment. Today it is really not. I think there are interesting things to be done in industry. When I started grad school I was 99% sure that I was going to be an academic and set up a big research lab. As I went through, I saw that academia has a lot of politics and issues with getting tenure, and I started thinking more and more about industry. I finally ended up going in that direction. It is not ShangriLa by any stretch of the imagination, but there are really interesting things that happen in industry. It is where things really get applied in a way where they help people. I feel great every day getting up knowing that I am working on developing a new drug to help people that are suffering from stroke. It’s a great thing.