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Warning: Don’t Let Bio-Euphoria Distract You from Being Disciplined

September 28, 2015
This piece by Allan L. Shaw was originally published in Life Science Leader.

We currently in a period I call “bio-euphoria,” in which the biopharmaceutical industry is experiencing growth in almost every area from market performance to patient-focused legislation.

In parallel to this positive momentum, there has also been a notable shift in management and operational strategy by Big Pharma companies in an attempt to keep evolving with the market.

These companies are taking creative measures toward improving their operational and capital efficiencies by, for example, creating partnerships with academic institutions (thereby reducing internal research), or by narrowing their company’s product portfolio (as opposed to being a jack of all trades, master of none). The result of such measures is a more agile and efficient company.

Given the increased scrutiny on resource allocation as a driver of value, I offer some suggestions concerning several high-impact focus areas:

  • Portfolio management: optimization and prioritization are critical as portfolio activities fundamentally transcend capital allocation decisions across an organization.

    • Differentiation is critical for success in a changing commercial landscape. This necessitates emphasis on innovative targets for unmet patient needs.

    • We must remain mindful of the very fluid competitive landscape, particularly with respect to development efforts. There is an increasing prevalence and clustering of innovative activities concentrated on common targets, reflecting capital inefficiency.

    • Addition by subtraction: capital-efficient organizations “kill” programs early and establish pipeline decision mile markers along with ROI metrics.

  • Cost structure can be a lightning rod for self-inflicted wounds, and it needs to be proactively challenged.

    • Innovation should go beyond the science and apply to all aspects of an organization’s operations. Simply put, it is about working smarter, not harder, and overcoming institutional bias to effectuate change.

    • Resource optimization can yield cost effective solutions to engage stakeholders, such as innovative marketing programs including digitization strategies (e.g. edugaming) to reach physicians and patients.

  • The balance sheet is a strategic tool, not a scorecard. Continue to improve capital allocation and leverage the ecosystem to stretch capital and unlock value.

    • It is critical to remain strategic and smart about resource allocation because your “pot” may not be as large in the future. It is foolhardy to take things for granted, such as easy capital access, and assume the party will continue.

    • Stay focused and committed to your core expertise, and understand your differentiation.

    • For public entities, consider utilizing your stock or “second currency,” particularly at prevailing valuations, to build upon your capabilities and mitigate risk.

My parting advice is not to lose your focus during this period of “bio-euphoria.” Stay true to your principles, and do not succumb to temptation; there are already too many people drinking from the punch bowl. The optimal deployment of organizational resources will inevitably become an increasingly important metric in differentiating management’s performance when the music stops.

Learn more about the biotech market outlook from industry experts at the BIO Investor Forum, taking place October 20-21 in San Francisco, CA. The forum is an opportunity for investors, analysts and industry executives to interact, evaluate investment trends, and get a big picture overview of the issues affecting the industry. Learn more and register today.


Allan L. Shaw is a Senior Biopharmaceutical Executive / Chief Financial Officer: Currently member of Akari Therapeutics’ board of directors and serves as chairman of the audit committee as well as an independent board member of VIVUS, recently managing director - life science practice leader for Alvarez & Marsal’s Healthcare Industry Groupand continues to support the firm on an ad hoc basis, formerly CFO of Serono, possessing more than 20 years of corporate governance and executive/financial management experience and responsible for more than $ 4 billion of public & private financings (including an IPO) and numerous business development transactions.