02 Sep Commercial Biopharma in Wisconsin: The next big step
The University of Wisconsin, Madison, is one of the country’s leading centers of public biopharmaceutical research, and the campus has spawned dozens of spinout companies based on University research. For this, the citizens of Wisconsin should be grateful; and, even more so, hopeful. Grateful because a foundation capable of supporting future growth is in place; hopeful because given the right conditions that growth could, over the next five years, support the emergence of the Madison area as one of the nation’s top five centers of commercial life sciences investment, and indirectly the emergence of the State as a whole as an important stopover for venture capital investors that today think of Wisconsin as flyover country.
The major progress to date is reflected in the dozens of Madison area life sciences companies, including biopharma companies, with important ties to UW-Madison research. While not large by national standards (UC-San Diego – good school, but hardly a match for Madison – has spawned a couple of hundred life sciences companies) it is a big enough number to establish that the University is technically capable of, and, as important, culturally willing to enable the kind of private/public collaborations that are critical to realizing the “real world” potential of the University’s basic research.
So, the question is no longer can Wisconsin play in the biopharma major leagues, but can it compete for championships. The answer is, in my opinion, yes; yes if we can take two more related and big steps. The ultimate step is becoming tightly integrated into the major venture capital markets, particularly on the two coasts: that’s where the vast majority of the pre-revenue risk capital that regularly invests in biopharma is located. The step before that, the penultimate step, is moving our biopharma university spinouts from founder/scientist-managed to professionally managed faster: the time, expense and complexity of launching and building a biopharma simply dwarf’s the comparable numbers for other technologies, including even most medical device and life sciences tools technologies, and historically the vast majority of biopharma success stories have been notable for their breadth and depth of management, as well as scientific, talent.
So, how do we get the major biopharma venture capitalists on the two coasts to Madison on a regular basis? Not now and then, but as a regular stop where they make regular investments?
Having spoken with some; having worked on the west coast for life sciences companies and their investors; and having seen money center biopharma investors warm to the Research Triangle life sciences market over the period from roughly 1995 to 2005, I think an answer – and probably even the answer – is attracting and developing deeper professional management. Biopharma and other life science spinouts from places like UC San Diego – at least those that in fact receive substantial capital from the most highly-regarded life sciences venture investors – tend to share one key characteristic besides compelling science: experienced professional management. I believe that if our most compelling young biopharma and similarly capital and time intensive life sciences companies could match management resumes with their comparable counterparts on the coasts, our companies would, in short order, find themselves with comparable balance sheets as well.
Why is professional management so important in the biopharma space? Several reasons. Foremost among them is that building a major biopharma business not only takes more capital and time then building, for example, a software company, it is just plain more complex. The science is more complex, the regulatory environment is more complex, the market is more complex, and the business/financial model is more complex. The bottom line is that venture investors, who in almost every case put the quality of the management team ahead of other factors on their investment checklists, do so even more regularly when they evaluate biopharma and other time and capital intensive life sciences investment proposals.
Why don’t our management teams match up well with management teams on the coasts? Two factors jump out. First, our founders (mostly university professors) have less experience (indirect as well as direct) than their counterparts on the coasts with the company building process. These are incredibly bright folks with incredible amounts of energy but, while they may be world class scientists, they all too often lack the experience to manage the growth of a world class biopharma company. As a result, they are often reluctant to transfer management of their companies to “the suits” nearly as early in the process as they should.
Like a football team, it takes a team of experts to build a successful biopharmaceutical company. While both the quarterback and the running back need to know the role of the other player, the skills and focus of each position is sufficiently unique that it is difficult for a player to excel at both positions. Just as it was be unusual to have the same person play both QB and RB it is rare for companies led by coastal investors to have the same person be both the Chief Executive Officer and Chief Scientific Officer. We have to adopt that mentality if we want to generate sustained serious investments from the life sciences venture capital centers.
Another reason we don’t have a deep pool of experienced company builders managing our biopharma spinouts is that it is hard to attract them here. No, I am not talking about the climate, though I am sure weather is not a net plus for us. Rather, I am talking about the career risks an experienced biopharma professional takes when they move to what is, for now, a minor league city in terms of “big time” (read “big money”) emerging biopharma companies. The kind of manager we are talking about wants to know that if the deal they are working on now doesn’t work out – or even if/when it does – they won’t have to relocate to find their next opportunity.
To some extent there is not a lot we can do, locally, to change the metrics of the “what will I do next problem.” But there are a few things that would help. One is changing the local culture to recognize that in order to build great companies it is necessary to have a great team of executives, including experienced CEOs. Another is making sure that the great science we have here in Madison is more visible in the business community on the coasts. I very much doubt, for example, that the typical life sciences manager on the west coast realizes that UW-Madison is a top-3 recipient of NIH funding.
UW-Madison, and the region, have made enormous progress over the last dozen years in demonstrating both the ability and willingness to work with the private sector to commercialize the University’s extraordinary research. If we can take the next big step – recognizing the need for and successfully competing for experienced professional biopharma managers – we will, I think, rapidly find ourselves among the nation’s leading centers of biopharma venture capital investment. And, once the venture people are here, they will – probably to their surprise – find that we have lots of other great technologies ripe for venture investment as well, all around the state.
Other columns by Paul A. Jones
- Paul A. Jones: Two sides of an often contentious issue
- Paul A. Jones: Term-sheet etiquette and other rules of capital raising
- Paul A. Jones: A venture-capital take on the financial meltdown
- Paul A. Jones: Two sides of a contentious, early-stage issue