Academic Commercialisation: The Third Way?

In an earlier post, Fail Fast Fail Early, focused on healthcare companies optimising their pipeline development, I asked whether there was a better way of commercialising medicines. Well GSK and Cambridge University have come with an interesting alternative development model using “academic incubators” to optimise the early clinical development of new medicines.

Cambridge will dedicate a team of academic experts to develop drugs with therapeutic potential, as well as bearing some financial risk for which they'd be compensated if the programme is a success. GSK will provide operational support, access to its in-house clinical research and imaging facilities, and background preclinical data on the drug. The agreement is fully aligned with one of the key recommendations of the Cooksey Review of UK Health Research Funding that consideration should be given to alternative drug development models, such as Public Private Partnerships, to optimise effective collaboration between industry and academic sectors in the development of effective new medicines.

Whether this is "ground-breaking approach" or just a sensible way of outsourcing development of low priority orphan drugs is open to debate. It does however establish a joined up pipeline from academic research towards commercialisation that may university inspired projects lack - despite their efforts to bolt on commercialisation activities. Also the fact that the projects are GSK sponsored gives a commercial focus to the activity from the outset that will undoubtedly benefit the eventual business outcomes. As we have seen with the Enterprise Fellowship projects backed by Yorkshire Forward, having some commercialisation DNA and focus at an early stage is invaluable.

Information Wants To Be Free

According to Wikipedia, this phrase was supposedly first pronounced by Stewart Brand in 1984, citing the fact that the cost of dissemination is getting lower and lower. However, the effort required to generate high-quality information ain't getting any cheaper.

But equally a lot of people view their information as free for dissemination as they make their money in other ways, like IKEA. You could say the likes of Google are parasitic and without information to search they wouldn't be able to sell advertising space, but I would argue it more of a symbiotic relationship. The concept of consolidating freely available information then selling easy access i.e. adding value is as old as the Bible.

With the trend towards Open Source the argument goes that enabling technology like operating systems and other basic building blocks that benefit everyone should be free so that, like Isaac Newton, you can reach greatness by 'standing on the shoulders of giants' rather than reinventing the wheel. I think there is a strong argument that if public money is spent on R&D then the IP should be made freely available. However, those who create valuable information (and whose business model requires payment) deserve to have their copyright and commercial integrity respected.

There Be Dragons Ahead

At the Business North West event, Doug Richards of Dragon's Den fame gave a inspirational talk charting his ups and downs (yes even he has them!). Mainly anecdotal, but some of his take home messages that particularly resonated with me were:

1. Luck and serendipity plays its part in any successful venture; the path to greatness is not deterministic. Deal with it.


2. Don't only listen to those that have only tasted success; they are the exceptions not the rule. Also take council from people that have tasted failure as well. Inductive learning requires negatives as well as positives.


3. Yes, have a cunning well thought-out plan but be prepared to deviate from it as necessary (recognising this is not what funders necessarily want to hear): The reality is that you have to be flexible and opportunitistic (which is what the big boys aren't, so you have the advantage).


4. Cash and share price are not equivalent currency: Market Cap ain't worth anything until you have exited with money in the bank.
   
5. Leadership is about enpowerment. "Ask for my forgiveness not my permission". The founder/CEO should strive to be operationally redundant - he or she is generally not replicatable nor reliable. Surround yourself with people more able than you!

Pile It High...

At BarCamp Leeds last Saturday, Dean Saddler CIO at PlusNet evangelised about how you can build a web-based applications quickly and easily and one of the tricks was to repackage and reuse the same underlying technology in different market niches and applications.

His take on monetisation was that if you have been smart about development, you only have to charge sensibly and adopt a subscription model to take market share from bloatware providers charging perpetual licence fees (where have I heard that before?). He also emphasised that his development plan only extended as far as the next round of features that users had requested. Sounds like the whole concept of component reuse and evolutionary development has finally caught up with web designers!

Not sure I totally agree you can produce something of any substantial worth so cheaply - even if you outsource development to China - but the idea that you have to work smart, reuse components, adopt incremental development strategies that keep you close to the users and offer something significantly better and cheaper than what has gone before is undoubtedly true.

The Second Bounce

Ronald Cohen of Apex fame argues in his new book that the everyone can see the first bounce of the ball; it's the second bounce that is uncertain. And it is only in situations of uncertainty that significant investment gains can be made. Well I beg to differ - until you bounce the ball once there is the highest degree of uncertainty - one can only guess at the outcome. Once you have seen a bounce, you have data to predict pretty well what the next bounce will do and even fix things that fall flat!

Releasing Version 1 of a product into a market is always the most uncertain stage. Once users have something to play with they can give you feedback and the whole market research process can be brought to bear on the problem. When all you have is ideas, hand waving and hopefully some passion and a committed team, most potential users will still just stare back blankly at you - they ain't good at looking at a blank canvas and saying what will make it a masterpiece.

That thought dovetails pretty nicely with a talk I caught on the first bounce at BarCamp Leeds on Saturday on the futility of trying to predict the future. Sure, it's hard but unless you can make an educated guess at where things are going how can you ever hope to align the technology idea you are working on with what the future holds. That said, the prevailing view was that the best way of predicting the future is to implement it!

Fail Fast, Fail Early

Not the most inspiring of titles, but ask any medicinal chemist what the chances of his or her lead molecule making it through clinical trials and it's about one in ten (and falling). And no matter what anyone tells you, no one knows which development projects will fail when on the journey from the lab to your bathroom cabinet. Yes, that pill you pop for hay fever or hypertension is the result of a whole lot of great science and one big dose of good fortune.

The development strategy of big pharma embraces this fact as they seek to spend the least amount of money on the ones that don't make it. Fail fast, fail early is their mantra. So why don't they run tests in parallel (assuming it's ethical and legal) and speed up the process? Unfortunately, with these odds history and a few calculations in Excel tells you its a mug's game to try to rush perfection to much. What you need is a development pipeline (which is what equity analysts sweat about as the last blockbuster goes off patent) and then you can play the numbers game and be reasonably patient.

But wait, what about small guy who just has one or two throws of the dice and mix in a doze of commercial reality that their wonder drug or medical device has a limited market potential? And what if they don't have the luxury of funding their development from previous successes? Then they have to raise funding from VCs who don't want to wait a decade to see a return and even then the market potential may not give sufficient returns to make the investment add up financially. This is the problem facing many Healthcare Technology companies and it ain't easy to beat the numbers.

Complaining about the short time horizon and greediness of VCs is about as useful as trying to rush a product through clinical trials (and by that I mean spend more money on failures faster). It just isn't that productive. So what is the answer to this connundrum? The obvious answer is to licence more things earlier and accept a smaller slice of the pie if they make it through to market - which is what most smaller biotechs do. Alternatively, you can find a friendly source of development funds that is prepared to wait for a return and see your project through from cradle to grave - it's called working for Glaxo! But is there a third way?

Developing an Innovation Strategy

Rob Hulme from Smith & Nephew spoke at the first of our Business Fitness workshops in Hull on developing an innovation strategy. He emphasised their strategy has moved from closed innovation to a more open approach to embrace ideas from outside. Another of his themes was the concept of teamwork and cross-functional approaches noting that breakthroughs often occur at the interface between two disciplines.

A interesting observation was on the competing pressures of Process & Bureaucracy and Passion & Anarchy that a company needs to find an appropriate balance between to maximise its potential. Too much bureaucracy and innovation risks being stiffled in favour of the status quo. But equally too many mavericks trying to change and tinker with things then chaos reins.

This complemented my discussion in the previous session on Business Strategy & Planning where I focused on the chasm between Visionaries and Pragmatists. Visionaries are by definition more driven by passion and a quest for radical improvement, whereas Pragmatists are looking for more incremental, managed evolution to improve the current situation. Most managers coming from larger companies have these pragmatic skills in spades, but may lack the open mindedness and willingness to experiment and even fail that sets out the visionaries from the rest.

There are four more seminars in the series which promise to be equally inspiring! Click here to find out more...

Suck IT and See

Do visionary/successful companies try lots of things consistent with their goals and and keep the stuff that works. Or do they know exactly how to get to where they want to be and home in on perfection like a wasp buzzing towards your pint of beer?

The ultimate suck it and see company has to be 3M. All things big start off small, but who knows for sure what will grow? They recognised that you need to develop a pipeline of little things and keep nurturing those that work. Time to market is also key. In the 1970's Glaxo was one of many drug companies climbing the greasy pole. Then their researchers discovered a potential wonder drug, ranitidine. Instead of doing toxicology testing sequentially, they decided to save time by running the toxicity studies in different species in parallel. By taking a calculated risk Glaxo were first to market and the rest, as they say, is history.

So one could conclude that if you want to make a bee line for success, you need to take a leaf out of Charles Darwin's book and try lots of things and keep the ones that work, and if you are going succeed, make it snappy!

Death Of Animal Testing

An interesting article in June 18th issue of C&E News predicting reduced animal testing in favour of experiments utilising human cells and components by the USA National Research Council. They say advances in systems biology and methods to test cells in vitro is reaching the stage where it will provide more information on human toxicity than high-dose in vivo testing on animals.

This may cheer our Venturefest Yorkshire Business Plan winner, Kirkstall Ltd. who are developing a multi-chamber bioreactor that utilises human cells. To read the NRC report, click here.

Those Who Can Do

I have been involved in developing software applications for more years than I care to remember and here are a few thoughts:

1. You are only a naive user once. Watch a new person try to use your software application and learn from what they can't easily do. Once you are trained, anything is intuitive.
2. You don't build new software the way you build a house - those that try to make it into a linear process with prescriptive completed outputs at every stage are doomed to failure - even if the project plan looks pretty. There is always a non-deterministic aspect to any complex system. Agile approaches, adaptive planning and iterative development is needed.
3. That said, you should always seek to reuse building blocks and design the components of the system with this in mind. If you have to reinvent the wheel each time, you are doing something wrong.
4. Don't expose too many end users to pre-alpha software (apart from those sacrificial virgins mentioned in 1) - they will not be able to see past the first bug/crash/wobbly and will not thank you for an early look at anything short of perfection.
5. So don't let core developers design a user interface. Their perspective is clouded by what is going on deep in the bowels of the system. A business analyst that has empathy with and understanding of the user requirements should always be part of the team and in small projects is more important than a 'project manager'. They can fein selective amnesia to immitate 1 and 4.
6. Everyone is qualified to criticize and say what’s wrong with a system; it’s a lot harder to contribute innovative ideas and define what’s right!

The World's Largest Seed Capital Fund

A Private Members Bill sponsored by Kitty Ussher gets its second reading this autumn which calls on the Government to implement a framework similar to the USA's Small Business Innovation Research Programme, which ensures that 2.5pc of the Federal R&D budget (worth $1.8billion in 2006) goes to young technology firms.

David Connell from Cambridge University's Centre for Business Research has written a report called "Secrets of the World's Largest Seed Capital Fund" and is leading the campaign for bringing such an initiative to the UK. Clearly, it could play a major role in helping to fund early stage technology businesses and give them a slice of the R&D pie that has traditionally gone exclusively to the Universities and larger research organisations. Improved access to proof-of-concept funding and seedcorn capital is needed to help nurture early stage science and technology companies and Connect Yorkshire applauds this initiative.

On a related theme, Red Planet Capital is a non-profit organisation that is establishing a strategic $75M venture capital fund for NASA. The purpose of the fund is to provide NASA earlier and broader exposure to emerging technologies. It is designed to promote the future availability of technologies with both government and commercial applications that can meet NASA's future mission requirements. The effort signifies the administration's commitment to creative approaches for promoting innovation in pursuit of America's space agenda.

Hot on its heals, is the MOD seeking to inspire innovators from across Britain to bid for a slice of £10M to develop their ideas further to help meet key defence challenges. See www.ideas.mod.uk.