The challenge of growth

Typically the inception of a new life science company begins when an entrepreneur (frequently a scientist), or a team, recognises an opportunity derived from research -usually but not always financed through government grants-, protects the intellectual property, performs some viability analysis, writes an initial business plan, and rounds up some collaborators.

Starting the company requires funds of course, and, apart from their personal funds, entrepreneurs find those from the FFF (family, friends and fools) set, public administrations (through seed capital mainly) and angel investors. So, there begins the adventure, focused on product, services or both, coupled with tons of excitement.

But growing a life science company, -pursuing the commercialisation of the innovations or the progress to a certain step in the development process-, is a tough business. For an industry based on R&D and which depends on innovative technologies, financing is a challenge because significant capital is required to commercialise technology or bring it to acceptable low-risk stage. So, adequate funding strategies are needed to succeed.

This aspect is particularly important in a period of economic downturn, despite the resilience demonstrated by the sector. Life science companies face a context of funding scarcity and complex market conditions, while start ups may additionally suffer the pressure of being in a very early stage to assure optimal licensing in the near term (especially in the biopharmaceutical industry).

In addition to financial constraints, factors like increased competition and regulation, pressure from users and payers, rising development costs, and demographics are producing significant transformations in the life sciences value chain. More importantly, these factors impact potentially in the ability of companies to deliver value to shareholders and innovative results to society.

Therefore, life sciences executives are challenged with the definition (or redefinition) and implementation of effective business models, which must be adapted specifically to the needs of research-intensive organisations, the capitalisation of new opportunities and the optimisation of net revenue and profits, -or streamlining the path towards profits-, with the goal to grow and increase shareholder value.

The business model thus defines the way, unique, in which a given company delivers superior business outcomes. But life science is not only a very heterogeneous and diverse sector: compared to more established industries, it can be considered a start-up sector itself and both executives and investors continue to experiment with strategies to make companies succeed.

Analysts and experts alike seeking more progressive business models agree that, despite the diversity of options, some essentials can be identified. The starting point may be the identification of unmet needs and the careful selection of research programmes, coupled to the abilities to progress the projects rapidly through important milestones and to build a good portfolio.

Many consider that success in the current context requires a survival mentality, focusing on remaining independent, turning to partnering when possible (without considering sales to third parties as the way out) and exploring new avenues such as semivirtual models which rely heavily on outsourcing.

Funding and finding innovative ways of financing remains critical and was the star theme of the workshop organised by the Council of European BioRegions (CEBR) in Luxembourg last 29th June, in which BioBasque took part.

But eventually, human talent is even more critical. Investors know that having a good team is equally important to having a good portfolio when securing funds. Most life sciences companies have founders with high levels of technical expertise, but studies have shown that the most successful ventures are those with a team with mixed backgrounds, industrial experience and clear market and product focus. Having fine advisors, and support of previous successes of serial entrepreneurs, also help.

When the economy recovers, the best positioned companies will be able to reap the benefits sooner. Something similar could be said of regions and countries, where all existing talent and knowledge should be rallied to assure sustainable growth. Quoting an African proverb, "if you want to go fast, go alone; if you want to go far, go together". Growing the life sciences industry is the responsibility of many. It will be everybody’s future.