Business of Bioscience (eBook)

Dr. Shimasaki has over 25 years of practical experience in the biotechnology industry and as a serial entrepreneur co-founded three biotech companies. Within these companies he has held a variety of positions, including Director of Project Planning, Executive VP of Research, VP of Operations, Chief Operating Officer, and CEO. He has raised multiple rounds of capital, both private and public and has been involved in most every facet of a biotech start-up. He is intimately familiar with the challenges of product development, and led international clinical testing and regulatory approval processes for multiple products through the FDA. He is an inventor of numerous patents for both diagnostic and therapeutic applications. His passion is for the establishment and growth of biotechnology companies focused on developing life-saving products that significantly impact the health and well being of others. He has written this book to provide insight into the inner workings of biotech product development and the practice of starting and building a biotech business. His desires is to share his experiences in the dynamic business of bioscience to help others gain wisdom so they can better manage the risks associated in building a biotechnology company. Dr. Shimasaki received his B.S. in Biochemistry from the University of California at Davis and his Ph.D. in Molecular Biology and Biotechnology from the University of Tulsa and his M.B.A. from Northwestern University’s Kellogg School of Business.

Shimasaki_FM.pdf 1
Introduction 1
Biotech in Its Infancy 1
The Business of Biotechnology Is Like No Other 1
What Exactly Is Biotechnology? 1
Biotechnology Clusters and the Decentralization of Biotech Hubs 1
Is the Biotechnology Business Model Broken? 1
What Makes a Biotech Entrepreneur? 1
A Different Breed 1
Know the Challenges: Count the Costs 1
Do You Have What It Takes? 1
Personal Costs 1
Four Backgrounds of Biotech Entrepreneurs 1
For the Scientist: Things vs. People 1
For the Businessperson: Communication with Scientists 1
First Time Entrepreneur, First Time in Business 1
Alternatives to Consider Before Taking the Leadership Role 1
Acquiring Additional Business Skills 1
For the Young MBA 1
Be a Life-Long Learner 1
Essentials of a Biotech Entrepreneur 1
Passion and Vision 1
Assess Your Strengths and Weaknesses 1
Learn New Skills Quickly 1
Good Business Sense 1
Have the Ability to Speak Two Languages: Be a Multi-Disciplined Translator 1
Beware of the Unknown Unknowns 1
Gain Knowledge and Wisdom 1
Persistence 1
Having a Deep Sense of Responsibility 1
Be a Negotiator 1
Enlarge Your Circle of Influence 1
On Creativity and Change 1
Leadership and Core Values 1
Summary 1
Shimasaki_Ch03.pdf 47
Start with the Idea: Licensing and Protecting Core Assets 47
What to Consider Before Licensing 47
Is There a Real Market for This Product? 47
The Quality of the Science 49
Is It a Core Technology or a Single Product? 50
Great Technology is Associated with Great Scientists 51
What To Do Next? 51
What Is Intellectual Property? 52
What Is a Patent? 52
How Is a Patent Obtained? 53
Types of Patents: Traditional, Regular (Nonprovisional) 54
Types of Patents: Provisional 55
Types of Patents: International 55
Get a Freedom-to-Operate Evaluation 56
Trade Secrets 56
Trademarks 57
Technology Licensing and Negotiations 57
What Does a Typical License Structure Look Like? 58
Factors in Licensing Negotiations 59
Exclusive Licenses 60
Nonexclusive/Coexclusive Licenses 60
Summary 61
Shimasaki_Ch04.pdf 62
Chapter 4 62
Significance of the Right Business Model and Managing Risk 62
Business Model Examples 62
Biotechnology Business Models 63
The Drug Repositioning Business Model 64
Molecular Testing Business Models 65
How Do You Determine the Best Business Model for a Technology? 66
Becoming a Risk Manager 67
Why Risk Assessment and Risk Management Is Important 68
What Are the Risks That Need to be Managed? 68
Biotech Evaluation Tool 69
Summary 71
Shimasaki_Ch05.pdf 72
Chapter 5 72
Legally Establishing the Company 72
The First Step: Find a Good Attorney 72
How Many and What Types of Attorneys Do I Need? 73
Corporate Attorney 73
Patent Attorney 74
Securities Attorney 74
How Does One Find a Good Attorney? 75
How Much Will This Cost? 76
Choosing a Company Name 77
Why Is a Company Name Important? 77
Can a Company Name be Changed? 78
Incorporating the New Company 79
Ownership: Issuing Stock 80
What Types of Stock Should be Issued? 81
What About the Founders? 82
What Agreements are Needed? 82
Setting Up a Board of Directors 83
Importance of Directors and Officers Insurance 84
Responsibilities of Your Board of Directors 84
How Should a Board of Directors be Compensated? 86
Setting Up a Scientific Advisory Board 86
Who Are They and What Do They Do? 86
How Often Should the SAB Meet? 88
How Should the SAB be Compensated? 88
A Clinical Advisory Board 88
The Virtual Company 89
Summary 89
Shimasaki_Ch06.pdf 91
The Product Development Pathway: Charting the Right Course 91
It Is About Creating Value 91
Biotechnology R& D: Little R, Big D
A Sense of Urgency Down an Unfamiliar Path 92
Two Types of Product Development Categories 93
Product Development Stages 94
Development Stages for “Treatments” 94
Treatments: Basic and Translational Research Stage 94
Treatments: Development Stage 95
Treatments: Lead/Process Optimization Stage 96
Treatments: Preclinical Testing Stage 97
Treatments: Clinical Testing Stage 98
Pre-IND Meeting 99
Investigational New Drug Application (IND) 100
Phase I, II, III Clinical Studies 100
Treatments: Regulatory Review Stage 101
Treatments: Scale-Up and Manufacturing Stage 101
Treatments: Marketing and Growth Stage 102
Development Stages for “Analytics and Tools” 102
Analytics and Tools: Basic and Translational Research Stage 102
Analytics and Tools: Proof-of-Concept Stage 103
Analytics and Tools: Prototype Development 103
Analytics and Tools: Clinical Validation Stage 104
Analytics and Tools: Regulatory Review Stage 105
Analytics and Tools: Scale-Up and Manufacturing Stage 105
Analytics and Tools: Marketing and Growth Stage 105
Product Development Milestones 106
Commit Your Plan to Writing 107
Product Development Assistance 107
Significance of Winning Competitive Grants 108
Commercialization Help from SBIR 109
Market Development and Business and Organizational Development Paths 109
Summary 110
Shimasaki_Ch07.pdf 112
Chapter 7 112
Developing a Marketing Strategy 112
What Is Marketing? 112
Misconception 1: What Is So difficult About Marketing? You Just Make It and Sell It! 113
Misconception 2: The Better Your Technology, The More People Will Want to Buy Your Product 113
Misconception 3: I Do Not Need to be Concerned with Market Strategy Now Because I Have Plenty of Time to Think About Marketing 114
The Evolution of the Marketing Concept 114
The Production Concept 115
The Sales Concept 115
The Marketing Concept 115
Understand and Appreciate the Market for Your Product 116
Marketing Tools 117
Segmentation 117
By Geographic Location 117
By Demography 118
By Behavior and Usage 118
Targeting 119
Positioning 119
Branding 120
Market Research and Assessment Tools 120
Primary and Secondary Market Research 121
Market Size and Opportunity 121
Sales Projections 121
Biotechnology Products Typically Have Three Customers 122
Who Is the Patient? 122
Who Is the Physician? 123
Who Is the Payor? 123
Five-Step Process to Applying Market Concepts 123
Step 1: Determine Your Potential Market Size 124
Step 2: Define Your Target Market Segment 124
Step 3: Articulate Your Product’s Value Proposition to Your Target Market 125
Step 4: Select a Market Channel to Reach Your Target Market Segment 125
Step 5: Validate and Refine Your Market Strategy 126
Using Biotech Product Examples 126
Example: Molecular Genetic Test for the Assessment of Breast Cancer Risk 127
Determine Your Potential Market Size 127
Define Your Target Market Segment 127
Determine a Value Proposition to the Target Market 128
Evaluate and Select a Market Channel to Reach the Target Market 129
Validate and Refine the Market Strategy 129
Example: Nasal Spray Vaccine Against Influenza Virus 129
Determine Your Potential Market Size 129
Define Your Target Market Segment 130
Determine Your Value Proposition to Your Target Market 130
Evaluate and Select a Market Channel to Reach Your Target Market 131
Validate and Refine Your Market Strategy 131
Market Development Milestones 132
Biotechnology Product Adoption Curve 132
Summary 133
Shimasaki_Ch08.pdf 134
Chapter 8 134
Financing Your Company – Part 1: Raising Money, Capital Needs, and Funding Sources 134
Raising Money 135
Why Does It Seem Like All Our Time Is Spent Raising Money? 135
Raise Money on Strength 135
Raise More Money Than the Anticipated Need 135
Do Not Wait Too Long to Start Raising Your Next Round of Capital 136
Do Not Overvalue Your Company 137
New Money Trumps Old Money 137
Just Because Investors Are Interested, It Does Not Mean They Will Make an Investment 137
How Much Money Does a Company Need to Raise? 138
Therapeutic Estimates 140
Diagnostic Tests Cost Estimates 140
Medical Device Estimates 141
Clinical Laboratory Services: Genetic and Gene Testing of Molecular Markers 141
How Long Does It Take to Raise Money for a Start-Up Company? 142
Academic Scientist or Physician 142
Industry Scientist or Industry Physician 143
Businessperson (Nonscientist/Nonphysician) 143
Spin-Off Group from Industry 144
Geographic Location Effects 145
Where to Go to Raise Capital? 145
Personal Money 146
Friends and Family 147
Peer-Reviewed Grant Funding 147
State and Local Financing Program Support 148
Angel Investors 149
Private Placements or Private Offerings 150
The Venture Capital Industry 151
Venture Capital Brings More Than Just Money 152
Finding the Right VC 152
How NOT to Find a Venture Capital Firm 153
The Dark Side 155
How Do You Approach Venture Capital? 155
The Term Sheet 156
What Is Due Diligence? How Long Does It Take? 157
The Funding Chasm: Bridging from Angel to Venture Capital 157
Nonprofit Foundation Partnerships 158
Industry Corporate Partnership 159
Institutional Debt Financing 159
Investors Expectations for Return on Investment 160
Learn to Appreciate the “Beatings” 160
Summary 161
Shimasaki_Ch09.pdf 163
Chapter 9 163
Financing the Company – Part 2: Funding Stages, Valuation, and Funding Tools 163
Financing Stages for a Life Science Company 163
Start-Up or Pre-Seed Capital 163
Seed Capital 164
Early Stage Capital: Series A/B Preferred Rounds 164
Mid-Stage or Development-Stage Capital: Series C/D Preferred Rounds 164
Later-Stage and Expansion Capital: Series E/F Preferred Rounds 165
Mezzanine Capital 165
Initial Public Offering or Acquisition 165
Funding Gaps: Convertible Notes or Convertible Bridge Loans 166
What Is the Typical Sequence of Funding Events? 166
How Much Money is Raised at Each Funding Stage? 167
How Is Company Value Determined? 168
Postmoney Valuation$2 Million.+.$3 Million.=.$5 Million Dollars 169
Percentage of Company Sold to New Investors at $15 Million Premoney$8 Million/($8 Million.+.$15 Million).=.35% 169
Percentage of Company Sold to New Investors at $30 Million Premoney $8 Million/($8 Million.+.$30 Million).=.21% 169
Valuation Methods 170
How Much Will the Founders Own? 171
How Much of the Company Is Given Up in Each Round? 172
Communicating to Your Shareholders 172
The Value of Public Relations in Raising Money 173
Exit Planning: Sooner not Later 175
What Are the Exits? 175
The Tools 176
The Business Plan 176
1. Cover Page 177
2. Company Focus, Mission, or Purpose 177
3. Company Background 177
4. Market Opportunity 178
5. Technology or Product Description 178
6. Competition 179
7. Market Strategy 179
8. Financial Summary 180
9. Intellectual Property 180
10. Regulatory Information 181
11. Management Team and Background 181
12. Risks of the Business Model 181
13. Return on Investment 182
The Presentation 182
All That is needed to Raise Money is a Good PowerPoint Presentation 182
What is Contained in Your Presentation 183
Pointers on Giving a PowerPoint Presentation 183
Presentation Body Language 184
Other Presentation Points 185
Building a Web Presence: Putting Your Best Foot Forward 185
Final Comments About Funding 186
Shimasaki_Ch10.pdf 187
Chapter 10 187
Corporate Culture and Core Values in a Biotech Company 187
Why is a Company Culture Important? 187
Development of a Company Culture 188
Individuals Define the Culture and Core Values 189
Examples of Core Values 189
Company Core Values 190
Guiding Principles Based On Core Values 191
Core Values Begin With the Leader 191
How to go About Improving a Company Culture? 192
Communication in a Biotech Company 193
Core Values Apply to Partnerships Even Suppliers and Service Providers 193
A Good Corporate Culture is a Strength That Cannot be Easily Copied 194
Shimasaki_Ch11.pdf 195
Chapter 11 195
Hiring a Biotech Dream Team 195
For the Start-Up: Virtual is Vital 195
Renting and Leasing Space 196
Who do You Hire First? 197
Category I Functions 198
Category II Functions 198
Category III Functions 199
Employee Benefits Challenges 200
Key Employee Compensation 200
Diversity is Essential 201
A New Hiring Approach 202
Relevant Experience 202
Ability-to-Execute 203
Shared Core Values 203
The Hiring Process 204
Have the Interviewee Give a Presentation 204
Face-to-Face Time 205
Use a Work Behavior Assessment Profile 206
Use Informal Meetings 206
Have Them Talk with a Professional 206
Making the Final Decision 207
How to Find These Individuals? 207
Management Skill Sets 208
Five Skills of Successful Mangers 208
Letting Some Go 209
When to Use Separation Agreements 210
Summary 210
Shimasaki_Ch12.pdf 212
Chapter 12 212
Strategic Alliances and Corporate Partnerships 212
What Are Alliances and Partnerships? 212
Why Are Partnerships Important? 212
What Does a Biotech Have That a Strategic Partner Would Want? 213
What Does the Biotech Get from a Partnership? 214
Can’t a Potential Partner Just Acquire the Biotech Company? 215
The Partnership 215
What Is the Partnership Process? 216
Making Alliances Work 217
Why Do Alliances Fail? 218
Summary 219
Shimasaki_Ch13.pdf 220
Chapter 13 220
The Regulatory Process for Biotech Products 220
Alphabet Soup 221
Biotechnology Regulators: The Food and Drug Administration 222
What is an Institutional Review Board? 223
Informed Consent 223
Regulating Drugs and Biologics: The Drug Approval Process 224
Pre-IND Meeting 224
Investigational New Drug Application 225
Phase I Testing 226
Phase II Testing 226
Phase III Testing 227
Phase IV Testing 228
Pre-NDA Meeting 228
New Drug Application or Biologics License Application 228
Other Types of Regulatory Review Processes 229
Accelerated Development Review 229
Parallel Track 230
Treatment IND 230
Regulating Medical Devices, IVDs, Diagnostics and Laboratory Tests 231
Medical Device Classification 232
In Vitro Diagnostic Devices 233
Investigational Device Exemption 233
Division of Small Manufacturers, International and Consumer Assistance 234
Medical Device Approval Process and Filing Route 234
Remember that Regulators are First People 235
Summary 235
Shimasaki_Ch14.pdf 237
Chapter 14 237
Company Life Stages and Changing Management Styles 237
Why Understand Company Development Life Stages? 237
Organizational Life Stages 238
Birth Phase 239
Infancy Stage 239
Development Phase 240
Toddler 240
Adolescent 240
Teenager 241
Expansion Phase 243
Young Adult 243
Adult 243
Retirement 244
Other Corporate Identity Features 244
The CEO’s Role in the Transition of Life Stages 245
Summary 246
Shimasaki_Ch15.pdf 247
Chapter 15 247
When Do You Call it Quits? 247
How Can One Tell When It is Time? 248
External Indicators 248
Internal Indicators 249
Assuming There Are No Alternatives, What Should be Done? 250
Face Responsibility: Do Not Cover Up, Make Excuses,Deny, or Ignore 250
Honesty and Transparency 250
Employee Assistance 251
When It Is Time for the Entrepreneur to Leave? 251
What Can be expected? 251
Summary 252
Shimasaki_Ch16.pdf 253
Chapter 16 253
Conclusions and Serendipity 253
A Biotech Company Opportunity 254
It Was the Best of Times, and It Was the Worst of Times 255
Every Success Was First Met with Challenges 255
Summary 256
Shimasaki_Ch17.pdf 257
Chapter 17 257
Practical Help: How to Get Started? 257
What to Do First 258
Organize Yourself 258
Organize Your Environment 258
Utilize a Project Management Software 259
Next Steps 260
Shimasaki_BM.pdf 262
Anchor 1 262
Anchor 7 273
Introduction 22
Biotech in Its Infancy 22
The Business of Biotechnology Is Like No Other 23
What Exactly Is Biotechnology? 23
Biotechnology Clusters and the Decentralization of Biotech Hubs 24
Is the Biotechnology Business Model Broken? 27
What Makes a Biotech Entrepreneur? 29
A Different Breed 29
Know the Challenges: Count the Costs 30
Do You Have What It Takes? 31
Personal Costs 31
Four Backgrounds of Biotech Entrepreneurs 32
For the Scientist: Things vs. People 32
For the Businessperson: Communication with Scientists 33
First Time Entrepreneur, First Time in Business 34
Alternatives to Consider Before Taking the Leadership Role 34
Acquiring Additional Business Skills 35
For the Young MBA 36
Be a Life-Long Learner 36
Essentials of a Biotech Entrepreneur 37
Passion and Vision 37
Assess Your Strengths and Weaknesses 37
Learn New Skills Quickly 38
Good Business Sense 39
Have the Ability to Speak Two Languages: Be a Multi-Disciplined Translator 39
Beware of the Unknown Unknowns 41
Gain Knowledge and Wisdom 41
Persistence 42
Having a Deep Sense of Responsibility 43
Be a Negotiator 44
Enlarge Your Circle of Influence 44
On Creativity and Change 45
Leadership and Core Values 45
Summary 46