Boston Business Journal by Julie M. Donnelly, Reporter
At this week’s Biopharm America conference in Boston, four local biotechnology CEOs — Lonnie Moulder of Tesaro, Geoff MacKay of Organogenesis, Richard Pops of Alkermes and David Meeker of Genzyme Corp. — discussed whether it’s still possible to build a biotech from the ground up and into a large, profitable company.
Moulder said there are three key factors that determine whether a startup can develop into a commercial-stage company. Tesaro (Nasdaq: TSRO), a 2-year-old biotech based in Waltham, went public in June.
“If you have a compound (as opposed to just good science), it makes it easier. Investors like to support teams that have done it before. And you need to have the aspiration to see it through,” he said. “Some new companies now are developed more as a ‘project finance activity,’ but you go about the business differently if you want to commercialize a drug.”
The CEOs agreed that capital to develop new companies has become harder to come by, and not just because of the slow economic recovery.
“What keeps me up at night is the payers, not the regulators,” said MacKay, CEO of Canton-based Organogenesis. “What is the biggest business risk is uncertainties around health reform, and fear among insurers that leads to disincentives to adopt new technology.”
Alkermes’ Pops said that the world has changed from the time when drug companies worried about getting insurers to pay for a drug, only after it is approved. Alkermes (Nasdaq: ALKS), which is incorporated in Ireland, maintains its corporate headquarters in Waltham.
“We don’t commit funding (to a new drug program) without a developed idea of who’s going to pay for it,” Pops said.
The CEOs said that growing biotech companies typically hit a number of hiccups in the middle years of development, and said it’s important to abandon a drug program as soon as it’s apparent it’s not a winner.
“If you’re going to fail, fail quickly,” said Meeker, the CEO of Cambridge-based Genzyme, a unit of French drug maker Sanofi.
When it comes to when and whether to go public, the CEOs expressed a variety of opinions. Pops said he has seen many companies go public too quickly, only to see a company’s market capitalization disappear in an afternoon after a relatively small scientific setback. In contrast, a private company can deal with such challenges without disclosing them to the public.
MacKay said he valued Organogenesis’ private ownership, as public market investors could detract attention from the company’s core mission.
Tesaro’s Moulder countered that sometimes a company has to go public to access capital. “There are not too many venture firms that are funding expensive Phase 3 clinical trials these days,” he said.
For companies that do become a successful public company with several drugs on the market, such as Alkermes and Genzyme prior to being purchased by Sanofi, there is an increased likelihood of being acquired. The CEOs were asked whether there were any ways to safeguard a company against being bought.
Meeker, whose company was bought by Sanofi less than two years ago, said you have to ask yourself, “Are you holding on to it because the company has value, or because of your ability to add value?” Meeker said biotech companies have to realize when a potential acquirer can advance its goals better than it could do on its own.
