A limited access to capital places undeniable strain on nearly every stakeholder in the sector. From a corporate perspective specifically, as a leader looking to build a company for long-term success, the strain is particularly acute. In a field like drug discovery, innovation simply can’t happen overnight – it takes years to bring forward and develop new medicines, and these years come with an unavoidable capital cost.

In navigating these current waters, I’ve found myself reflecting on some of my past experiences – be it the downturn of the early 2000s or the 2008 recession – for not only the lessons learned, but for the perspective gained by having to guide a ship through a difficult course.

Each of these downturns felt existential at the time, with many jobs and companies lost in the absence of capital. And yet with hindsight, each of these cycles also created the fertile soil from which new leaders emerged, sharpened strategies took root, and truly innovative companies began to grow.

And this dynamic is worth sitting with: as painful and seemingly endless as a market contraction can feel, they inherently necessitate clarity of vision and decisive focus for companies.

Forged in Scarcity: The Nimbus Story

Looking back to 2009, during my days as a member of the founding team of Nimbus Therapeutics, we were deeply inspired by the promising findings of our early computational work, yet faced the uphill climb of establishing our footprint in an era in which skepticism around computational drug discovery abounded. At the time, one colleague joked “computational chemistry can tell you why a molecule didn’t work two years after you shut down the project.”

Capital was incredibly hard to come by in this climate. We ground our way through countless meetings with VCs who thought we were crazy. “We’ll get back to you on Tuesday … ” was oft the response (and when we didn’t hear back for months, it was clear the VC hadn’t specified which Tuesday).  Despite these frequent closed doors and dead ends, we triaged the feedback, focused our vision, and sharpened our story. Amidst all the negativity, we never lost the conviction that Schrödinger’s 20-year innovation powering the Nimbus team/business model had something very special to offer when directed the right way.

Despite tremendous headwinds, we were able to secure key investments from non-traditional pockets of capital, such as from Bill Gates, that anchored and ultimately enabled our first proper Series A financing. During this time, I especially appreciated the active engagement of our founders (Bruce Booth and Ramy Farid) as it took all hands on deck to navigate through this specific downturn. 

Looking back at the early days at Nimbus, I still remember the pain, but also can plainly see how the enforced discipline made the company stronger and laid the groundwork for the company’s ongoing success. A clear and decisive early strategy was a key ingredient in what has ultimately allowed Nimbus to successfully demonstrate how computational chemistry can indeed be used prospectively to design breakthrough medicines.

Today’s Environment: Parallels to the Past

Fast forward to today, and the industry is living through another prolonged correction.  Following the pandemic boom, the tide rapidly receded and the persisting hangover is severe. I feel this acutely while running an early-stage private company, as a large proportion of capital has shifted to later-stage clinical stories or, in the case of generalists, away from the sector all but entirely.

The contours feel familiar – skepticism, scarcity, triage – but the duration may be even longer this time. The implication for founders and CEOs is clear: discipline isn’t optional. Clarity isn’t a nice-to-have. The bar for capital efficiency and differentiated science has permanently risen.

Principles for Leading Through Scarcity

Looking across these cycles and reflecting on my own journey, a few themes stand out for those leaders navigating the current environment.

• Hardship Clarifies Strategy
  When capital is abundant, it’s easy to pursue too many ideas at once. In contrast, scarcity forces prioritization. It demands that leaders answer the hard questions: What is essential to our mission? Which bets truly differentiate us? Steve Jobs is famously quoted as saying, “Deciding what not to do is as important as deciding what to do.” At HotSpot, a close examination of our pipeline has led to the challenging decision to partner our oncology programs. Despite encouraging early clinical and pre-clinical data, we recognized that a focused internal deployment of capital on our immunology pipeline opens the door to realize distinct synergies – of talent, platform, and innovation – within this one area, which is all the more valuable in a scare capital environment.

• Execution Discipline Creates Credibility
  In a bull market, momentum stories can raise capital on vision alone. Non-specialist investors that lack the patience for life-sciences value creation flood into the sector.  As one buy-side investor put it, “tourist investors were investing in cartoon companies.”  In our current environment, generalist investors drawn solely to big visions and exciting stories have largely exited, and the overwhelming focus is on product stories with clearly defined upcoming milestones. In this environment, investors and pharma require execution, not froth. Companies who show they can thoughtfully deploy runway to deliver on milestones are the ones who create financing opportunities, whether that be through capital raising or partnerships. 
  
  
• Culture Sustains Endurance
  Downturns are hardest on teams, testing the leadership and culture of a company. Transparency, intellectual honesty, and a shared sense of purpose are the shock absorbers that get a company through lean times. In my experience, the companies that endure are not just the ones with capital in the bank, but the ones with cultures resilient enough to keep believing in the mission. 

The Upsides of a Downturn

None of this is to downplay the pain – and potential permanent costs – of the current market. Over just the past two years, 156 public biotech companies have ceased to exist, representing a 16% contraction – such a large number of shuttered companies and shelved companies undoubtedly carries unknowable costs. And yet we can also view this contraction through a different lens – a lot of bloat has been culled, leaving focus, discipline, and innovation in its wake. 

The companies that survive this period will skew toward those with genuinely differentiated science, thoughtful capital strategies, and resilient teams. And these are the precise ingredients that enable the industry to advance real medicines to patients. Moreover, past experience suggests that these companies will be rewarded. The post-contraction IPO market has historically been extremely robust, in large part due to the pent-up demand from many high quality companies that effectively weathered the storm of the contraction and now sit in queue.

While each market downturn I’ve lived through causes deep pessimism and anxiety, it’d be inaccurate to deny the lens of hindsight, wherein each has also cleared the path for a new wave of innovation and for a generation of leaders who were forged in adversity. That’s the quiet promise embedded in today’s challenges: clarity, discipline, and resilience are being cultivated in real time.

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HotSpot has gained recognition for its groundbreaking approach to innovation, pushing the boundaries to target previously-unexplored pockets on proteins with small molecule inhibitors. This impressive track record includes developing a range of pioneering achievements, including the potential first-ever selective CBL-B inhibitor and first small molecule inhibitor targeting the key transcription factor IRF5. Moreover, our Smart Allostery platform is the cornerstone of our impressive pipeline of differentiated allosteric small molecules, targeting cancer and autoimmune diseases with the potential for transformational impact on both the science of drug development and clinical medicine.

The company’s differentiated approach to work we do, or “how,” truly sets us apart. HotSpot’s values were developed from the ground up, reflecting the authentic commitment of “HotSpotters” to achieving what others may consider impossible. As a result, we have built a culture that values courage and goes deeper into building trust, teamwork, and accountability. We prioritize ‘Keeping it Human’ in all our endeavors and strive to uphold the highest standards of integrity and follow-through.

Drug development takes a village, and as we transition into becoming a clinical-stage company, we’re committed to integrating our values even more deeply into the fabric of our work to drive meaningful impact. Twenty years ago, the very first precision therapy for oncology was approved; ten years ago, the immune therapies that have transformed clinical oncology were still in their infancy. The future for our field is bright, and we understand that the only way to continue making strides in pushing the envelope is by staying true to our values. We are eager to embark on this journey and excited to see where it takes us.

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To do this, we established a small, cross-functional group who spoke with people throughout the company, learning about what makes all of us tick and trying to identify what the Harvard Business Review defines as: “the essential and enduring tenets of an organization.” We shared our collective insights and quickly concluded that we did not fit the traditional mold of over-used corporate tropes like authenticity, teamwork, integrity and transparency. Sure, those things are important to all of us, but they don’t define the exceptional something that makes HotSpot so special.

Ultimately, our North Star became defining the specific behaviors and actions that mirror the confidence we all have in our incredible, disruptive technology and its ability to hopefully transform drug discovery. We set out to develop core values that would elevate the company, resonate with current and future employees, create an environment of resilience and inspire us more than any motivational corporate poster on a wall could ever do.

Ultimately, we landed on a typology that very much underscores our thinking about the future of work, the accelerated pace of change occurring in healthcare and the increasing complexity of our operations. The following represents a set of core values that best capture what it means to be a part of HotSpot and what we think our mark on the future will look like:

Courageous adventurers

We see what can be

We are on a cutting-edge adventure to break down barriers between what is, and what can be, in our relentless pursuit to drug the undruggable.

We need rebellious innovation to reject the status quo, try new ideas and have the confidence to successfully challenge conventional thinking.

Leave your mark

We take on big problems with broad impact

We are galvanized by the prospect of making a lasting contribution to society to help people that we might never meet.

By tackling big problems that matter, we want to fundamentally change the way researchers think about discovering and developing new medicines.

Keep it human

We care about each other

Innovation occurs best when team members share deep levels of trust, check egos at the door and assume the best about each other.

Make it real

We do what we say we are going to do

We are pragmatic dreamers, committed to testing new theories and pushing scientific boundaries with the knowledge that none of this matters unless we can consistently deliver on our promises.

We now have a small set of core values that everyone in the company is getting to know and will become embedded into our performance reviews and recruiting. We worked diligently to ensure our values are thoroughly understood, deeply felt and in the decades to come, will stand the test of time.

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With millions of Ukrainians now in limbo, we’ve also been heartened by the staggering outpouring of global support being shown in so many ways, from donations of food, medicine, and supplies to the opening of private homes for the influx of refugees to simply flying the blue and yellow Ukrainian flag as a show of solidarity. 

That’s why I’m so humbled by the grassroots effort that has grown out of our Berlin office to support Ukrainian refugees. True to our values of being broad and flexible thinkers with a strong results orientation, our team alongside many other companies and volunteers in Berlin, sprung to action as soon as they saw the first images of Ukrainian refugees flooding Berlin Central Station. Gathering up SIM cards, gift cards and other small necessities that could reach a large amount of people, the team has organized regular trips to meet arriving trains and offer a helping hand in any way they can. While providing access to cell phone service in a foreign country or a few dollars to a family in need will not reverse the column of tanks that are destroying towns and cities throughout Ukraine, these tiny steps are helping people get by in a time of great stress. More importantly, they send the signal that we are all part of a much larger global community, one that will not stand back and watch as others struggle. I’d like to applaud the efforts of Berliners for their creativity and grit and celebrate the problem-solving spirit that keeps them going back to the train station each week.

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However, being forced to work from home over the past year has taught us about the downsides of the model, albeit at an extreme.  In a recent Harvard Business Review report (Figure 2) virtually all respondents felt that workplace wellbeing had declined since the pandemic.  This is no surprise, but interestingly, 56% noted that increased job demands were to blame in large part due to a loss of work-life separation.   

Only 24% of respondents noted feeling of lost connection from colleagues at work (Figure 3).

This highlights the fact the downsides of work from home need to be carefully managed.  Finding the right model as we return to the office is not going to be trivial.

***

As we have been thinking through our return to work at HotSpot Therapeutics, a number of topics have come up in discussions with Leadership Team members.

Avoiding the knee-jerk.  Many of us are fed up with the isolation that has resulted from being forced to work remotely all of the time.  As we return to the workplace, many of us will have a natural tendency to over correct in the opposite direction.  From a management perspective, it’s important that we take a long-term view of what’s right for the company and employees.  We should give ourselves the time to develop a new working model, which may involve some experimentation, recognizing that the post-pandemic workplace needs to be in line with the needs of the business.  

While certain tech companies such as Google, Twitter, Facebook, Adobe, and Oracle have announced that employees can “work from home forever”, it is important to note that software development companies are ideally suited to distributed work since their product is digital in nature.  Technology companies also stand to gain financially from less time in the office because remote workers make greater use of tech products and social media.

At HotSpot, a hybrid model will remain core to how we operate but the specifics will be refined post COVID and because we have grown as a company in the interim.  For example, even prior to the pandemic, we had fully equipped employees to be effective from home due to the need to work with Asian- and European-based collaborators early in the morning East Coast time.

Overarching philosophy: In a recent publication from BCG, the authors urge companies to think about Smart Work which includes:

• Remote work, although not necessarily from home, with clear guidelines for when employees should be in the office
• New ways of travel that are conscious of the environment and a desire to save time and money on commuting
• An altered purpose of the office based on shifting views of what activities are best conducted in the office

From our perspective, office time is at a premium for those activities where in-person interactions are the most value add including white-board brainstorming sessions, team lunches, candidate interviews and Board meetings.  We all know the situations where there’s a buzz in the air and the contributions from one team member build seamlessly on the next.  This occurs when a group is well prepared and ready to work together as a team.  These are the sorts of interactions that should take place in person.  As a corollary to this, we have eliminated most formal presentations from our Board meetings.  We provide a detailed pre-read and then focus on discussion around the Boardroom table in the meeting.  This has led to much more effective Board meeting discussions.

Work from home time is prioritized for individual work requiring uninterrupted concentration.  One-on-one meetings via Zoom are effective in this setting for team members where there’s an existing working relationship.  Also, meetings that involve one team member presenting to a group offer few in person benefits given the reduced emphasis on group discussion. 

A key watch out with remote work is that establishing trusted personal connections and relationships, essential for optimized professional interactions, takes a lot longer.  Hence, it’s critical that unscheduled time also be available for chance discussions and interactions, around the much-missed water cooler.  Slack/Teams do enable spontaneous reach outs but interactions are more transactional and require deliberate effort.  Peer-to-peer interactions can be the most negatively impacted as a result.  Managers have 1-on-1’s with direct reports scheduled on a regular basis but peer-to-peer interactions are less formalized at HotSpot representing an area of opportunity for us.

Work flexibility – benefits and costs.  It’s hard to remember this but prior to the pandemic, work from home was viewed as a privilege that offered employees flexibility that balanced time spent commuting with in-person effectiveness.   As work from home becomes a way of doing business rather than a temporary response to the pandemic, we need to define the rules of engagement.  Not everyone can maintain a high level of productivity outside the office especially if the home environment isn’t conducive to concentration.  Hence managers need to be attentive to any drop offs in performance. 

For team members that work at the lab bench or in manufacturing facilities, work at home isn’t an option.  Therefore, we need to avoid creating a situation where certain groups of employees are advantaged through the work from home flexibility.  This means investing in making the physical workplace a healthy, vibrant, and rewarding place to work.  It’s also important to emphasize that working from home isn’t all roses given the longer working hours and difficulties in switching off.  Good work/life balance is much harder to achieve with remote work and, without some reasonable set of boundaries, there is risk of burn out and loss of innovation.  One CEO noted to me recently that, “the three hours spent commuting in and out of Cambridge each day may seem like a waste of time, but it does provide an important mental divider between work and home.”

Managing through the transition: returning to the office requires us to think through pressing issues such getting everyone vaccinated and ensuring a safe working environment.  It’s also important to note that we have hired a significant number of new team members during the pandemic that we have never met in person.  The usual get-to-know-you activities haven’t taken place so we will need to devote time to this when we reconvene.  Within HotSpot, we are planning corporate-wide events, but offsites are planned for individual functions with precisely this goal in mind.

Continue communication.  Many of us have gone out of our way to communicate effectively and broadly during COVID using a range of formats e.g. weekly all hands, daily “stand up” meetings, open hours with management team members and an increased frequency of one-on-ones.  Although informal communication is going to become easier as we spend more time together in person, there is no reason to give up on these formalized touch points that have served us so well during the pandemic. 

Setting clear expectations: As we transition to a new working model, it’s going to be especially important that expectations are clearly set and followed through by senior management.  Days that employees need to be on site must be crystal clear and senior management needs to live and breathe the same guidelines.  It would feel disingenuous, for example, for a hybrid model to exist on paper but then employees that take advantage of the work from home option to be disadvantaged in some way.

Workspace needs: given our rate of hiring during the pandemic, we have outgrown our current physical footprint.  As we look for new office/lab space in the Boston area, the requirements are different post pandemic, as illustrated by a recent analysis done by Margulies Perruzzi (Figure 4).  Given the likelihood that we adopt a flexible or balanced work model, the implications for space are significant.

In conclusion, I am excited about reinventing key aspects of how we work post pandemic but it’s clear that finding the right balance is going to take careful thought and likely some mistakes along the way.  I welcome feedback from those in the broader biopharma community on this topic as we all wrestle with similar issues.

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