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.

The post A CEO’s Perspective on Navigating Choppy Market Waters appeared first on HotSpot Therapeutics.

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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In this blog, I want to reflect on some of the learnings that I have had during this time. Moreover, with so many companies in our industry run by individuals with advanced science degrees, I frequently get asked what role “business types” like myself can or should play in the leadership of science-driven enterprises.  My journey is specific to me but I see commonalities with others with business backgrounds who have followed a similar path and are leading high science companies — Sam Truex (CEO, Quench Bio), Jeb Keiper (CEO, Nimbus Therapeutics) and Ron Renaud (CEO Translate Bio) to name a few. 

For business types that are too busy read this blog, I conclude the following:

• Aligning scientific and business goals is critical and not a given in many organizations
• In a business as complex as pharmaceutical R&D, broad functional experience is invaluable and enables you to ask the right questions even if you are not a content expert
• Early innovation can’t be simplified down to a number in a spreadsheet and the path to value will undoubtedly have many twists and turns. As a businessperson, it’s critical to work with outstanding scientists that have a bold vision
• Your most valuable currency is your time so have the intellectual honesty to do the thesis bearing experiment early
• Value creation takes time in this industry so enjoy the ride and stick with it long enough to derive the learnings from the decisions you made some time ago
• The big picture perspective provides a source of leadership during good and bad times
• This business is really hard. Humility is essential

First, I should disclose that I have scientific training but transitioned to the dark (business) side shortly after completing a degree in Chemistry at Oxford University.  Midway through my Masters, I became increasingly disillusioned with day to day lab work and decided it was time to make a change.  I realized that I simply didn’t have the meticulous attention to little detail required to succeed at bench research.  

In January 2000, right at the start of the new millennium, I took a job at the Boston Consulting Group (BCG) serving clients across industries but I admit that didn’t feel a connection to the work outside Pharma. Truth be told, I wasn’t a great consultant.  I recall a close colleague of mine at BCG explaining how he would wake up in the early hours of the morning in a deep sweat, stressing about his client’s problems.  In contrast, I never lost any sleep thinking about how to sell more tractors or how a major oil company could offer dog-walking services … although I do shed a tear for those crazy dot com days!

That all changed as I went to work for a former BCG partner, Craig Wheeler, who was heading up the BioPharma division at Chiron, with a dotted line to Bryan Walser, Vice President of Strategy.  I served as a general dogsbody, taking on projects across manufacturing, marketing, business development and research. I had found my calling and my passion at the intersection of science and business – turning great science into products that make a difference in people’s lives. It was then that I recognized the value of bridging science with business.  Science that is not directed toward a market need will not see commercial success; and a business strategy unsupported by scientific reality will fail. As a businessperson with a passion for science, I could be that bridge.  

Working for a fully-integrated Big Biotech allowed me to appreciate the awesome complexity involved in drug R&D.  Planning manufacturing campaigns in a multi-use facility is a mind-blowingly complex game of Tetris involving millions of dollars at every move.  While I was seemingly taking a random walk through different functional roles in biotech, this experience was building my pattern recognition repertoire in the same way that a research scientist develops an intuitive feel for different biologies or chemistries.  This led me to put value on broad experience across the value chain.   Beadth of functional experience helps reduce the number of “unknown unknowns”, to quote Donald Rumsfeld, and the likelihood of issues appearing out of the blue .  As we make IND-enabling decisions at HotSpot, I am not the expert but I know what questions need to be asked.  Or as my former Operations professor noted, “you know enough to be dangerous.”

Following business school, I was recruited into a four-person team responsible for the launch of two recently in-licensed antimicrobial products at Johnson & Johnson.  One day, I was sitting contemplating the beautifully manicured corporate gardens outside our Ortho McNeil facility in New Jersey, when I received an offer to join a new biotech company called Concert Pharmaceuticals. The team and investors were stellar. The question at the time was whether I was going to leave the salary, benefits and comfortable life at J&J to take up an uncertain position at a biotech that no one had heard of, “unencumbered” by real data but nonetheless full of promise.  My analytical brain was sounding alarm bells since net present value (NPV) analysis was overwhelmingly negative and completely uninformative.  What swayed me ultimately was that this was my ticket to join the biotech “glitterati” in Boston and learn from legendary Vertex drug hunter, Roger Tung, and deal maker Rich Aldrich.  I had read the Billion Dollar Molecule and, like a groupie getting to hang out with Axl Rose, I was in my element.

At Concert Pharmaceuticals, we went on to build a pipeline, progress multiple programs into the clinic, raise a lot of capital and do a series of interesting deals. I couldn’t have imagined any of this as Roger, Nancy Stuart and I shared the tiny Regus office in Burlington on my first day.   The lesson for me was the importance of working with world class scientists that have a bold visionwhile recognizing that the path to value may have a lot of twists and turns.  As Sheryl Sandberg noted, “If you’re offered a seat on a rocket ship, don’t ask what seat. Just get on.”  

My next lucky break came in 2008 in the midst of the recession with a meeting with Bruce Booth at Atlas Venture who paired me with Rosana Kapeller and Gerry Harriman to shape an embryonic Nimbus Therapeutics.  Like other Atlas companies, Nimbus embodies the Atlas philosophy of grounding companies with the highest quality science while being unafraid to do the thesis bearing experiment. This has resulted in successful failures because management focused on unearthing scientific truth rather than prolonging the financing merry-go-round.  This type of intellectual rigor and efficiency strongly resonates with me because I believe that our most valuable currency is our time.  It is critical for me that I am investing this valuable resource in activities that have the highest likelihood of leading to a new medicine. This is where the business mindset can be important: while I appreciate cool science more than most, if we aren’t progressing towards data that can help the business make decisions, we aren’t making the right investments.

Creating value in this industry takes a long time and this means there can be a long “incubation period” between decision and demonstrable impact.   A project decision early in a company’s life can have dramatic, unforeseen consequences 5 years later.  Despite the up and to the right value curve often portrayed, and the “we knew it all along” post hoc rationalization, every biotech company goes through ups and downs. Dealing with adversity is the best teacher as we found when raising Nimbus’ Series A during the depressed financial markets in 2010.  Sticking through the tough times to gain those learnings is something that’s happening far less in this overheated job market.  If a company has even the slightest hiccup, business executives are soon loose in the saddle and are lured away to another company.  This prevents the critical learning cycle between decision and effect that allows a business leader to learn from mistakes. I admit my personal motivations and biases are strongly apparent here.  There’s certainly a lot of money to be made by making career decisions like a stock picker: work for the next company to go IPO and then leave to go to the next.  However, you are never going to learn the true skills of leadership, entrepreneurship and company-building.

As business leaders, we are constantly painting a vision that looks far out into the future.  We need to excite investors to give us money, hire team members to be part of the journey, and recruit patients to try our experimental medicines.  As an industry of storytellers, we are constantly riding waves of the hype cycle.  I have experienced a number of big waves during my first 20 years in the biopharma industry where everything seemed possible: the genomics and combi chem revolutions of the late nineties; the explosion of RNAi and CRISPR; and, more recently, the rise of machine learning.  Biotech has also experienced times when the market is oversold.  Following the financial crisis in 2008, relatively few investors were interested in buying into speculative drug discovery enterprises. There was an unmistakable sky-is-falling feeling at that year’s JP Morgan conference.  

But, looking back, it’s clear that the unbridled optimism never really fully played out and getting to real products took at least a decade longer than anyone expected. Similarly, the lows weren’t as bad as we thought and the leadership teams that focused on innovation delivered incredible value, and even took advantage of less competitive labor and real-estate markets.  Riding the wave takes the dexterity of a Californian surfer: leveraging investor excitement to raise capital at good valuations while keeping a close eye on where the wave is going to crash.  As business leaders, we have an important role to play in providing the big picture perspective, stepping back to give the right context for investors, employees and partners.

In closing, the business of Biopharma research and development is hard.  It’s crazy expensive and risky.  We are constantly surprised by Nature’s complexity and how the sure thing turns out to be infinitely more complex than previously thought.  While the stereotypical image of the businessperson is the Wolf of Wallstreet, over confidence has absolutely no place in biotech and it likely underpins an incomplete understanding of what’s really going on.  Humility in the face of this challenge is essential.  After all, we are doing something that humankind has never done before. We are pushing scientific boundaries and, despite all the odds, delivering new drugs to market.  Each drug takes a village to invent, develop and market so we can celebrate the contributions made by both our business and science colleagues.  There’s no other job I’d rather have and I am honored to work alongside some of the best in the business.

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