Thursday, July 27, 2006

The fear of getting too big The relationship between size and innovation is explored by a recent Financial Times article by Christopher Bowe ("Growing pains: why 'big biotech' fears becoming a victim of its own success", 7/21/06). Bowe documents the fear of expanding biotech companies like Amgen and Genentech that they might grow into sluggish big pharma companies like Merck. He explains: As the notion of "big biotech" becomes a reality, the two companies are grappling with a raft of new dilemmas: how to remain nimble and entrepreneurial despite a burgeoning bureaucracy and how to preserve their reputation for cutting-edge science, resisting pressure to join mainstream companies in the race to develop blockbuster drugs that could prove vulnerable to generic substitutes. It's a matter of innovation in both science and the products that come from it. Ironically success and expansion of the efforts of the biotech companies look likely to make them ever slower on their feet; as the money involved goes up, so too does the innovation-crushing fear of making a big mistake. The article quotes one consultant as saying: 'What was once a cosy biopharma start-up with some great idea and some blockbuster product is suddenly dealing with scale and employee populations that are on a par with the rest of pharma. That will challenge some of the culture and dynamics that made these companies what they are. It's not that the companies' leaders are oblivious to the danger. The execs know the problem and are worried about playing it safe. They've seen the innovation dry up as Pfizer and Merck have gotten bigger and bigger with a quarter-to-quarter focus. Yet the growth imperative from restless stockholders makes them lose some of their focus on truly new products and turn to safer research, the kind that the big pharma companies tend to. How can they sustain double-digit growth rates by gambling as they used to. Amgen employs three times as many employees as it did in research five years ago. Gone is the early entrepreneurial spirit and, according to the article "investors worry that the growth will prove harder to sustain from such a high base and that bureaucracy could breed inertia." The approach for both companies has been to avoid the hierarchy of the big pharma companies and to foster risk-taking. They sponsor research leaves for senior staff and offer post-doctorate research fellowships. They also are trying to have science, not marketing, lead the way. Of course, both companies are doing very well at present. Should growth slip for a few quarters, management will be under pressure to act like every other company, shying away from basic research and pampering creative minds, and pursuing customers, with a desperate hope of making the next quarter's numbers. 8:14:47 PM

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