Biotech Startup Companies: How to Take on the Pharma Giants and Win

Dubbed the 'combination of money and molecules', Biotech is a famously hard sector in which to find and fund success. But research shows that small Biotech startups are now winning more drug approvals than their pharma giant counterparts. How has this happened, and how can others replicate their success?

Drug approval is a long and expensive process

The timeline for new drug approvals can be decades long, and the price tag for success runs into billions.

In 2019, the average cost of developing a new drug hit $2.3 billion (source Deloitte). Meanwhile, the average project length from preclinical testing to approval reached 15 years.

Biotech and Pharma companies both compete to bring new drugs to market. But research shows that, despite a recent downturn in fortunes, smaller, biotech firms are now responsible for the majority of new drug approvals in the US market.

In 2023, 57% of all new drugs approved in America originated at small companies

Source: The Economist

What's the difference between Biotech and Pharma companies?

Pharmaceutical companies focus on chemically synthesised drugs and tend to be larger, more established operations. Biotech companies, on the other hand, tend to be more entrepreneurial in their makeup, leveraging biological processes and innovation to create cutting-edge therapies faster. 

One consequence of the rise of smart biotechnology platforms has been a reduction in early phase and preclinical timeframes, allowing quicker screening of product candidates.

The recipe for Biotech success

Biotech companies can, therefore, be more agile in structure. Driven by ambitious and highly educated teams, they are often unencumbered by the rigid decision-making processes of pharma companies. 

The dynamic makeup of these companies often leads to remarkable innovation and success in drug development:

• 56% of newly appointed biotech CEOs are first-timers.
• 85% of biotech CEOs hold advanced degrees.
• 7% of biotech CEOs possess two doctorates.
• 77% of biotech firms employ fewer than 50 people.

Donald Drakeman, author of Breakthrough to Blockbuster: The Business of Biotechnology, attributes the impressive ability of small biotech companies to create novel and impactful medicines to this blend of skill and ambition. This advantage allows them to outperform larger pharmaceutical companies that have more lavish funding.

Fail-fast approach brings commercial flexibility

Embracing a 'fail-fast' approach to experimentation, says Drakeman, these teams can significantly reduce costs, accelerate innovation, and enhance the quality of drug development. 

"From 1998 to 2016, biotech firms developed 40% more FDA-approved 'priority' drugs than the entire pharmaceutical industry, while spending less than half as much," 

Source: Cambridge Judge Business School

But Biotech CEOs still face fierce odds against success 

• Only 10% of new drug candidates will become approved medicines
• Only 90% of publicly traded biotech firms are unprofitable at any given time

Source: NIH.gov, Factset, EvaluatePharma, BIO Industry Analysis

And both sectors face an equal amount of paperwork

Both Biotech and Pharma companies operate in the same life science sector and need to comply with the same regulations and quality standards. They both face a heavy (and time-consuming) burden of documentation to compile and submit before their drugs can be legally sold.

The challenge for 'biontrepeneurs'

Meanwhile, the ongoing management and strategic challenges for 'biontrepeneurs' are extreme:

•   Complex projects firing in multiple directions
•   Constant search and support for investors
•   Navigating budget uncertainty
•   High probability of failure
•   Large amounts of data to interpret and report on
•   Growing governance challenges

Funding is a constant headache

They may be at the cutting edge of research, but they still can operate on a shoe-string:

• 25% of biotech companies operate with less than a year's worth of cash
• A further 25% of biotech companies have less than two year's worth of cash

As 'the offspring of a marriage of convenience between science and money', CEOs can find it challenging to nurture these products to launch and beyond.

Listen to the voice of the angels!

From the other side of the fence comes the voice of the investor. They have an appetite for Biotech riches but a clear-eyed understanding that most projects are bound to fail and returns are always uncertain. One VC is quoted in 'Breakthrough to Blockbuster' as saying:

"Innovation generally is a bit whacky, and that implies a lot of risk. The chances are it won't work."

This can result in a drip feed of money to ensure losses can be minimised. Investors typically provide just enough capital for Biotech firms to reach the next milestone. The investor's goal is to quickly cut their losses in case of unsatisfactory results.

What does the CEO of a Biotech company need for success?

Against this backdrop, CEOs need extraordinary gifts of communication, organisation, resilience and creativity to convince investors and internal teams to keep the faith:

“Managing a development-stage, publicly traded company can feel like trying to play three-dimensional chess against multiple opponents, outdoors in an intermittent windstorm"

Source: Breakthrough to Blockbuster

What support do you need?

With extraordinary obstacles in their way, CEOs and their teams often put thoughts about governance and compliance on the back burner in the first few years of their existence. 

After all, clinical trials may be years away, and the struggle for final regulatory approval can seem a distant prospect.

But, as R&D generates exponential paperwork and investors clamour for more data around progress and potential, teams can quickly realise the need for document control and formal quality management.

What’s standing in the way of Biotech efficiency?

Often, the challenge of managing documentation can creep up on a small Biotech business – and then loudly announce itself. 

As different platforms are threaded together to create more frictionless collaboration, the seeds can be sown for issues with governance later down the line.

Here's how many Biotech companies can find a lack of formal document control affects their ability to maintain momentum when it matters most.

1. Fragmented systems

Without a single repository for accessing documentation and organisational knowledge, you risk delays in accessing important data and hours lost to productivity. Research conducted in the US by Panopto in 2018 suggests that many hours of every employee’s working week were spent waiting for information to be shared by others.  

“Employees spend 5.3 hours per week waiting for information. These delays have a major impact on project schedules — 66% will last up to a week, and 12% a month or more.”

Source: Panopto (from interviews with 1000 workers) 

Researchers also found that the difficulty of retrieving data and information is leading workers to duplicate tasks that have already been completed by others.  

“On average, employees reported spending nearly 6 hours each week 'reinventing the wheel' and duplicating other people's work.”

2. Lack of Standard Operating Procedures (SOPs)

As your team establishes ways of working and adds headcount, the need to establish SOPs to ensure quality and consistency becomes more obvious. Having digital tools to formalise workflows and approval sequences can accelerate the quality process while ensuring faster and more efficient knowledge sharing.

3. Communication breakdowns

Do you have records of approval sequences in your development process? Can you view audit histories and comments on different versions of the same document? Access to this information—knowing when, by whom, and why critical R&D decisions were made—streamlines and enhances transparency. It ensures all team members are on the same page, reducing misunderstandings and enabling more efficient and accountable workflows.

4. Reporting becomes harder

Requesting and collating data from disparate teams and individuals for sharing with the board and potential investors can be hard. Knowing where to find the most up-to-date information can be a challenge in a fragmented network of drives, apps and email accounts. You need to be able to seek comments on the same deck from multiple stakeholders in one place. You need to be able to compare data sets and documents fast. You need a single document management system that is a secure, single source of business truth.

5. Training requirements

As teams grow, you need to know who has seen what and when. Consistent onboarding and knowledge sharing can be notoriously difficult. Research suggests over 50 actions that need to take place during an onboarding process. Do you have the data on hand to show these have happened? Do you have data showing that existing staff have seen important regulatory updates and received the right job training?

These are the kinds of governance and compliance timebombs you may be storing up without a digital, quality management framework.

Why compliance shouldn't be an afterthought

A lack of control over documentation can be a particular problem in the early phases of your Biotech project.  

After all, at this stage, your documents are your assets. They help you record and evidence your development activity and, ultimately, keep investment flowing into your business. You need to store them safely and marshall them to streamline your operations and reach your milestones with the minimum of stress.  

Manage them carefully with the right digital tools and these documents can become the foundation of your formal QMS (Quality Management System), with all the levers you need to:

• Control approval sequences
• Manage revision history
• Stage gate your QbD (Quality by Design) process
• Impose ALCOA+ principles to your document handling

In supporting this level of document control, they can become the foundation and repository for all your future FDA submission documentation.

The good news is that these tools don't have to be the clunky, prescriptive digital systems that are used by (and slow down) your pharmaceutical rivals. 

Flexible LEAN eQMS systems on the market can help you structure your process from the very start of your project without slowing you down.