New England PharmAssociates

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Virtually Real Biotech

In my last post, I mentioned pros and cons of both virtual and traditional biotech business models, mostly using the words of panelists in the 2012 MassBio Annual Meeting panel on this subject. I also suggested that virtual biotech is quite real – outsourcing life sciences R&D has become increasingly common, with a variety of vendor options. It is unfortunate though that entrepreneurs often believe outsourcing to a lab more than 10 time zones away is the only option – or even a good option. Inexpensive FTE rates can be attractive, but for a research-driven business to succeed, leadership has to take a holistic view of operational needs, and contract FTE cost is only one component.

Choose vendors carefully; as though your business depended on it

Selecting contracted research requires a clear understanding of timeline and quality expectations and honest assessment of internal capabilities and aptitudes, both scientific and managerial. Then, due diligence to assess contractor quality capabilities, reliability and responsiveness is essential. There is sufficient uncertainty in research without layering on an incapable contract lab. Price should be the last consideration, compatibility is assured. It’s also important to factor in all costs – a start-up can’t benefit from shifting costs to another cost center…when there isn’t one.

Big companies are not the same as start-ups

It is important to consider the costs beyond FTE rates – they’re not really hidden. Since the turn of the century, well funded companies, have fueled expansion of R&D centers in Asia. However, it is important to recognize that these companies have also spent considerable capital on frequent travel, complex project logistics, and many have resorted to constructing ‘offshore’ research facilities, often staffed with expertise imported from the US or Europe. Productive working relationships certainly have been created across geographic boundaries, and I have had the pleasure of participating in excellent long-distance collaborations over the years. However, creating truly productive research teams across multiple time zones and cultural boundaries is challenging and often cost-prohibitively expensive.

And sometimes you just need a lab

Often, biotech start-ups are formed around technology or science that can’t be outsourced. The good news here is that incubator facilities, with a wide variety of start-up benefits and price points, are becoming an important part of most biotech ecosystems. For example, in eastern MA, life sciences incubators include North Shore InnoVentures, the BU Business Incubator Program, and the UMass Venture Development Center.

By: roger.frechette