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EDITORIALS

The Arcus Vision

What Biotech Companies Can Learn from Consumer Tech Outliers

By Jennifer Jarrett   |   Chief Operating Officer at Arcus Biosciences

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Analysts are already attempting to look beyond the bear market in biotech and are pointing out that strong fundamentals will likely steer the industry through this period of stock declines, delayed IPOs, layoffs and valuation cuts. Biotech has weathered tough markets before, and the prognosis is that it will do so again.

But even when the market rebounds, lawmakers will still wrangle over the high prices that keep too many drugs out of reach for too many people. Startups will still face a growing pack of rivals in a space where being first-to-market is no longer enough. Development timelines will still stretch for years or even decades. Budgets will still be strained—some past the breaking point.

Long after the rest of Silicon Valley gets back to moving fast and breaking things, biotech startups will still be moving at a halting pace. And patients will still be waiting for the treatments they need.

To thrive after the current downturn, and to best serve patients, biotech companies should take a page from the book of consumer tech startups. These businesses have proven that failing fast—and repeatedly—can lead to massive success.

Biotech companies don’t think the same way, but they should. They can make headway on problems that have plagued the industry for years. They can get more therapies into the hands of the patients who need them and with less anguish along the way.

With some fundamental changes to the traditional mindset, biotech companies can fail faster on the road to success—or better yet, not fail at all.

Lean Startup Mentality

Venture capitalists working in consumer tech and other sectors tell their portfolio companies to focus on unit economics, make their funding last and mind their burn rate. They give emerging companies the skills they need to survive a long winter, if necessary.

But in biotech, startups are seldom incentivized by investors to be efficient, especially during their clinical work. A new drug can cost $1 billion to go from the laboratory to the pharmacy shelf, and companies often want to take multiple shots on goal. This is exactly what many are encouraged to do.

With some fundamental changes to the traditional mindset, biotech companies can fail faster on the road to success—or better yet, not fail at all.

These are the types of costs that are put under a microscope during bear markets, when investors ask themselves how long they have to wait and how much they are willing to invest. As some biotech investors know only too well, a drug failing in Phase II or Phase III trials means fortunes going down the drain.

To take a page from the book of lean startups, biotech companies should invest more in the translational tools that can inform their clinical roadmap, giving them valuable insights on their drug candidates before they reach human trials. Translational tools can help companies decide which compounds should reach the clinic and which should not, and which indications are most likely to be successful.

This means investors—and eventually patients—will no longer subsidize multiple unsuccessful attempts. The right tools can weed out those most likely to falter. While there is no immediate payout for investments like these, the ROI for the industry and patients can be enormous.

Clinical work can also be more efficient. Any trial that can achieve a strong signal from 30 patients does not need to be a 500-patient trial. Smaller, more decentralized trials can take place across the country, which would be more convenient for patients and less costly for sponsors.

Changes like these will mean clinical-stage companies can learn much faster in scenarios where failure is unavoidable. In other cases, they won’t have to fail at all.

The Ecosystem Approach

There’s a reason tech giants like Google, Apple and Amazon have made significant moves into healthcare: there is a big opening for them. The ecosystem approach that these companies pioneered are a hit with consumers, and healthcare has lacked a similar approach.

A device like the iPhone sits at the center of a network of services that make day-to-day life more convenient and easier to manage. Social connections, payment functionality and connectivity with banks, retailers and healthcare providers are all accessible in one place.

Just as the iPhone sits at the center of a network of services, a new medicine can be one component of the overall patient experience. And biotech companies can be creators of other aspects of the experience:

  • Monitoring the patient before and after they begin a course of treatment
  • Offering tools so that patients have a better understanding of the treatment
  • Tracking side effects
  • Integrating with digital pathology tools, electronic health records and diagnostics
  • Offering prevention techniques and programs to boost wellness
  • Helping patients stay connected to providers and healthcare teams
Not every company is in a position to build out a full ecosystem, but this is the mindset biotech startups should adopt.

These are just a few of the components that can make up an ecosystem that surrounds the medicine and surrounds each patient. Not every company is in a position to build out a full ecosystem, but this is the mindset biotech startups should adopt. How can a product sit at the center of a larger experience for people? This is the kind of question Google, Apple or Amazon asks, and that’s why they have made impressive inroads in an industry that has traditionally been siloed. It’s the kind of question biotech startups need to start asking.

The biotech bear market is likely to end, as other tough periods in the market always have. There are brighter days ahead for innovators and the investors who back them.

But to ensure those brighter days will extend to the patients who are waiting, biotech companies need to learn a few things from consumer tech outliers. Since the plentiful capital they enjoyed in the past may be harder to come by, companies will need to move quickly and lose the fear of failure.

They will need to fail faster, or never fail in the first place.

Jennifer Jarrett spent nearly 20 years in investment banking before transitioning “in house” where she has held senior-level positions and board seats in biotech and at a large consumer tech company.

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