The First Time Biotech CEO: A High-Wire Act

THE COWEN INSIGHT

Extensive interviews with biotech CEOs, boards, C-suite execs, VCs, and investors yielded advice for first-time CEOs. Key drivers of success include planning for success but preparing for failure, having a versatile, dual-tracked strategy, building pipeline optionality, focusing on execution and having a deep leadership team with strong mentorship from the board.

CEOs Should Plan for Success but Prepare for Failure – Develop A Dual-Tracked Business Strategy

Our conversations with successful biotech CEOs emphasized the importance of developing a clear strategy that dual tracks the future. Plans should emphasize optionality around key data readouts or technology-validating gates and appropriately mitigating risk in the pipeline. Mike Tyson once said that “everyone has a plan until they get hit.” Planning for success while having a backup plan can spell the difference between success and failure. It also boosts the confidence of the board, employees and investors.

Strategy Should Focus on Execution and Hold Team Accountable – Be Eyes-On And Hands-Off

A key element of strategy should focus on execution and on a commitment to holding the leadership team accountable against milestones. Successful CEOs advise rookie CEOs to stop doing what made them successful in the first place. The CEO is a coach who does not need to be a domain expert. Instead, the CEO needs to be eyes-on and hands-off, thereby letting the leadership team thrive. That said, eyes-on means the CEO should be very close to the science and data, understand what the challenges are, and make their own assessment of the merits of their programs.

Risk-Mitigate The Pipeline

The overall risk profile can be balanced by:

  1. Building a deep pipeline 
  2. Have at least 2-3 assets with differently sized commercial opportunities
  3. In different therapeutic indications

Be Nimble

The importance of having a clear plan to execute was echoed loudly. However, CEOs should be wary of fostering a culture of paralysis by analysis. Opportunity can beat strategy. Having the ability to be nimble and jump when opportunity arises could also boost the chance for success.

CEO Needs To Focus On Value Creation – Emphasize Market-Disrupting vs Market-Making Drugs

CEOs must have a sophisticated grasp of what drives value in biotech companies. Value creation is an art and not science. This involves a deep understanding of the future competitive landscapes and having a keen strategic eye. Prioritizing market-disrupting drugs can yield the highest returns but with the highest risks. Less differentiated market-making drugs should be geared to less competitive market segments.

Raise Money When You Can And Not When You Want To

Our conversations also emphasized the importance of having a clear financing plan that is not tied to a single data readout. Instead, having flexibility and planning several trigger points for financing should smooth out the pitfalls of negative results. The key rule is to raise capital when you can and not just when you want to.

Successful CEOs Have Humility, Listen, Learn and Lead

At the outset, new CEOs, especially first-time CEOs, are rarely able to grasp the full extent of what they do not know. Thus, understanding your own strengths and identifying gaps knowledge or resources are indispensable. We argue that this requires adaptability and the capacity to absorb, reflect, and evolve in real-time.

Successful CEOs emphasize that it is critical to have 2-3 key C-suite executives early on that are aligned with their vision but will not necessarily defer judgment or support every decision. Building a team that can challenge assumptions and engage in respectful, open debate can spell the difference between success and failure in biotech

The CEO must understand that most information flowing up to them is heavily filtered and not always as transparent as is needed. Thus, a successful CEO should maintain a strong internal network of truth tellers to reliably field differing viewpoints.

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