Critical Success Factors in Biopharmaceutical Business Success Factors in Biopharmaceutical Business...

download Critical Success Factors in Biopharmaceutical Business Success Factors in Biopharmaceutical Business ... Critical Success Factors in Biopharmaceutical Business: ... company developing

of 24

  • date post

  • Category


  • view

  • download


Embed Size (px)

Transcript of Critical Success Factors in Biopharmaceutical Business Success Factors in Biopharmaceutical Business...

  • Critical Success Factors inBiopharmaceutical BusinessA Comparison Between Finnish and Californian Businesses

    Tanja Rautiainen

    Technology Review 113/2001

  • Critical Success Factorsin Biopharmaceutical Business:

    A Comparison Between Finnish andCalifornian Businesses

    Technology Review 113/2001Helsinki 2001

  • Tekes your contact for Finnish technology

    Tekes, the National Technology Agency of Finland, is the main financing or-ganisation for applied and industrial R&D in Finland. Funding is granted fromthe state budget.

    Tekes primary objective is to promote the competitiveness of Finnish indus-try and the service sector by technological means. Activities aim to diversifyproduction structures, increase productivity and exports, and create a foun-dation for employment and social well-being. Tekes supports applied andindustrial R&D in Finland to the extent of some EUR 390 million, annually.The Tekes network in Finland and overseas offers excellent channels for co-operation with Finnish companies, universities and research institutes.

    Technology programmes part of the innovation chain

    The technology programmes for developing innovative products and pro-cesses are an essential part of the Finnish innovation system. Theseprogrammes have proved to be an effective form of cooperation and net-working for companies and the research sector. Technology programmespromote development in specific sectors of technology or industry, and theresults of the research work are passed on to business systematically. Theprogrammes also serve as excellent frameworks for international R&D co-operation. Currently, a total of about 50 extensive national technologyprogrammes are under way.

    ISSN 1239-758XISBN 952-457-042-4

    Cover: LM&COPage layout: DTPage Oy

    Printers: Paino-Center Oy, 2001

  • Foreword

    This paper is based on the authors Masters thesis Critical Success Factors in BiopharmaceuticalBusiness: Finland vs. California published in 2000. Since the thesis is written in an academic formand comprises of a total of over hundred pages, this second version was written for a lighter, moreenjoyable reading experience.

    I would like to thank Tekes, especially Solveig Nylund and Jari Kauppila for extending this greatopportunity to me to study the biopharmaceutical business in Finland and California. Specialthanks go to all the 25 interviewees who remain anonymous throughout the study.

    I have been impressed by the high quality of biotechnology research and the effectiveness of thebusiness environment in Finland. I hope that this study brings new valuable information to all itsreaders, and I also hope to contribute to the strengthening of the industry in the coming years.

    Helsinki, May 2001

    Tanja Rautiainen

  • Contents


    1 Introduction 1

    2 Critical Success Factors 52.1 Human Resources 5

    2.1.1 Commitment 62.1.2 Entrepreneurism 62.1.3 Teamworking Skills 62.1.4 Management Skills 7

    2.2 Products 72.2.1 Number of Products 72.2.2 Strong Technology Platform 72.2.3 Unmet Needs 82.2.4 Early Marketing 8

    2.3 Networking 82.3.1 Academia 92.3.2 Big Pharma 92.3.3 Foreign Partners 9

    2.4 Company Climate 102.5 Clustering 10

    2.5.1 Labor Pools 112.5.2 Knowledge Spillovers 112.5.3 Specialized Services 11

    2.6 General Infrastructure 112.7 National Policies 12

    2.7.1 Government Funding 122.7.2 Government Support for Start-ups 122.7.3 Tax Reductions 13

    3 Pharmaceutical R&D Industry in Finland and California 153.1 Finland: Strengths and Weaknesses 153.2 California: Strengths and Weaknesses 163.3 Pharmaceutical R&D Industry in Finland 16

    3.3.1 Development of the Industry 163.4 Pharmaceutical R&D Industry in California 17

    3.4.1 Development of the Industry 18

    4 Conclusions 19

    References 21

    Technology Reviews from Tekes 23

  • 1 Introduction

    Most biopharmaceutical companies today are in their de-velopment stage by all measures. Hardly any of them aremaking a profit, but are nevertheless in a capital spendingrace to build superior technology platforms, capture first-mover advantage, and accumulate intellectual property(IP) rights. They are all facing long product developmentcycles and years of business development before, if at all,becoming sustainable operating companies. However,some of the biopharmaceutical companies of today will be-come the Amgens or Genentechs of tomorrow.

    The business angels, venture capitalists, equity analysts,and business managers are all asking the same questions:Which companies will succeed? What are the signs of suc-cess? Many biopharmaceutical success stories have origi-nated from California, where biotechnological research hasbeen actively turned into business since the early 1980s.Generally, Europe has lagged behind the USA, and nowEuropean newcomers are facing a tough challenge; the in-ternational market for biotech products is already very con-solidated, and the entry barrier is much higher today thanwhen the American biopharmaceutical business was in itsinfancy. The newcomers must conquer their niches strate-gically.

    Critical success factors (CSFs) for a product developmentcompany have been a popular research topic among econo-mists for the past two decades. Most of the research is fo-

    cused on information technology (IT) companies or prod-uct development processes in general, and biopharma-ceutical companies have very seldom been studied as a ho-mogenous group.

    The aim of the present study was to determine those CSFsthat are specific for biopharmaceutical companies. First, anextensive literature review was conducted to find the majorCSFs and to form a hypothesis. Seven CSF groups wereidentified, and the hypothesis was then tested for bio-pharmaceutical companies by interviewing 25 industry ex-perts with a technique referred to as theme interview.While 15 of the total 25 interviewees were Finnish, 10 ofthe interviewees were Californians. This led to an interest-ing setting Finland as the worlds mobile IT forerunnerand a biotechnology challenger vs. California, the birth-place of modern hi-tech business and the indisputable num-ber-one biobusiness hotbed in the world.

    The CSFs were thus also used to compare the Finnish andCalifornian biopharmaceutical businesses (see Figure 1):what seemed to be critical in California was not necessarilyconsidered critical in Finland and vice versa. Most CSFdifferences found could easily be explained by differencesin the infrastructure and business culture of these two geo-graphically distant areas. And the differences are very im-portant to remember when planning overseas business op-erations.





    Critical Success Factors

    Differencesbetween Finnishand Californianbiopharmaceuticalbusinesses

    Figure 1. The question setting of the present study.

  • Pharmaceuticals are a USD300 billion business. The man-ufacturing and marketing of drugs are well covered bylarge pharmaceutical companies, the big pharmas. Mostbig pharmas today were restructured during the late 1980sas the result of a strong consolidation trend in the industry.The consolidation generated ever fewer and larger compa-nies, which eventually became too large to fill their ownproduct pipelines. This in turn led to the emergence of anew, fast-growing industry sector in the 1990s: the phar-maceutical R&D industry.

    At the core of the pharmaceutical R&D industry are thebiopharmaceutical companies: small to medium-sizedcompanies (SMEs) focusing on the development of new in-novative drugs, using modern biotechnology as a tool. Thebiopharmaceutical companies operate in close cooperationwith academic research, directing the research from the labtoward a clinically approved drug. At some point in the tri-als, the product is often licensed to a big pharma. In addi-tion to the pharmaceutical industry consolidation creating amarket for these companies, the advances in biotechnologyoffered them a technology push.

    The terminology used in the pharmaceutical R&D industryis relatively young. In some 25 years of its existence, theindustry has grown from a coup