So long, and thanks for all the value creation

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Article Highlights

  • Biotech transactions are driven almost entirely by the products, not the people

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  • What is perceived to drive success in biopharma is not exceptional employees, but capable employees led by a very savvy CEO

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As Fierce Biotech’s John Carroll points out today, the first question on the mind of most Onyx employees following the just-announced acquisition by Amgen  is “Will I have a job when the dust settles?”

These employees are worried for a good reason.  Onyx’s main attraction to Amgen lay in its marketed products,” Carroll notes.  Onyx employees — probably not so much.

This seems to be universally true in biotech transactions – they are driven almost entirely by the products, not the people – in marked contrast, perhaps, to the tech industry, where “acqui-hires” are common.  Small tech companies — generally young startups, often with no real products — are routinely taken out for the talent.

You have to wonder what this says about how value is created in biopharma – or at least, how value creation is perceived.

In tech, star talent – like Aza Raskin, say, formerly of MassiveHealth, currently at Jawbone – is aggressively pursued because of the perception he, personally, can create exceptional value at whatever company manages to attract him.

If this were true in biotech, then after an acquisition, there would be a concerted effort to retain employees, with the view that they could replicate their success, and continue to create value for the new parent company.  This generally is not the case.

The perception, at least, is that biotech is different than tech.  Even a superstar biologist, chemist, clinical developer, or marketer doesn’t seem as likely to drive biotech success in the way Raskin can at a tech company.  Perhaps the amount of contingency in the entire drug development process seems to overwhelm the potential contribution of any one person.

Of course, everyone recognizes that mediocrity in any given biotech function reduces your chances of success dramatically; the issue here is that even if you optimize each function, there’s still a tremendous degree of perceived uncertainty.

The one exception to this trend may be at the CEO level, where repeated successes have generated, in some instances (e.g. Christoph Westphal) a very high degree of confidence.   Interestingly, however, this confidence generally is not in the ability of this person to successfully discover or create a particular drug , but rather to effectively manage the process: raise money, adroitly pivot, move to the left, slide to right, detect a seam, opportunistically lurch towards a sliver of an opening, and ultimately achieve a successful exit.

If true, this would suggest that what is perceived to drive success in biopharma is not, in fact, exceptional employees, but rather capable employees led by a very savvy CEO who is skillful at playing a very difficult game.

In this view, Onyx’s successful creation of value would be fundamentally attributed to CEO Tony Coles, and the decisions he made along the way.  There’s likely more investor confidence in his ability to replicate his efforts and create value again in the future than there is in the ability of almost anyone else at Onyx to do the same.

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