How Biotech Is Getting It Right

Biotech is a standout sector in The Art of Smart data. What can other industries learn from its success?


Biotech is a standout sector in The Art of Smart data. Not only is it the most prominent subsector in healthcare, but in the entire index. It also dominates the growth rankings: 11 of the top 20 companies ranked by overall growth (across all industries) are healthcare companies headquartered in the United States — and of those, eight are in biotech.

That’s surely no coincidence, but why is this? What commonalities can be observed in the decisions behind this success? And what, if anything, can businesses in other sectors learn from the Biotech example?

Investing in innovation

Investment in research and development (R&D) is a major factor with record amounts of private funding flowing into biotech last year1, although given the high costs involved in getting products to market, some commentators argue that even more is required to fully exploit its potential.

This is a sector that is continuously having to adapt: unlike in many other verticals, in Biotech (and pharmaceuticals generally) exclusivity [of patents and other intellectual property] is known to disappear in time. Businesses are perhaps better placed to anticipate the death of certain income streams in the future and innovation is built in accordingly. This long-term view requires significant upfront investment.

Thankfully, market dynamics are attractive, given the world’s growing and ageing population, but what investors are really backing is innovation that will lead to important advances and solve problems.

Pam Hrubey, Managing Director of Crowe LLP Consulting Group, explains that in this sector, attracting investment is about identifying an unmet need or developing next-generation processes. In healthcare, that could mean focusing on “orphan” (extremely rare) diseases, as Seattle Genetics (ranked 18th overall) is doing, or improving patient care, as with Stryker’s (ranked 54th overall) focus on improving patient outcomes in back pain–related procedures, knee replacements and even stroke-related treatments.

Andrew Hessel, CEO of Humane Genomics, a developer of virus-based therapies for cancer, and founding faculty of the bioinformatics and biotech track at Silicon’s Valley’s Singularity University, makes a similar point regarding investment in biotech in food production. For example, as the earth’s ecosystem comes under increasing pressure to provide for changing demographics, the drive to find alternatives to meat via synthetic processes that create vegan “meat” products and to deliver more efficient and environmentally friendly farming practices is becoming intense.

As in other industries, highly specialized ideas for cutting-edge products and techniques that improve quality of life or user experience, and the ability to capitalize on them, are as important as the macro trends shaping the market itself.

Investment may be a key to unlock success, but it takes smart decisions to secure it, particularly in a highly regulated environment where scrutiny is stringent and several stages of support may be needed over a decade or more to allow for clinical trials before treatments get to market. Having a robust communications strategy right from the start is vital, both to navigate regulatory requirements, and to help companies make a strong case so they can attract the funding (or acquirer) they are looking for. For example, if a company can demonstrate that its team has the right capabilities and dynamics to deliver an innovation successfully, investors will have confidence even at an early stage. Clearly, this translates into other sectors too.

Technology — a decisive factor?

As the name suggests, technology can be a success factor for some biotech companies, but in this sector, it’s often the way that technology is deployed that matters most. Mindy Herman, Principal and Life Sciences Consulting Leader at Crowe LLP, makes the point that in the main, these are research-focused businesses that use tech tools to support and facilitate their work, rather than being tech-focused2.

That’s not to say that tech is not transformative. Robotics is set to revolutionize labs, and pharma companies will increasingly seek to leverage the power of artificial intelligence (AI) to deliver new ideas, for instance, by scanning their libraries to identify new drug candidates.

Andrew Hessel adds that the tech tools available as the industry digitizes are becoming much more powerful, easily accessible and far faster, so that processes can be rapidly accelerated, and startups can leapfrog more established rivals in a way that would not previously have been possible. What’s more: “This growing base of tools is opening up more and more possibilities for the development of new medicines and other biotech applications. It’s a feedback loop.”

Of course, something similar is happening across many industries to a greater or lesser degree. Perhaps what companies in other sectors can take from biotech’s example is the extent to which technology can be an enabler for efficiency gains and for opening up new avenues for exploration. In the future, Hessel believes, as biotech becomes increasingly digitized, the opportunity to capitalize on an even more diverse range of potential applications — for instance, in areas such as building materials or textiles — will continue to grow, inspiring a new wave of advances.

Technology is changing the processes of biotech companies. Thanks to digital tools, I think the industry is going to see even more innovation and new competition coming
Andrew Hessel

Diversity and a new approach to processes

This report has already discussed various aspects of diversity and its link to performance. In the specific context of Biotech, diversity of thought is critical to success, and the industry has long sought to bring together the brightest brains from around the world across various scientific, medical and other technical disciplines. Today, this approach has evolved, so that problems are tackled from multiple perspectives at once (e.g., organic chemists, physicians and regulatory scientists together) and, crucially, teams can look at the entirety of a problem in parallel (rather than in sequence).

Working in parallel may be more expensive in the short-term, but it also saves time, so that products can be brought to market faster and profit can be returned to shareholders far earlier in the patent lifecycle. As efficiency gains remain a high priority for businesses of all types, the benefits and feasibility of such tactics may be worth considering more widely. 

Moving from serial processes to parallel processes is key to successful innovation in the biotech sector. It requires enormous boldness and bravery, but the payoff can be huge.
Pam Hrubey

Smart partnering 

Businesses in many industries are seeing the advantages of partnering with complementary businesses to innovate and create competitive advantage, with partnerships between automotive manufacturers and tech companies being a prime example. What’s different in biotech is that partnerships often focus on spotting and exploiting synergies with rivals so that progress can be made more quickly and to increase the chances of success.

This collaborative approach between biotech companies allows them to continue to focus on what they each do well, while maximizing their chances of finding a product, getting it through testing and approval, and building their product portfolios. Irish pharma company Allergan’s (ranked 14th overall) partnerships with several other companies in recent years, from a clinical data provider3 to a startup therapeutics biotechnology company4, among others, are cases in point. These have helped enable Allergan to become an attractive acquisition target itself, for US biopharmaceutical company AbbVie (ranked 56th overall).

Such partnerships can take many forms, but to make them work clearly requires robust intellectual property (IP) protections. Biotechs have become adept at crafting well-defined processes and milestones into partnership agreements so that they are mutually beneficial and the rewards outweigh the risks on both sides.

Companies that can manage antitrust concerns may find that their biggest competitor can actually bring them major business benefits. And it’s not just the big fish who win. Done well, it’s something businesses in other industries could learn from biotech.
Mindy Herman

Crowe Art of Smart 2019 Biotech Top Companies

Key points to consider

In a sector so synonymous with innovation, what stands out is that ground-breaking ideas are not simply focused on the end result: biotechs are pioneering creative ways to arrive at those outcomes too. Driven by a desire to find cutting-edge solutions to human problems and a need to continuously look for new revenue streams, they are harnessing appetite for investment to its fullest potential, deploying sophisticated tech tools in a transformative way, and re-writing the rule-book on processes and partnerships. All smart factors that could resonate with any business large or small, new or established, in any sector, anywhere.

Why are US biotechs so dominant?

While most biotech/pharma companies have business strategies aimed at global markets, it’s very common for them to be headquartered in the United States, and to derive a large proportion of their turnover from there, which is why they are so dominant in The Crowe 100 Decision-Making Index. Partly, this is due to a receptive political system, as well as to a culture of openness to new ideas and innovation: With the US government being a major spender thanks to Medicare and Medicaid, a large, entrepreneurial health-related infrastructure has developed, supported by large amounts of venture and corporate capital. However, other major centers of “spend” include European countries such as Switzerland, the UK, Germany, France, The Netherlands, Italy, Spain and, increasingly, eastern European EU member states like Poland.
2However, the Crowe Art of Smart Index does include some innovative tech-focused examples, such as Veeva Systems, which develops cloud-based software tools for use by biotech companies.
3European Pharmaceutical Review