Maturing Biotech Firms Face New Challenges

Growing enterprises are rethinking staff needs and realigning priorities as they move to parlay early gains As more biotechnology companies bring products beyond the discovery stage, small, research-driven organizations find themselves acquiring large staffs. Company officials say this new era of growth demands that they change recruiting strategies to hire employees with different skills, cope with increased competition among companies for workers, and create management structures that will p

Apr 13, 1992
Marcia Clemmitt
Growing enterprises are rethinking staff needs and realigning priorities as they move to parlay early gains
As more biotechnology companies bring products beyond the discovery stage, small, research-driven organizations find themselves acquiring large staffs. Company officials say this new era of growth demands that they change recruiting strategies to hire employees with different skills, cope with increased competition among companies for workers, and create management structures that will promote efficient business practices while protecting the creative freedom scientists cherish.

"Until recently, when I thought `biotech company,' I pictured a research firm with a handful of employees," says William Small, the newly appointed executive director of the Association of Biotechnology Companies, a Washington, D.C.- based industry group. But Small says that a recent cross- country tour of the industry helped him replace that outdated image with a truer picture of biotechnology in the 1990s.

"I was amazed to see so many [companies] in the 300- to 800- employee range," he says, "and more are gearing up to this stage all the time. It's grown from an industry employing 10,000 in the early to mid-'80s to one with over 50,000 employees today."

Product development activity beyond the research stage is accelerating throughout the biotech industry, according to a report issued recently by the accounting and financial services firm Ernst & Young, headquartered in New York.

The firm found that 80 percent of the biotech companies it surveyed were creating new organizational structures to support commercialization of their products during fiscal years 1990 and 1991. More than half the companies reported expanding their management staffs to cover new areas of responsibility--regulatory affairs, marketing, and manufacturing--during the same period. As a result of these changes, research expenditures by the publicly held biotech companies fell from 33 percent to 30 percent of total costs, indicating the change in emphasis of the growing companies.

The current growth spurt in biotech firms' staffs is unlikely to mean a rise in biotech opportunities for academic researchers who want to switch to industry, since company research laboratories aren't the focus of the expansion. But while company research staffs are growing only slowly, rapid growth in other departments, such as regulatory affairs and manufacturing, offers expanded biotech job opportunities for Ph.D. scientists currently working in pharmaceutical companies or government regulatory agencies.

"You need people who know the ins and outs of government regulations, who've had the experience of taking products through, say, the European drug approval process," says Timothy Morrison, director of human resources at Repligen Inc. in Cambridge, Mass. "These people have to come from other companies."

Like the managers, research scientists already working in the biotech industry are adjusting to some new realities. More scientists are being asked to take on management roles in areas as far from the research bench as marketing and financial planning. And scientists who remain primarily researchers are looking for ways to maintain the spirit of creative science in organizations that are larger and more bureaucratic than the traditional biotech startup.

In the early days of the biotech industry, most staff could be recruited directly from academia. University researchers could become company researchers. Newly minted bachelors and masters of science could provide technical assistance. But as products approach commercialization, companies need more workers at all educational levels with industry and government experience.

Besides experience, staff recruited from established companies bring necessary credibility to young biotech firms, according to John Byington, a pharmacist and lawyer who is president of Synthecell Corp. in Rockville, Md. "Capable large-scale production managers have grown up in the pharmaceutical industry," he says. "An academic researcher with that expertise would make Ripley's [Believe It Or Not]. And young firms just entering this field need the credibility they can get from a manufacturing manager who's already established a reputation with a big-name pharmaceutical company."

Hiring technical staff with industry experience is "not necessarily more difficult" than hiring purely research people, says Frank Burke, vice president, human resources, for Biogen Inc. of Cambridge, Mass., "but it's a different kind of difficulty. Hiring researchers, you don't necessarily face a numbers crunch," because there are many good biotech researchers around, Burke says. "But you have to convince them that industry won't cripple their ability to do research in their own way.

"Process development and manufacturing specialists don't need that convincing. They've already made the switch" from academia to an industrial environment, Burke says. "But there are many fewer of these skilled people for us to go after" than there are of basic researchers.

While few companies now report a shortage of suitable job applicants, many report, the sheer number of companies currently increasing their staffs means that stiff competition for the best workers can't be far off. "We're seeing a bit of it now," says Aileen Griffin, human resources officers at Viagene Inc. in San Diego. "Among the Ph.D.'s, we're finding people who had no interviews last year but who suddenly have four or five now."

"The higher volume of hiring has to make a difference," says Laura Wallace, director of human resources at Synergen in Boulder, Colo. "Hiring 50 people in a short period is one thing. Two or three hundred is another."

A survey of North Carolina biotech companies provides a picture of what the new work force will look like. "In companies with research focus, about two-thirds of the work force hold bachelor's or master's degrees in science or Ph.D.'s, with the Ph.D.'s constituting about 32 percent," says Katherine Kennedy, education projects coordinator at the North Carolina Biotechnology Center in Research Triangle Park, N.C., which conducted the survey. "But in production and quality control, about 50 percent of the work force have only high school diplomas, and a large percentage have the associate's [two-year college] degree."

According to some industry experts, competition for workers is likely to become most acute among this last group-- technical employees without advanced science training. Shortages of technical staff would make it harder for companies to bring scientists' discoveries to market as commercial products, many executives say. And that's why many are recommending that industry and academic scientists join forces to improve science education for all students, not just those who'll go on to graduate training.

"We're about a year from staffing a quite large manufacturing facility," says Biogen's Burke. "And we're concerned about finding enough people skilled in this very new kind of manufacturing process--biological manufacturing- -as well as enough high school and junior college graduates motivated, intelligent, and educated enough to learn these processes." Burke says that manufacturing processes in biotechnology, though "rote and automated," are far more complex than those in other industries. That means the workers who perform them must be able to understand and think about what they're doing. Burke and other biotech executives predict inevitable shortages of such workers unless biotech companies work with local schools and, especially, junior colleges to educate them.

As companies scale up to more advanced product functions, the proportion of workers doing research will shrink, even though some research staffs may grow in actual numbers. That balance shift will challenge companies to maintain their entrepreneurial spirit and commitment to creative science in organizations whose researchers no longer form the majority. To do it, executives say, companies need to create management structures that are conducive to letting scientists do their best work as well as to achieving business success. And building those structures, they say, will challenge the industry's creativity.

"The oldest, most successful companies are hard at work, trying to distill some [management] structure that's uniquely biotech," says Synthecell chairman and founding scientist James Hawkins. "But that process is far from finished. What will these companies be like a few years down the line? That's one of the most interesting unanswered questions."

Although the final shape of those "uniquely biotech" companies is still unclear, many company officials agree that in order to remain innovative yet survive financially, they'll have to include several items in their game plan: managers responsive to employees' ideas, scientists in significant managerial roles, help for scientists who want to develop management skills, and rewards and opportunities for scientists who choose to remain at the research bench.

"It's of vital importance to keep a vigilant eye on the management structure you're building. You have to work at it overtly, all the time, not just keep it in the back of your mind," says Christopher Mirabelli, vice president for research at Isis Pharmaceuticals in Carlsbad, Calif. "It's a matter of keeping as flat a science environment as you can, not building in a lot of line management and extra channels for people to go through.

"You need to help people develop their careers by taking responsibilities in new areas, not by supervising more people. You need to look carefully at managers you bring in, making sure they're driven by interest in the technology."

Biotechnology companies are in the business of introducing not just new individual products, but a wholly new genre of product, to investors and customers, industry experts say. That's why many management roles must be filled by scientists, since only scientists understand this brand-new technology well enough to shape business plans and marketing strategies for it.

The nature of the biotech industry dictates that many positions away from the research bench must be filled by scientists, says William Peros, a research scientist who is marketing director at OmniGene Inc. in Cambridge, Mass. "Making bacterial products for human use is an entirely new concept. Even the most experienced nonscientist business people are only comfortable with products that act like machines," says Peros. "Scientists have to be closely involved with formulating business plans, because only they understand the kinds of glitches that come up when you're manufacturing living organisms."

But just moving scientists into leadership roles is not enough, executives say. Companies also need to help scientist-managers develop new organizational skills. "If you've spent your life learning to be a good scientist, you haven't had time to pay much attention to management skills," says Laura Wallace of Synergen, one of several companies with newly instituted seminars or mentoring programs aimed at developing scientists' managerial excellence. "I introduced the notion here that management skills like developing team behavior, dealing with conflict, and motivating others can be learned," she says. "And, luckily, scientists are, by and large, smart enough to see what they need to learn and look for help learning it."

It's also important to provide professional rewards and responsibilities for scientists who choose to remain at the research bench. At some companies, this means allowing bench scientists to follow their own discoveries as far into the development and manufacturing process as they want to go, sometimes taking a kind of product champion role.

"People here have options about how long they stay with a product--to clinical trials, to product licensing, all the way if they want," says Daniel Vapnek, senior vice president for research at Amgen Inc. in Thousand Oaks, Calif. "Some stay with a product for a certain length of time, then go back to research. That's a rewarding experience for scientists, but it's also good for the products.

"When you scale up, of course you need people with different expertise. But the longer you can also involve the basic scientist with the product, the smoother things will go. There are many subtle things the scientist can communicate that would probably be lost if he just wrote down the basics and tossed the product over the fence [to the staff who will develop it further]."

To many scientists in the biotechnology industry, the most important thing companies can give them is an atmosphere that supports free exchange of information, says Christopher Fennie, a senior research associate at Genentech Inc. in South San Francisco, Calif. "I think you keep scientists by having an environment that retains academic qualities," says Fennie. "At meetings, scientists from big, traditional pharmaceutical companies seem to come out of a more closed- door atmosphere--where you're encouraged to listen, but not to share your findings. That's very different from here [Genentech]. I think scientists need to feel that freedom to do good science."

Creating companies that balance scientific freedom with good business practices is certainly the next big challenge for the biotech industry, many company officials say. "The companies that are successful now are surely showing that you need brilliance in science--the creative, germinal idea- -but that's not enough," says Synthecell's Hawkins.

"Success clearly requires brilliance in all areas. Great technical ideas and poor management won't cut it, nor will the opposite."

Says Hawkins, "I came into this as a research scientist in a classic start-up mode.... But the best advice I got was, `Start thinking about this right now as a company of 10,000 employees, just lacking 9,998 of them at the moment.' "