Over the past year, and largely in the past few months, the phenomenal growth in the US technology sector is reason enough to pause and ponder its impact of the “new business” on the global economy, as well as the local community and culture of this area of the country. These businesses, biotechnology, high technology and e-commerce, not only are emerging with huge valuations but are converging and gaining substantial, irreversible interdependence, certainly as they impact the broader healthcare industry. For example, MiniMed, Inc., a Sylmar-based company and a global market leader in glucose monitoring instruments, is relying more and more on the internet to market medical supplies for diabetes patients and is developing mechanisms to monitor the health status of those patients to improve long-term care. The power of the Internet also is being leveraged in a variety of “low-tech” business models (e.g., DrCoop.com, Healtheon/webmd.com) to improve patient education, patient monitoring, and market prescription pharmaceuticals, through PBM’s and retail pharmacies, and manage physician groups. Very quickly these players have become competitive with primary care physicians and are becoming viable vehicles to support the efforts of managing lager groups of patients.
Biotechnology has been an identified industry only for about 20 years and has gone through periods of great growth and substantial retrenchment. The original promise of the new biology, faster, better, cheaper drugs, has not been realized the time and cost to develop biotechnology drugs is not demonstrably different from pharmaceuticals. Only one year ago, the industry was saddled with low valuations, market skepticism and the likelihood of major restructuring. In recent months the industry has been in a boom, not because of its amazing drug discoveries, but because the market realizes that biotechnology is fundamental. The code of the human genome is as fundamental to the future of human health as electricity is to a light bulb. No one really knows how or what will come of it all, but the information is so vast and so rich that it will support a lot of businesses and elicit endless dreams. Moreover, the valuations and success of companies such as Incyte, Millennium and Affymetrix are more and more dependent on high technology and the Internet, not only as service providers, but also as components of their business plans.
Common elements of these new businesses, almost uniformly, are that they do not make profits for their shareholders and that they fundamentally provide information, not widgets, to their markets. Profitability is important, but it is often not the main investment point. So what drives them? How do they get so big so fast yet maintain their ability to move quickly with technology developments and implement? And perhaps most importantly, who leads them?
Los Angeles, historically, has had a great deal of difficulty attracting seasoned executives, especially in the biotechnology and pharmaceutical sectors, to lead its new companies. Mainly, this has been the result of competitive pressures from earlier developing areas, mainly the Bay Area, San Diego and Boston. According to Ahmed Enany, Executive Director of the Southern California Biomedical Council, this situation is changing for the better. “The continuing development of a significant biomedical and biotechnology presence in the Los Angeles area is beginning to attract the types of seasoned individuals who have the ability to lead these developing companies to significant growth and contribution to the local economy,” said Mr. Enany. Strong, pragmatic and experienced leadership remains a constant in the development of successful, broad-based businesses. These emerging industries are subject to extreme vulnerability if such skills are absent fro the management team and their respective boards. Imagination, technological creativity and an “entrepreneurial spirit” are vital leadership elements to build these new industries, but must be balanced with clear business acumen and credibility in the financial markets. The new leadership in the biomedical fields must be open to the broader capabilities of the “new businesses” and recognize the blurring of technology platforms.
Stephen J. Williams, Denise DeMan and Catherine Balin are with Bench International, a Los Angeles-based executive search and consulting firm serving the healthcare industry.