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The Absurdity of Biotech

“You walk into the VC’s office and say: Look here, I need $900 million to build a biotech company. I won’t show any profits for the next 15 years, and will depend on the support of my competitors for half of my revenues. And the best part? The probability of failure is 90%!”
Very few people in the world can give this speech with a straight face. Steve Holtzman, whose talk at HBS Wednesday was sponsored by the Healthcare and Biotechnology Club, is one of them. From 1994 to early last year, Holtzman was the Chief Business Officer of Millennium Pharmaceuticals. On his watch, Millennium grew from a start-up to a $2 billion market cap company that employs 1,100 people, has partnerships with eight of the world’s largest pharmaceutical companies and, as a result of its recent merger with COR Therapeutics, now has its first drug on the market.

What made this meteoric rise possible? In addition to a stellar executive team, outstanding science and near perfect timing, there was another component. Holtzman, ever political, called it “optics”; at HBS it may be better known as smoke and mirrors. “I would never call a glass 80% full if it is just 20% full. But don’t you ever-ever!-call it half empty if it is in fact half full!”

Listening to Holtzman explain his approach to deal-making was like watching a magician reveal the secrets of his tricks. “All human beings respond to stories, emotionally powerful stories which have the beginning, the middle and the end. Remember this whether you are talking to your employees, to potential partners or to Wall Street.” The story that Millennium told its partners was the story of genetics, a new approach to drug discovery that would revolutionize the pharmaceutical industry. And how did Holtzman persuade the Fortune 500 executives to make multi-million dollar investments into this new and untested approach? “People are attracted to the unknown.”

In response to a question from the audience, Holtzman described the ever-changing VC landscape. With many of the leading funds having close to $1 billion under management, the VCs now don’t have the time to do small start-up deals. Case in point is his latest start-up, Boston-based Infinity Pharmaceuticals: Infinity raised $12 million in its first round, turning away another $12 million. And if you are looking to raise just a million or two? According to Holtzman, angel investors are your only possible source of funding.

Holtzman’s background-he started his career teaching moral philosophy at Oxford as a Rhodes scholar-is hardly typical for a biotech executive. Nevertheless, Holtzman credits his training as a philosopher with helping him develop clarity of thinking and the ability to understand other people. His closing line clearly resonated with the audience.

“You can’t be successful unless you understand people-your employees, customers, partners-as individuals and engage them on a personal level.”

January 28, 2002
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