Shimasaki Craig D. The Business of Bioscience: What goes into making a Biotechnology Product

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256 Glossary

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Corporate

Biotechnology

Any application of engineering and technology applied to life sciences. Usually, it

refers to applications that use living organisms in the making of its products.

Board of Directors

A group of individuals chosen to govern the affairs of a corporation or business

entity usually elected by the shareholders. The Board of Directors holds a fiduciary

responsibility for the company.

Critical Path

Within a sequence of activities that are necessary for the completion of a project or

to reach a goal, it is the most essential and/or the most lengthy task needed to com-

plete the project.

Downsizing

The reduction of the number of employees in a company through termination, layoffs,

or early retirement.

Chairman of the Board

The highest ranking officer on the Board of Directors of a corporation. This indi-

vidual typically presides over the Board of Directors’ meetings.

CEO

Chief Executive Officer, the highest ranking individual in the organization, who is

responsible for the final decisions and direction of the organization. The CEO

reports to the Board of Directors.

CFO

Chief Financial Officer, the most senior financial executive of the company

COO

Chief Operating Officer

CSO

Chief Scientific Officer

Corporate Structure

The inter-relationship of different groups/departments and their functions that make

up the company.

Exit Interview

The interview that is held between an employee who is leaving through resignation

or termination, and a company representative.

FDA

US Food and Drug Administration

257Glossary

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Good Manufacturing Practices (GMP)

Also referred to as cGMP or “current good manufacturing practices.” These are

standard guidelines set by the FDA to ensure the quality, reproducibility, and safety

of manufacturing processes for manufactured products.

Quality Assurance (QA)

Defines a set of practices which insures confidence that a product is produced con-

sistently and according to specifications. These practices can include inspection,

audits, standard operating procedures, and other testing measures.

Quality Control (QC)

The process and policies that are used to insure that the company’s products and

services are of the highest quality.

Recombinant DNA

Genetically engineered products or processes that combine DNA fragments from two

or more sources with the use of restriction enzymes. Also referred to as gene splicing.

Legal

Bylaws

The rules that govern a corporation which include the procedures for holding share-

holder meetings, the election of the Board of Directors and Officers, and the issu-

ance of stock in the corporation.

Articles of Incorporation

A legal document filled with the state in which the company is incorporated, stating

things such as the purpose, name, amount and type of stock issued.

Certificate of Incorporation

A legal document from the state where the company is incorporated certifying that

the company has complied with the requirements of the state for incorporation.

Collaboration

The interaction of two or more organizations working together to achieve a com-

mon goal. This arrangement is usually evidenced by a Collaborative Agreement,

which states the responsibilities of both parties and the conditions under which the

work will be done and how the benefits will be shared.

Confidential Information

Information that is private to the company and its employees. The information is

covered by law under Confidentiality Agreements.

Employee Stock Option

The right given to employees to purchase and sell a specific type of company stock at

a specific price and time period in the future. These are usually used as noncash incen-

tives by start-up technology companies to recruit and retain needed employees.

258 Glossary

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Freedom of Information Act (FOI)

The FOI was enacted in 1966 and is a policy pertaining to information that must be

made freely available to the public.

Insider

Is a person who by definition owns 10% or more of the corporation or is an officer

or director of the corporation. It is also an individual who has inside information

about the company and its activities. An Insider has specific legal obligations and

penalties regarding the disclosure of Nonpublic information which can be used for

trading securities.

Medical Device

This can be broadly defined as any physical item used in medical treatment, diag-

nosis, or testing. These can range from tongue depressors to cardiac pacemakers.

Medical Devices have broader and specific legal definitions outlined by the FDA

and have specific requirements that regulate its approval and usage by the

public.

Noncompete Agreement

A contract between an individual and a company that prohibits the activities of the

individual in certain markets should the individual leave the corporation and join a

competitor or begin their own business that is directly competitive to the company.

Some consideration must be given to the individual to make this agreement valid

and some states do not favor enforcing Noncompete Agreements unless they are

narrowly defined.

Power of Attorney

A legal document allowing an individual to act as an agent of another.

Marketing

Brand

The collection of assurances that is associated with a company’s products, name,

and symbols, which promise the customer a certain expectation of quality or ser-

vice that has been built over time by their reputation.

Commercialization

The phase when products and services developed by a company are ready to go to

the market. It can also refer to the process by which the market is built and

expanded in order to accept and purchase the company’s product or service.

Competition

In business, it is the rivalry between two or more companies that sell products or

services to the same market.

259Glossary

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Demand

A measure of the amount of goods and services that a segment of consumers will

want to purchase at a given price.

Direct Sales Force

A group of sales individuals that market the company’s product directly to a par-

ticular segment.

Distributor

A company or group of individuals that specialize in marketing a company’s products

or services. This organization usually can purchase the products at wholesale and

sell them to a retailer.

Distribution Channel

The collection of steps or the route a product takes as it passes from seller to

buyer.

Early Adopter

Usually refers to the individual or group of individuals that embrace or purchase

new products during the beginning of their introduction to the markets.

Launch

Refers to the beginning of commercialization of a company’s products or services.

Market Forecast

The expected or anticipated volume of sales for a product or service prior to its

actual sale by examining various available information.

Market Share

The percentage the company captures of the total sales possible for a given product

or service in a particular segment.

Market Penetration

The percentage of the market that the company has successfully controlled by its

products or services.

Segmentation

A dividing of the market into groups of customers that have similar characteristics

or interests to improve product sales by appealing more effectively to homogeneous

customers needs.

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Additional Reading

Claudio Fernandez Araoz, 2007. “Great People Decisions – Why They Matter So

Much, Why They Are So Hard, and How You Can Master Them.” Wiley, Hoboken,

NJ, 336 pp.

Constance E. Bagley and Craig E. Dauchy, 2003. “The Entrepreneur’s Guide to

Business Law,” 2nd Edition. Thomson, South-Western West, 730 pp.

Cynthia Robbins-Roth, 2000. “From Alchemy to IPO – the Business of

Biotechnology.” Basic Books, New York, 253 pp.

Dawn Iacobucci, Editor, 2000. “Kellogg on Marketing: The Kellogg Marketing

Faculty, Northwestern University.” John Wiley & Sons, Hoboken, NJ, 427 pp.

Geoffrey A. Moore, 2006. “Crossing the Chasm: Marketing and Selling Disruptive

Products to Mainstream Customers,” Revised Edition. Collins Business Essentials,

HarperCollins, NY, 227 pp.

Hal Urban, 2003. “Life’s Greatest Lessons: 20 Things that Matter,” 4th Edition.

Fireside Book, New York, 165 pp.

Harvard Business Essentials, 2003. “Managing Projects Large and Small: The

Fundamental Skills to Deliver on Budget and on Time.” Harvard Business

School Press, Boston 192 pp.

Harvard Business Essentials, 2005. “Time Management: Increase Your Personal

Productivity and Effectiveness.” Harvard Business School Press, Boston, 150 pp.

Hugh B. Wellons and Eileen Smith Ewing, 2007. “Biotechnology and the Law”.

American Bar Association, New York, 921 pp.

Jim Collins, 2001. “Good to Great: Why Some Companies Make the Leap...and Others

Don’t,” Collins Business, New York, 300 pp.

Louis V. Gerstner, Jr., 2002. “Who Says Elephants Can’t Dance? – Inside IBM’s

Historic Turnaround.” Harper Business, New York, 372 pp.

Michael G. Pappas, 2002. “The Biotech Entrepreneur’s Glossary,” 2nd Edition.

M.G. Pappas & Co, Shrewsbury, MA, 184 pp.

Orville C. Walker, Jr., Harper W. Boyd, Jr., John Mullins, Jean-Claude Larreche,

2003. “Marketing Strategy: A Decision-focused Approach.” McGraw-Hill

Irwin, 4th Edition, Boston, 365 pp.

Peter Morgan Kash with Tom Monte, 2002. “Make Your Own Luck – Success Tactics

You Won’t Learn in Business School.” Prentice-Hall, Englewood Cliffs, NJ, 231 pp.

261

262

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Additional Reading

Steven K. Gold, 2004–2006. “Entrepreneur’s Notebook – Practical Advice for

Starting a New Business Venture.” Learning Ventures Press, 217 pp.

Steven Rogers, 2003. “The Entrepreneur’s Guide to Finance and Business – Wealth

Creation Techniques for Growing a Business.” McGraw Hill, New York, 340 pp.

Index

Angel investors, 132–133

The Apprentice, 18

Bessemer Venture Partners’ website, 234

Biologics License Application (BLA),

213–214

Biotech business

challenges and victories, 241

serendipity, 239

Biotech company

acquisition market, 151

background, 161

body language, 168

communication, 177

core values

examples, 173–174

guiding principles, 175

leaders, 175–176

partnerships, 177–178

corporate attorney, 247

corporate culture

development, 172–173

improvement, 176–177

strategic advantage, 178

cultural compatibility, 203

development-stage, 199

funding ranges, 152

marketing relationship, 204

opportunities, 240–241

partnership process, 201–202

potential acquisition, 200

PowerPoint presentation, 166–169

product development, 243

shareholders, 156–157

strategic presentation, 167

technology/product description, 162–163

time management, 244

valuation, 155

venture capital, 154

Web site, 169

Biotech company establishment

agreements, 63–64

Board of Directors

compensation, 67

directors and officers insurance, 65

fiduciary duties and legal responsibili-

ties, 65–67

company name

changing established name, 59–60

four aspects, 59

guided brain-storming process

professionals, 59

importance of, 58–59

good attorney

attorney fees, 57, 58

corporate attorney, 54–55

cost estimate, 57

legal advice and business guidance,

53–54

medium-sized law firms, 57

patent attorney, 55

securities attorney, 55–56

start-up costs, 57

traditional biotech cluster, 56

venture capital term sheet, 54

new company incorporation

Business Law for Entrepreneurs, 61

legal structure, 60

ownership, issuing stock

Cliff Vesting, 62

equity ownership, 61

fair market value, 61, 62

founders, 63

restricted stock and non qualified

options, 62

263

264 Index

Biotech company establishment (cont.)

Securities and Exchange Commission

(SEC), 62–63

vesting schedules and strike price/issue

price, 62

Scientific Advisory Board (SAB)

Clinical Advisory Board and, 69–70

compensation, 69

functions, 67–68

meetings, 69

stock options, 69

technology inventors, 68

virtual company, 70

Biotech entrepreneur

biotech personnel, 192

business strategy, 241

category functions, 182–184

commercialization, 10

different breed, 9–10

diversity, 185–186

employee benefits, 184

essentials

creativity and change, 25

good business sense, 19

influence circle, 24

knowledge and wisdom, 21–22

leadership and core values, 25

multi-disciplined translator, 19–20

negotiator, 24

new skill learning, 18–19

passion and vision, 17

persistence, 22–23

responsibility, deep sense, 23–24

strengths and weaknesses, 17–18

trickier problem, 21

venture capitalists, 21

first time entrepreneur

additional business skills, 15–16

alternatives, 14–15

life-long learner, 16–17

young MBA student/graduate, 16

four backgrounds

communication, scientists, 13–14

things vs. people, 12–13

hiring process

ability-to-execute, 187

decision making, 191

informal meetings, 190

interview process, 189

personnel recruitment, 190

presentation skills, 188–189

relevant experience, 186

shared core values, 187–188

work behavior assessment profile, 190

key employee compensation, 184–185

management skills, 192

medical changes, 242

organizing the environment, 244–245

personal costs, 11–12

product development process, 10

project management software utilization,

245–246

quitting

employee assistance, 237

entrepreneur leaving company, 237

honesty and transparency, 236–237

market approach, 234

responsibilities, 236

time sequence to, 234–236

regulatory and market risks, 10

renting and leasing space, 180–181

separation agreement, 194

termination, 193

virtual company, 179–180

Biotech Evaluation Tool

financing suitability, 51–52

management leadership, capability, and

past success, 50

market demand, positioning, and entry

barrier, 51

regulatory hurdles, 51

technology robustness, applicability, and

scientific team, 50–51

Biotechnology business

airline industry, 7

decentralization, 5, 6

five elements, establishment, 4, 5

genomics, 3

human proteins, cell culture fermentation, 3

models, 44–45

Oklahoma Center for Advancement of

Science and Technology (OCAST), 5

Biotech product

regulatory process

accelerated development review,

214–215

acronyms, 206–207

drugs and biologics, regulation,

209–214

Food and Drug Administration,

207–208

IND treatment, 215–216

informed consent, 208–209

IRB and, 208

medical devices, 216–220

parallel track, 215

Technology Adoption Curve, 115–116

Business Judgment Rule, 65

Index 265

Business Law for Entrepreneurs, 61

Business model

biotechnology business models, 44–45

Dell computer, 44

determination, 47–48

drug repositioning business model, 45–46

financial benefit, 44

manufacturer–retailer model, 44

molecular testing business models, 46–47

Center for Device and Radiological Health

(CDRH), 216

Center for Medicare and Medicaid Services

(CMS), 207

Clinical Laboratory Improvement Amendment

(CLIA), 125, 207

Clinical testing stage

Contract Research Organizations (CROs),

80–81

Investigational New Drug Application

(IND), 82

phase I, II, III clinical studies, 82–83

pre-IND meeting, 81

Commercialization Assistance Program

(CAP), 91

Company financial system

company sold percentages, 156

exit planning, 159–160

founder’s ownership, 155–156

presentation, 166–169

public relations, 157–159

shareholders, 156–157

stages

early stage capital, 148

funding events, 150–151

funding gaps, 150

initial public offering, 149–150

later stage and expansion capital, 149

mezzanine capital, 149

mid-stage capital, 148–149

seed capital, 148

start-up capital, 147

tools

business model risks, 165–166

business plan, 160–161

competition, 163

cover page, 161

intellectual property, 164

management team and background, 165

market opportunity, 162

market strategy, 163–164

regulatory pathway, 165

return on investment, 166

technology/product description, 162–163

valuation

methods, 154–155

postmoney, 153

premoney, 153–154

venture capital, 154

web site, 169

Company life stages

birth phase, infancy stage, 225–226

corporate development, 223–224

development phase

adolescent, 226–227

teenage, 227–229

toddler, 226

entrepreneurial management vs.

professional management, 232

expansion phase

mature adult, 229–230

retirement, 230

young adult, 229

organizations transition, 224–225

transition, CEO’s role, 231

work-life balance, 231–232

Confidential Disclosure Agreement (CDA), 64

Confidentiality agreement, 201

Core values, biotech company

examples, 173–174

guiding principles, 175

leaders, 175–176

partnerships, 177–178

Corporate culture

crisis response, 171

development, 172–173

foundational values, 172

individual responsibility, 173

Corporate partnerships

biotech company and, 199–200

development capabilities, 198

drug development targets, 201

importance, 197–198

licensing agreements and, 197

product development, 199

working of alliance, 202–204

Development phase, company life stages

adolescent, 226–227

teenage, 227–229

toddler, 226

Division of Small Manufacturers, International

and Consumer Assistance

(DSMICA),219

266 Index

Dow Jones Venture Source, 122

Drug repositioning business model, 45–46

Drugs and biologics

pre-IND meeting, 209–210

pre-NDA meeting, 213

Employment agreement, 64

Exclusive licenses, 40

Expansion phase, company life stages

mature adult, 229–230

retirement, 230

young adult, 229

Fair market value, 61

Food and Drug Administration (FDA)

Medical Devices regulation

approval process, 219–220

classification, 217–218

DSMICA, 219

Investigational Device Exemption

(IDE), 218–219

In Vitro Diagnostic Devices, 218

Fully Integrated Pharmaceutical Company

(FIPCO), 44, 45

Health and Human Services (HHS), 208

Hiring process, biotech entrepreneur

ability-to-execute, 187

decision making, 191

informal meetings, 190

interview process, 190

personnel recruitment, 190

presentation skills, 188–189

relevant experience, 186

shared core values, 187–188

work behavior assessment profile, 190

Incentive Stock Options (ISOs), 62

Industry corporate partnership, 142

Initial Public Offering (IPO), 149–151

Institutional Review Board (IRB), 208

Intellectual property

freedom-to-operate (FTO) opinion, 36

patent

claims, 34

novelty and nonobviousness, 33

patent attorney, 33, 34

property right, 32

types, 34–36

utility, 34

trademarks, 37

trade secret, 36–37

Invention assignment agreement, 64

Investigational Device Exemption (IDE), 218

Investigational New Drug Application (IND)

clinical hold, 211

phase I testing, 211

phase II testing, 211–212

phase III testing, 212–213

phase IV testing, 213

pre-NDA meeting, 213

Investor return potential, 143

Investor’s Golden Rule, 120

In Vitro Diagnostic Multianalyte Index Assay

(IVDMIA), 217

Licensing and protecting core assets

core technology/single product, 30–31

great technology, scientists, 31

intellectual property

freedom-to-operate (FTO) opinion, 36

patent, 32–36

trademarks, 37

trade secret, 36–37

product, real market

gene therapy, 29

market potential, 28

premature products, 29

science quality

federal agency grants, 29

scientific merit of technology, 30

technology licensing and negotiations

commercialization, 38

exclusive licenses, 40

licensing negotiations, factors, 39–40

nonexclusive/coexclusive licenses,

40–41

typical license structure, 38–39

venture capital deal database, 37

Marketing strategy

biotechnology product adoption curve,

115–116

biotechnology products, customers of

patient, 105

payor, 106