Henrik Ekman BioTech Equity Analyst

Management changes – for your benefit
If you follow BioTech and Life Science companies, you probably sometimes wonder what is going on, when there is a reshuffle at the Board of Directors or as changes of management are unexpectedly taking place. Those changes are an integral part of the normal development of any company across industries, but even more so within BioTech and Life Science companies. 

First, contrary to companies from most other industries that are run more or less effectively on and on-going basis and therefore sometimes only needs minor adjustments, running a BioTech company in a risk off environment where vital funding is not guaranteed puts a completely new dynamic in place. The BioTech company runs the risk of having insufficient funding available leaving it no options as to drastically alter its strategy for the company to survive. The same goes if a study, development or approval of a major product candidate in the pipeline fail. In both circumstances more drastic measures are required than in other industries, which also includes replacement of management or members of the Board of Directors.

Second, and more importantly, management changes and reshuffle at the Board of Directors also take place when things are going well and as planned. It happens because the BioTech company develops according to plan. From a management and Board of Directors perspective, very different skill sets are typically required as the BioTech company develops and matures. From the initial scientific idea of a product, conducting pre-clinical trials on a limited base of funding, typically provided by a few co-founders, to the more sophisticated company with a portfolio of pipeline projects in different phases, perhaps based on a well-established technology platform according to the scientific community, and funded primarily by external investors through a stock market listing, and finally to the BioTech company that successfully has develop a product, that needs to be launched and commercialized through partnerships deals. Just to illustrate as there can be many variations to these three phases, but the point being that different phases typically requires different skills sets and priorities from an organizational perspective.

Of course, there will be BioTech companies where the initial founders, management and Board of Directors are more or less the same throughout the development of the company. But more often you would see the composition of any current management team and the Board of Directors in a BioTech company reflecting the current required skill set of that particular phase that the company is in. Actually, you should expect to see it – for the benefit of your investment.