Biotech C-Suite Construction With Allan Shaw

And while there's never a bad time to be plotting out your next C-suite talent moves , it's a particularly timely talk right now , as stubborn scrutiny and volatility continue to harshly persecute biotech management , missteps that would have likely been handily forgiven just a few years ago . Executive teams in biotech are a study in evolution .

They come together over time and with intention . Getting caught without the right people in the right seats at the right times can be costly , but so can putting those people in those seats . On today's episode , I'll interrogate Allan's wisdom , gained over a decades-long career in which he's been both a strategic hire and a strategic hire .

Allan , it's good to see you .

I've been reading on the airwaves , you know some of the forums out there , uh , the , the , the reflection on some of the companies that have uh , fallen on hard times of late and let uh , let a lot of people go , and I often see finger pointing around executive hiring strategy .

I don't know how much of that is bluster , how much of it's , how much of it's true , but what you know from , from your perspective , what , what are some of the ? You know the dangers that lurk in in poorly metered hiring decisions .

I think , generally speaking , you know you do want to be early than late when you bring resources on board , but you know you have to be thoughtful about it too . You know , if you bring in an elephant and there's only a few mice , you know the elephant isn't going to stick around , it's not going to be interesting enough . So you know it .

Really it depends on where the organization is and how the organization evolves . I think , going back to you know your specific question . I'd call out a couple of Areas to talk about and focus on . One is certainly .

I think there's inevitably blind spots in decision making and I think a lot of decisions many times are fear driven as well , based on insecurity or the perception that they should be doing something . You know , one major risk is that people often know what they know but they don't always recognize what they don't know . And these are important blind spots .

And you know , I think being able to expand around that and get input from others help . You know , talking to the board , thinking of talking to your organization , thinking about what you really need is important , and understanding the implications to your culture as you do it as well . I think there's also fear-driven decisions .

In the absence of good information , fear and insecurity can drive poor decisions . This often manifests in hiring decisions based on perceived expectations rather than the actual needs . And I think , as people think about you know , for example , you know that they have aspirations for it to be public at some point in time .

You know they have certain concerns about where they are relative to where they should be from an organizational perspective . So those are some of the things to be mindful of as you think about it and often can lead to bad decisions .

With interest rates starting to come down now , with the election behind us , in short time I think you know it's going to be much more fertile and I think there are a lot of organizations that have done crossovers and are ready to go , that are just sitting on the runway .

So I think , as that starts to open up , I think IPO aspirations are very real and I think there's then a level of expectation that when the company is ready to go , when the window is open , that you're ready to go right and that leads to , you know , starting your car and letting the engine run for a while .

So you know you need to gauge a little bit of , you know the pathway that you need to go .

You know , usually you do a crossover round and there's steps along the way and as you move along the way you need to , I guess there's an investor expectation that you have your house in order and that you can do things , and , again , given the emphasis on determining whether or not you even have a business right .

You know you need to kind of get answers scientifically , I . I think it gets people into a position well , when do we start building the rest of the organization ? And and I think that's where some of those and where the anxiety comes from uh , and it's good anxiety because directionally they are correct .

But you know , there's a lot of steps in the way in terms of how you stage your organizational build out . And you know , I don't know if it necessarily has to be the immaculate conception .

I mean , this episode will drop a few weeks from now , but like in the moment that we're in right now . A few weeks ago I had Rahul Kakar on the podcast . He's the CEO at Tome and Tome Biosciences . They , you know , raised a couple hundred million dollars , I think , last spring . They're in a tough spot right now .

They made an acquisition , they spent a lot of money on a company recently , but they're in a tough spot financially right now . And there's , you know they're dealing with those consequences . They just let a whole bunch of people go .

They got some bad press and when you read into the weeds , you know you start reading the commentary on the forums from industry observers , you know shareholders , even biotech employees . A lot of finger pointing happens , like whoa look at all the money they're spending on their executive leadership team . You know , and I go .

Well , you know , I don't know , I don't know that that's going to contribute mightily to the you know , the downward spiral of a 200 plus million dollar funded company . But you tell me like I'm curious about that , about that Do you ? I mean , do you think that overzealous spending on high dollar ? You know ?

And you know , I think when things aren't going well , right people , I think the salaries , the compensation that executives of troubled companies receive , becomes a little bit of a lightning rod . And I think and I get that , but I also would call out in this industry where there's a lot of industrial jeopardies and binary risks , that you know it's .

You know a company could be well run and still have issues like that at the end of the day . But it's certainly easy to be a Monday morning quarterback and criticize people after the fact . If everything was going good , no one would have a problem . And then that becomes a decision of whether or not those people should be retained or not .

It's not whether or not they should be getting paid Everyone should be getting paid but whether or not those were really the right hiring decisions , whether they were the right fits . You know there's other questions to be asked as opposed to how much money they're necessarily making . In my view .

You know , leadership versus resource allocation , you know , I mean I'm not sure if it really works that way . You know , I think building out a C-level leadership doesn't automatically lead to running out of money , but it certainly ties into how an organization prioritize and allocates its resources . And you shouldn't be , you know , and I think it talks about fit .

It also talks about the kind of person that you want in your organization . You know , right , I think a lot of us are generally Working , you know , to make an impact , and the benefits associated with making that impact would result in wealth creation . The salaries pay our bills .

At the end of the day , it's a punch in the clock , and what I've often marveled is that when you see companies that are broken , companies that are reverse merger candidates , it asks the question why are these people sticking around ?

The equity isn't worth anything , you know , and those people are probably the wrong cast in the wrong roles because they're very happy just collecting their cash and they're not looking to . You know , move the needle at the end of the day . I would also call out that you know a balanced approach to scaling an organization is also crucial .

You know , the key is ensuring that the company's value drivers , like development programs , are adequately funded to reach critical inflection points , while simultaneously bringing in the necessary expertise to inform optimal decision making and resource deployment necessary expertise to inform optimal decision-making and resource deployment .

You know , I think , before you know you build the whole house , you want to make sure that the fundamental plumbing is working and ready to go and then you can certainly scale accordingly , and I think you need to .

When I talk about development programs , it's not just making sure that the programs are fundamental and that they're and you're going to be delivering some good data , but I think you also need to understand . You know , what are you going to need to do organizationally to grow that , what are your inflection points ? What are your timing ?

Because , again , if you're looking to go public as well , you need to have all of these things identified , because timing is really important . Otherwise it's also the tail wagging the dog . You know you do need to understand how to build the organization and I think the organization follows really the development programs . Also , you know time is a critical factor .

Many factors influence these decisions , but one constant remains Time is the enemy . The time and cost associated with poor decision making can never be recaptured . It's you know , time is lost and you never get that back . So you do need to think about , you know , not being , you know , so focused on today's cost if it's going to have a real impact on tomorrow .

I mean , and that's a balanced thought , I'm also often advocate that you don't want to get too much in front of your skis , but you can never lose the cost of time , and I can't say enough about it . But ultimately , the real question is how can companies source the expertise that they most need on a practical basis ?

Because there's no dispute that adult supervision is required . But the shorter answer is one size doesn't fit all . From a resource perspective , it may not be practical or even prudent to fully build out a C-level team .

Instead , companies might consider more thoughtful scaling approaches , like utilizing C-suite executives on a fractional basis while leveraging others to build out functionality along with processes . You know , a good example it would be . You know , do you need to bring the cfo in day one ?

Or can the cfo help with providing guidance , helping strategically , helping with the selection of a controller who can then actually come in and put in the foundational ?

You know , purchase to pay processes and safeguard your cash and also make sure that the underlying accounting is in order and that you have audited financial statements , which are prerequisites for going public . You know , that's just an example and you know , and I guess , the kind of distill that you know .

You know , if a company can't afford the entire cow , the fractional approach allows them to buy the stake instead and providing access to really the expertise needed to avoid costly mistakes without over committing resources to manage the company's growth and organizational needs responsibly .

You know I wanted to ask you a question around conversations that I've had with biotech leaders who you know tell me when they're talking about hiring strategy and oftentimes this comes along with them mentioning a very specific person , like you know that you know I've got Alan Shaw on my team . Alan Shaw joined my team because he was available . He's a ringer .

So I went out there and I hired Alan Shaw . You know they tell me that they hire these . They hire these executives when they're available , not necessarily when they're necessitated . So I'm going to ask you a number of questions about this and how that sort of aligns with this fractional hiring mentality .

Other biotech execs tell me like , hey , you know , I'd really like to have Alan Shaw on my team . I'm going to have Alan Shaw on my team . I don't really think I need Alan Shaw yet , but when I need Alan Shaw I'm going to go get Alan Shaw . What's the right approach there in your mind ?

Is it like , hey , this person's available , you know , maybe it's a chief regulatory officer , for instance . We all know that there comes a pretty distinct point on the clinical path where if you don't have a chief regulatory officer advising you and leading that function , you're probably going to be in big trouble .

But maybe it's two years before you need that chief regulatory officer , but the one you want is available . Do you go get her or do you wait until you need her ?

We're actually going to have to start laying people off as opposed to bringing people on . So there's tension throughout all this process . Many times I've seen conversations that we you know we we'd like we should talk in six months or we should talk in a year , but I certainly respect it .

And then you also have to ask yourself , when you bring somebody in and the company isn't ready for that , are they going to be happy ? Is there enough there for them right now ?

You know , if you're , you know you know bringing it , bringing going into a company full time that just completed their series A , I don't think necessarily makes a lot of sense for the company . You know there's just not enough to do . Maybe if you expand somebody's role , you can , you can do it .

Yeah , I'm the chief operating officer , the CFO and chief HR and administrative officer . Ok , my role is expanded . But am I happy ? I don't know . So you know , I think it makes sense , depending on the circumstances and how far off you are , because it should be win-win for everybody .

You know , the idea of hiring top talent whenever available , regardless of the immediate need , is similar to the strategy of successful sports teams that draft the best athlete available rather than building a specific position . But I would also say that while it sounds rather idealistic , it's probably much easier said than done . Yeah , I would also .

You know , carrying on , I you know , I think , when you think about the prioritization of needs , I believe that you know , in applying the Maslow hierarchy of needs to drug develop , for drug development , you know , in applying the Maslow hierarchy of needs to drug develop for drug development , you know it serves as a guide for determining when hiring top talent is

truly necessary versus when it might be an unjustifiable luxury . And again , you know , bringing in expertise doesn't necessarily mean hiring . There are a lot of different ways to , you know , inform your activities , to execute , to work around issues , without necessarily bringing hiring somebody full time .

But you know , going back to your point , you know , if you're , if you're one I see and living with you know we're talking about a company that's talking about going into the clinic , right , they're saying you know the use of proceeds were going in and running phase two , but they don't have a chief medical officer on staff .

You know , in my mind , you know that's probably something that needs to be spoken to . You know , and I think people certainly understand , that you may not be able to afford one right now . That's , but I think then , speaking about what is that , you know type that you're looking for , what are you looking for to augment the team ?

So I think those things are important to be aware of as you execute . And then , ultimately , you know we're in the business of drug development and without data generation there's no de-risking . And , as the saying goes , in God we trust and in data we believe .

This underscores the importance of aligning leadership hires with the critical stages of development and data generation .

Is there sort of a general playbook in terms of the cadence at which cadence in order , right cadence in order of hires ? We kind of talked about cadence . You know cadence is a is a cash dependent thing .

But if , if , if I'm starting out as a biotech builder I've never done this before before is there a general rule Like , well , the first thing I need is a chief scientific officer .

The next person I'm probably going to need is somebody to help me with my finances , you know , maybe a CFO At some point after that , maybe a chief technology officer would be great , then a chief medical officer , you know , and then a chief regulatory officer , like you know , and then a chief regular officer .

Like , is there an and then and then and then , or is that highly dependent ?

You know there's a champion behind the technology , but you know they could be a business person or a scientific person . So , yes , I think it starts , begins with the technology and it should be coupled with a business person which could be the CEO .

And if the CEO is a scientific person , you know you might want to pair them with somebody with a business orientation . But I think initially , you know , the most important thing is does the dog hunt ? You know , does the technology work and what's the plausibility for that , what's the hypothesis and what needs to be done to support that hypothesis ?

And so it really depends where you are in the journey of the drug candidate . Or , if you're preclinical , where are you in terms of nominating a candidate . So I think there's different aspects to it , but you're absolutely right , you know . I think the foundational leadership evolves in stages , bringing the credibility and expertise as needed .

And again , I think it speaks to why a fractional approach could make sense , again , depending on where you are in your evolution , I think you know . Again , it comes back to focus on the product development plan .

I can't emphasize enough the importance of nailing down a product development plan with meaningful milestones that guide the financing strategy and the leadership build out . I would also call out the need to pay attention to medical affairs early on .

Successful companies really do pay attention to this early on , cultivating meaningful relationships with the investigators and the clinicians . It's really important . It helps on so many different levels . It helps drive patient accrual . Also , on a financing side , you know investors don't necessarily always want to talk to the SAB .

They want to talk to people that are viewed to be much more objective and independent . So you know the medical affairs side of the house , even if you don't have a chief medical officer , it's still something that you want to be paying attention to early on . And moving on , I think the timing of key hires is always a consideration .

I think , again , it follows the development plan . But I you know from what I've observed and you know I've noticed that CFOs are typically the last C-suite hire that's often brought on board before an IPO , kind of akin to Ringo Starr joining the Beatles before they went on tour .

But , with that said , I think getting a controller on board earlier on , as I mentioned before , to establish the internal control policies and procedures is a good practice . Because you know I remember when I was many times over the course of my career that you know if the steam room isn't working . I had no business being on the Lido deck .

So you know you need to make sure that your back office is fine , that you can safeguard your assets , particularly your cash , that you got controls over procurement and that you know , particularly during the clinical trial , the CROs aren't so great at it .

So you do want to be able to be upfront and negotiate contracts , that I mean they're always going to be favoring the CROs . But there are efforts that you can do to level set those and , again , not people aren't necessarily aware of the business side .

You know as the name of this podcast , you know it's the business of biotech and sometimes people get lost in the weeds .

Is there a problem area , a trend , you know a trend in terms of the problem area in executive leadership appointment in biotech ?

I think on the regulatory side , I've seen people , you know , take that for granted and not necessarily cultivate the FDA as they should and interact with them like they should . So you know , I think you know regulatory side , and again it depends on the company .

You know I've seen companies make bad decisions on hiring the wrong chief medical officer , thinking they needed to hire a chief medical officer , and rather than getting the right one , they just lowered the bar and got who they can get . And sometimes it's a factor of the company and you know not get who you want .

But so I could say , you know , definitely time , like going back to time , being the enemy . You know there are decisions that sometimes are made too late . You know a lot of companies will bring a CFO in late but they don't have the benefit of having advice along the way and they make bad decisions along the way .

So you know , I think it's really depends , but I think there's instances all over the spectrum where you either are bringing in people late and making bad decisions prior to that , and I think unfortunately there's a situation where you just bring in the wrong person and then that's also really costly and can set an organization back .

And we're not even talking about culture and the other implications .

So I want you to straighten me out here on these right , like on one hand , on one hand there's the old , you know , alan Shaw , standby that in God we trust . All others must bring data , love that . And then there's the old Alan Shaw saw that says investors bet on jockeys , not horses .

So in my mind , in my very simple Pennsylvania boy mind , right , there's there's , there's friction there , there's some conflict , I should say , around companies that maybe aren't data ready , you know .

So they they just have to trust in God because they're not data ready , but they feel a need to spend money on leadership horsepower because investors bet on jockeys , not horses . Walk me through that . How do we resolve that conflict ?

And you know , betting on someone who's done it before , who has much less in way of blind spots of any , who is much more secure and not making fearful decisions but making decisions based on their experiences and facts and circumstances there's a lot to be said for that . It's really the question of how you do pace right .

I think the CEO you want to set the tone at the top , and a good CEO will attract the resources that needs , and a good CEO will know the resources that are required and the most cost-effective way to source them . And we'll build an advisory group and get the input on things that need input on . So there's no getting around that .

But I think it's really the pace of how you build that out and how you source the rest of the organization . But there's no question about it that past experience is a good predictor for future performance , no question .

And management is a great differentiator , you know , given the numerous factors beyond the company's direct control capital markets , scientific developments , regulatory hurdles , competition , reimbursement challenges the quality of a management team becomes the key differentiator in determining success , particularly in turbulent times . So I stand by that in every which way .

My only point is pace , and you know , a good management team can usually , more times than not , generate the financial backing to execute and put a team and again I think , coming back to time , you know if you're properly capitalized and you've got a robust development plan , then you need an organization around that .

But I still stand by the fact that it's development plan and your development activities that drive the pace of your organizational development .

Uh , as I mentioned in the in the intro , you , you , you've been a fractional leader and you've you've hired fractional leaders . You've got a lot of , a lot of experience on this . No-transcript .

So you know , I think figuring out how you do more with less I think really drives the concept of the fractional approach . Obviously , idealistically , if you can afford it and everyone's going to be engaged and happy , you can have everybody day one .

But you know you're going to be spending money that could otherwise be redeployed on drug development and what I would otherwise characterize as value creating activities . So you know , you really have to , with that in mind , understand that and tie that to the company's evolution .

You know the decision to bring on a fractional leader versus hiring full time depends on where the company is in its development . You know full time depends on where the company is in its development . You know preclinical , clinical , late clinical or planning an IPO . I think those are important .

You know , as you evolve an organization , people , you know , taking it going back to the Wizard of Oz , people want to know if there's anybody else besides the man behind the curtain . So you know you need a team else besides the man behind the curtain . So you know you need a team .

You know and this does allow you to kind of approach it from bringing in the expertise that's necessary to inform good decisions . You know , to inform what you need to do in your clinical plan in terms of filing your IND . You know , et cetera , et cetera .

You know , and I think you know , you got to look at this kind of bill versus buy type of thing , and you know , I think , there's tipping points for hiring as well . You know , I think , that the functional need begins to require more than 50% of someone's time . It's a good moment to reevaluate the role and understand that I mean .

By doing so , it ensures that the leaders are proactive rather than reactive .

You know , if you want somebody , I think , that has a view to what's in front as well as what's behind , and I think if you're trying to limit people to time or if the organization's evolving , you know at the point that they're at 50% and you need more , you need to start thinking about whether you need someone in there to get ahead of things and being

proactive rather than reactive . You know , I think it's , and again too many sad stories where I've seen pitfalls of folks being penny wise but pound foolish . And you need to understand what the long game is . But you also can't get in front of your skis too much . Hopefully that's not another contradiction .

When a fractional employee gets to the point where you know 50% of their work is dedicated to your company and maybe it's time to start looking at bringing that person out full-time , if that's the right , if that's the person you want , like , I'm curious about your perception on the fractional quote-unquote like market . On the fractional quote unquote like market .

I just had a conversation a couple of days ago with a guy who had a fractional chief science no , chief technical officer and the guy was working on contract for his , for his biotech , and he wanted the guy , like he wanted the guy on full time .

But the guy was happy being a contractor and only when that guy got to the point where , to your point , he was doing like 60% of his work on this one client , did he even entertain coming on full time . And fortunately for the biotech builder I was talking to , he wanted that guy . So we brought him on full time . Now he's there full time and it's great .

But is there ? So this is the follow up . I'll try to be more concise with my follow up . Is there ? So this is the follow-up . I'll try to be more concise with my follow-up . Is there like a market of , like you know , cxo for hire , that you know the drive , try on for size and perhaps bring on full-time down the road .

I'm not aware , but I believe there are organizations that can provide CMOs under the same type of situation , under the same type of situation , and then there's a lot of what I would say , people who freelance in that regard , who don't necessarily need a broker , right , you know , why should I be sharing a part of what's being generated with a broker if you can

generate it without a broker ?

So I think there's a market for it and I think you know also , I think , talking through colleagues , you know , for instance , I connected to a situation from talking to somebody who was in a CEO leadership group and at the CEO leadership group , someone expressed a need for a CFO , fractional CFO , and that one thing led to another In another situation .

You know , I know people that I've worked with in the past and they , you know , they approach you and they say you know , we want you to join the team , but we can't , we can't . You know , this is where we are in our development and you know so it's only on more on a fractional basis .

But you know , I think you know , for the person that you referred to , who really liked doing what they were doing it , there's a lot to be said and I think there's a lot of advantages on a couple of levels . I mean , on a company side perspective right , you are getting a test drive .

You know , if you decide that you might want to try to hire this person in the future , you can see how they fit in and you know , and you minimize the costs of a bad hiring decision for sure . On the flip side , from the , from the purse , the service providers perspective you know it gives them optionality .

The service providers perspective you know it gives them optionality . Right , because even the best in drug development only have , you know a success rate of what ? 10% , 20% , maybe . You know , I think having a portfolio approach makes sense . From a risk management perspective , you know what works good for investors , can we work for the operator ?

And I'm I'm certainly quite fond of collecting lottery tickets as I , as I go about my business and uh , and you only need one win to to move the needle .

And if you don't like it , you have the freedom to change to somebody else too . So you know there's , you know you minimize the downside , but you are opening up the window to getting expertise that you might not otherwise have . And I think it does reduce your blind spots at the end of the day and allows you to make more informed decisions .

And , as you know , as a constant theme , time is the enemy . You don't get the time back . You know you make a bad decision . You know there's time and there's costs . And you know and people , you know people look at runway but they forget about overhead , overheads , that silent killer .

So you know again , you do want to minimize your overhead and fractional organizations do extend the cash runway .

Well , I think maybe for all these reasons that Alan Shaw has been and expounding on this episode of the Business of Biotech , maybe it makes sense for us to do some fractional leadership hiring . What do I need to be careful about ?

As I mentioned , many experienced professionals are adopting a portfolio to their careers in life sciences and I think , as a consequence , you know , there's a body of work that can be evaluated as well as you talk to them . So , you know , I think a little reference check is helpful .

I think , looking at their body of work and you know I would be probably more focused on not necessarily the references that they live in I think , you know , just identifying people who may have crossed paths with this person that's in your network is also a very valuable way of independently vetting a person , whether it's fractional or whether it's full-time .

I've spent my entire career in the publishing industry and I've worked as a full-time employee , I've worked as a contract employee , I've been , you know , an independent contractor and even in publishing I've had to sign a lot of IP agreements , non-compete agreements . In this biotech space , IP is so fiercely protected and so important .

Considering when they're saying like hey , I might bring Alan Shaw in as a fractional CFO , not knowing necessarily whether Alan Shaw is also being a fractional CFO for my biggest competitor , Someone else is playing in the same indication . I'm in with a very similar molecule .

But I think , as a general rule , I think the protections or the safeguards taken for fractional leadership are really similar to those for full-time hires .

Their standard agreement should include confidentiality clauses , there should be indemnification , non-poaching of employees and clear terms for company ownership of any inventions or intellectual property developing during the engagement . So you know , you want to kind of preempt issues of dispute and really clarify .

It should be clarifying and so that's very definitive and these things are done for when you hire a full-time employees .

He's been doing good work for me fractionally it might not be a smart thing to do to go ahead and transition you into the CFO role from a full-time , from a fractional role . So when does it make sense , like what's the writing on the wall that says you know what ? It's time , it's time to transition this guy into my full-time position .

And I think it's also a good time to also just generally evaluate what other gaps do I have in my organization that need to be addressed ?

And you know , just as an organization evolves , I'd also call out that you know sometimes you're confronted with organizational obsolescence where the organization has grown quicker than the people and you want to get in front of that as well .

You know it has implications on the culture , it has implications on execution and , as a company is growing , you know if you can recycle folks and put them in an area for success as opposed to them being an impediment as the organization evolves , you know that's it can be a win-win for everybody .

In respect to the why the why is transitioning at this stage helps leaders to be proactive rather than reactive , avoiding the mistakes of trying to save money in the short term while potentially causing bigger problems in the long term .

You know , I think at the end of the day , you can either allow external factors to manage you or you can do a better job of managing external factors to help derive the outcomes that you're working towards yeah , what uh ?

That's like an important , important part of this was hiring strategy , and particularly the frat . You know , the fractional part is super fascinating to me , but is there a facet that we we didn't beat on hard enough or at all ?

You know , I think it would be important to emphasize that you know these aren't races but these are a marathon , and that you know you need to kind of thoughtfully think about your development plan and think about how you go about filling the gaps .

I think you know , I think we go back to the beginning of this thing in terms of decision-making and I think , at the end of the day , people make good decisions with good information and the best way to minimize , to mitigate the risks that the industry and the drug development pathway has .

I think it serves everyone well to make sure that you have the right thought leadership available to execute .

You know you're , you're always a good sport to keep coming back on here and subjecting , subjecting yourselves to these interviews , uh , and I always have a fun time doing it . So , uh , thank you Lots of insight there . We appreciate it .

Backslash B-O-B . And in the meantime , we'll see you next week . Thanks for listening you .