Film and pharma, like many creative endeavors, exist in a world of power law economics, where a handful of exceptionally successful products account for a massively disproportionate share of the total revenue. 

Consequently, in both domains, there’s a powerful incentive to “pick winners.” Every studio head and every R&D leader tries desperately to do this. 

But there’s a problem: as screenwriting legend William Goldman (The Princess Bride, All The President’s Men, Butch Cassidy and the Sundance Kid) famously observed.

“Nobody knows anything.”   

The full quote, from Goldman’s classic 1983 memoir, Adventures in the Screen Trade, continues, “Not one person in the entire motion picture field knows for a certainty what’s going to work. Every time out it’s a guess and, if you’re lucky, an educated one.”

Similarly, distinguished physician-scientist and former head of R&D at Merck, Dr. Roger Perlmutter, bluntly acknowledges, “we have no idea what we’re doing,” adding, “It’s a bloody miracle if you ever make a drug that works.”

Revenue predictions in pharma ahead of launch are also notoriously difficult to predict, as studies by both BCG and McKinsey have affirmed. Earlier stage (pre-Phase 2) forecasts – the sort of thing former NIBR head Mark Fishman wisely banned, but current management has reinstated – seem especially fraught (see here).

Yet beneath this truth lie two conflicting realities.

1. As appealing as the narrative of drug development moving gracefully between biology and clinic is, with “line of sight” thinking and guided by a target product profile, the actual process tends to be far messier, particularly in the case of novel mechanisms;
2. Even though a huge number of lucky breaks are required to achieve a blockbuster, this does not mean that such success is simply random, equally available to anyone who buys a lottery ticket.  Talent, taste, and teamwork are vital as well, not to mention judgement and determination. 

The real lesson is that in power law domains like film and pharma, success is incredibly difficult to achieve.  You need both a huge amount of good fortune and a team that actively seeks opportunities to benefit from serendipity.

A good team has the mindset, competence, and agility to leverage effectively whatever luck comes their way. 

Path To A Blockbuster Drug: Messier Than You’d Think

In a fascinating recent interview, R&D productivity scholar Jack Scannell (of Eroom’s Law fame) discusses what might be called the noble lie of drug development: the conceit that we have the ability to understand adequately and domesticate reliably biology. Nassim Taleb and I wrote about this in the Financial Times in 2008.

Scannell explained that to advance a candidate medicine in a drug development organization, you need a very clear and crisp story of why you think it’s going to work, in order to compete successfully for resources.  He also notes that every time a drug is successfully developed, there’s always a just-so story explaining why the process worked.

The problem, Scannell accurately points out, is that these narratives evolve over time – an approach that in retrospect seems logical and methodical (and hence, presumably, repeatable) yet was almost certainly far less structured and streamlined in practice. 

If there’s a canonical path for drug development, many first-in-class medicines never got the memo.  Scannell cites the example of anti-TNF drugs, which were initially developed for sepsis; they didn’t work.  Only later were anti-TNF candidates tried in inflammatory conditions like rheumatoid arthritis; products in this category today include Humira (cumulative global sales of around $200B) and Enbrel (cumulative sales of around $74M as of 2021, estimated to hit $100B by 2029). 

Similar examples abound.  Botox (as I’ve discussed, see here, here) was originally developed and FDA-approved as a medicine for strabismus; sildenafil (Viagra), famously, entered clinical trials as a potential treatment for angina.

Pembrolizumab (Keytruda), Merck’s blockbuster oncology drug, as I discussed in depth here, was initially developed by researchers at Organon Pharmaceuticals in Oss, the Netherlands, as part of a hunt for an inhibitor of the immune system to help patients with autoimmune disease. 

When a stimulator (technically, an inhibitor of an inhibitor) was discovered instead, researchers contemplated a range of uses including as an anti-viral medicine and as a vaccine enhancer, before setting on developing it as a potential cancer medicine.  Even so, it was effectively invisible to the R&D leadership of multiple companies for years, including Merck which was on the edge of out-licensing it, only pulling it back in at the last moment. 

Or consider my former employer, Takeda, which acquired Millennium Pharmaceuticals in 2008 for $8.8 billion in order “to bolster its cancer drug business,” according to Reuters. At the heart of this transaction was bortezomib (Velcade), a cancer drug Millennium acquired when it bought Leukosite in 1999 for its pipeline, most notably a share the drug Campath (later sold to ILEX which was then acquired by Genzyme).  At the time of the acquisition, Millennium “had no interest in bortezomib,” and was effectively unaware of its existence. 

Leukosite, for its part, had acquired bortezomib from a company called ProScript after it ran out of money; ProScript, meanwhile, began life as Myogenics, a company co-founded in 1993 by Harvard scientists Alfred Goldberg, Tom Maniatis, Kenneth Rock, and Michael Rosenblatt.  The company was focused on targeting the proteosome, which is involved in protein degradation.  The original goal was to help treat disorders of muscle wasting, hence the name.  But in 1994, after a compelling conversation with Israeli researcher and future Nobel laureate Avram Hershko, the startup’s head of research, Julian Adams, decided to pivot to cancer (and change the company’s name to ProScript). 

As Goldberg later reflected, “Most scientists do not realize how the progress of drug development depends so much on nonscientific issues and random events — and luck.” 

The broader point is that while both Velcade and Keytruda are important oncology medicines ultimately developed successfully by Millennium and Merck, respectively, the origin and early evolution of each was incredibly messy, and effectively the antithesis of the carefully scripted process we might have been tempted (or seduced) to imagine. 

Similarly, anti-TNF medicines weren’t initially developed to treat rheumatoid arthritis, Botox wasn’t developed to treat wrinkles, sildenafil wasn’t developed for erectile dysfunction. Moreover, as Morton Meyers documents in Happy Accidents (see my discussion here), many categories of medicines used in psychiatry were originally discovered through astute clinical observation rather than deliberate drug design focused on the particular indication.

Path To A Blockbuster Film Franchise: Messier Than You’d Think

The Marvel Cinematic Universe (MCU), featuring Spiderman, X-Men, Iron Man, The Hulk, Thor, Captain America, Black Widow, and many others is the single most successful franchise in movie history, netting nearly $30B in global box office so far, and much more in associated licensing.  These are impressive numbers even by pharma standards.

Much like the eventual success of Keytruda and Velcade, the triumph of the MCU was hardly inevitable, as a fascinating new book, MCU, and an engaging Wall Street Journal podcast series, “With Great Power,” both reveal.

Marvel Comics, founded in 1939 as Timely Comics, enjoyed its heyday in the 1960s, as writer Stan Lee led the development of such memorable characters as the Fantastic Four, X-Men, Spiderman, Ant Man, and Iron Man, among others.  After a series of financial transactions starting in 1968, Marvel wound up in the hands of corporate raider Ronald Perelman in 1989.  Perelman, in turn used the company as a vehicle to acquire other companies including a sports card company and a sticker company, loading up Marvel with extensive debt. 

In 1990, Marvel sold licensing rights to ToyBiz, a company owned by entrepreneur Ike Perlmutter, an emigree from Israel who had made his fortune in the U.S. as a liquidator, buying products from failing businesses and selling them to consumers at a small markup.  The profits from this enabled him to acquire and turn around distressed companies instead of products; for example, he acquired and later flipped Caleco to Hasbro, pocketing $40 million in the process. 

In 1990, Perlmutter acquired the struggling toy maker ToyBiz, and hired inventive toy creator Avi Arad (another Israeli emigree) to help the company come up with new products.  Having watched the sales of Batman toys go through the roof with the release of Tim Burton’s Batman in 1989 (ToyBiz had a non-exclusive license to DC characters), Perlmutter pursued and acquired the exclusive rights to Marvel characters from Perelman.  The sales of these were sufficiently encouraging to encourage Ike to strike a new deal with Perlman in 1993: Marvel would get 43% of ToyBiz and in exchange, ToyBiz would gain exclusive licensing rights for all Marvel characters into perpetuity.

To support Marvel’s struggling balance sheet in 1993-1994 – and to stimulate the sale of toys – Marvel, in a deal led by Arad, sold the movie rights to X-Men and the Fantastic Four to 20^th Century Fox. But Marvel couldn’t stave off the inevitable, and in 1996, the company declared bankruptcy, with the intention of restructuring their debts.   

Unexpectedly, a fight ensued between Perelman and another well-known corporate raider, Carl Icahn.  In 1997, ToyBiz abruptly parachuted into the middle of this dispute with an unsolicited offer of their own to acquire Marvel, showing up uninvited to a meeting of creditors to make their pitch.  After a lengthy legal fight, ToyBiz was awarded the business in 1998. 

The future of Marvel was now in the hands of a toy company.

Desperate for cash, Perlmutter soon cut a deal for Spiderman with Sony (who already owned a sliver of the rights, from an earlier tractions).  Marvel received $10 million plus 5% of the profits – in addition to whatever they made from any Spiderman-related toys.  The movie, which came out in 2002, did fairly well, achieving a box office of more than $100 million.  When Perlmutter saw this, he was furious, and decided he gave away too much to Sony in this transaction. 

In 2003, a savvy young business whiz named David Maisel met with Perlmutter and floated what was a radical idea at the time: perhaps Marvel could make its own movies, rather than just license the rights to others.  By controlling the production, Maisel said, they could better coordinate the timely development and sale of movie-related toys, which was always what Perlmutter saw as the key source of revenue. 

Maisel eventually persuaded Merrill Lynch to provide $525 million, enough to make two movies; as collateral for this, Marvel offered up movie rights to a broad portfolio of their characters.  After conducting focus groups with children, Marvel decided that the most popular toy would be one based on Iron Man, and so this was nominated to be the movie they filmed first.

Overseeing this project would be a Marvel fanatic named Kevin Feige, who was hired by Arad in 2000 after seeing Feige’s contribution to an X-Men movie that was made in the late ‘90s and released in 2000, produced by Lauren Shuler-Donner, for whom Feige was working as an assistant at the time. 

Feige and Maisel, in turn, both selected Jon Favreau to direct Iron Man. This was critical to the movie’s eventual success, not least because Favreau identified Robert Downey Jr as the ideal actor to portray Tony Stark, and then passionately advocated for him despite Perlmutter’s strenuous objections (Downey was considered a risky choice because of his well-known history of substance abuse). 

Favreau eventually won, Downey joined the cast, and other talented actors and crew members were soon drawn by Downey’s presence.  Downey turned out to be perfect for the role, the movie was an enormous success, and the franchise was launched, steered by Feige’s vision for an integrated series of films all taking place in a coherent universe – the MCU.

Interestingly, Favreau got the opportunity to direct Iron Man in part because of his success directing the 2003 Christmas classic Elf, starring Will Ferrell. Favreau had heard about Elf in 2001 when he was guest directing an episode of a TV show called Undeclared, created by Judd Apatow, who shared a manager with Ferrell.  The TV show opportunity, in turn, resulted from the success of his 1996 cult classic, Swingers – a film that he wrote in less than two weeks after his dad sent him screenwriter software and for amusement, he thought he’d try it out. 

Favreau barely managed to get Swingers financed (ultimately a friend of the director’s father ponied up $200,000). He struggled to film the picture on this tiny budget, relying on friends, spare supplies, and unpermitted locations often requiring guerilla filming tactics to complete a take rapidly before he was kicked out.

In short: the MCU was launched from the success of Iron Man, driven largely by the appeal of Robert Downey Jr, who was cast only because director Jon Favreau had insisted, and Favreau was in the director’s chair only because of a remarkable series of fortunate events. 

Contingent but not Random

While the successful development of blockbuster movies and medicines clearly requires a huge number of unplanned and perhaps unplannable things to go right, their successes, critically, are not random either. 

Luck may be necessary, but it’s hardly sufficient.

The launch of the MCU, for example, clearly involved an exceptional amount of luck but it also required extremely talented people, in this case a balance sheet-focused business executive, Ike Perlmutter, joined by the creative Avi Arad; a visionary finance strategist, David Maisel; an imaginative, ultra-high-EQ subject matter expert, Kevin Feige; and a director with great taste and an expansive network, Jon Favreau. 

It would be a mistake to attribute the coalescence of this team to dumb luck.  Feige, for example, had attended film school at USC after applying six times (he was rejected the first five), and then pursued an internship with the Hollywood power couple of Laura Schuler-Donner and Richard Donner (Richard had directed the 1978 film Superman, starring Christopher Reeve). 

Maisel, drawn to the entertainment business, had apprenticed with legendary superagent Michael Ovitz after first attending Harvard Business School and spending time at the Boston Consulting Group.  Favreau, meanwhile, had spent years hustling in Chicago and Los Angeles as an aspiring actor and director; bit parts include “D-Bob” in Rudy (1993), and “Eric the Clown” on an episode in the fifth season of Seinfeld (1994).

In Outliers (my WSJ review here), Malcolm Gladwell discusses underappreciated factors that can contribute to success, such as hours of practice and hard work.  As I noted, “For the Beatles, the hard work of marathon engagements in Hamburg’s red-light district early in their careers was crucial. ‘By the time they had their first burst of success in 1964,’Mr. Gladwell writes, ‘they had performed live an estimated twelve hundred times. Do you know how extraordinary that is? Most bands today don’t perform twelve hundred times in their entire careers.’”  Similarly, Bruce Springsteen, in his captivating autobiography, cites his years of experience in a bar band as critical for his later success. 

Seth Stephens-Davidowitz, in Don’t Trust Your Gut (see my discussion here), also examines how artists can increase their exposure to serendipity by getting themselves out there rather than waiting to be discovered.  Maisel, Feige, and Favreau, in evolving their careers, all seem to have chosen, deliberately, to put themselves in the path of serendipity, maximizing their chance to get lucky.  Maisel worked with Ovitz, Feige went to USC film school and then worked with Schuler-Donner, and Favreau keeping himself in the mix as an actor (and later director), as frustrating as that must have felt for most of his early career.

The success of Keytruda and Velcade, also, required more than just good luck.  While Merck’s head of R&D Roger Perlmutter wasn’t responsible for the Keytruda’s discovery and early development, he soon recognized the promise of the drug, and ensured Merck was all-in on its development, independent of whatever his (and Merck’s) preexisting strategic plans might have been. Similarly, the championing of Velcade by Julian Adams was essential to its development — not least his role in persuading a skeptical Millennium to resource it after the acquisition of Leukosite.   

What Is To Be Done?

On an individual level, it seems like a good idea to stay in the mix as much as possible, not least because the people you work with on a failed program today might be some of the same people you might work with on a successful drug tomorrow, and the skills and instincts you develop along the way in the trenches enable you to become increasingly effective, assuming you are curious, industrious, and collegial.

On a company level, it’s more complicated. Most large pharmas are built around a degree of planning and projection that works beautifully in Excel and Powerpoint.  However, the approach generally doesn’t meaningfully acknowledge, much less come close to describing, the messy reality of novel product development. 

This discrepancy suggests there must be an incredible arbitrage opportunity here for more agile leaders and nimbler organizations, and presumably this is what venture-backed biotech start-ups are effectively doing. It’s not surprising to learn that only a quarter of new approvals in big pharma originated in-house, and unless big pharma can truly figure out how to industrialize and brute-force innovation, I’d be surprised to see big pharma’s in-house number go anywhere but down.

Stay Humble

It seems only appropriate to conclude a piece around uncertainty with several humbling reminders.

As Judah Folkman, a pioneering surgeon-scientist and a great champion of innovation at Harvard famously observed, “If your idea succeeds, everybody says you’re persistent. If it doesn’t, you’re obstinate.”  

In other words: to pursue any idea, at some point, you have to just put your head down and go after it; the problem is you have no way of knowing until afterwards whether you were right.

This lesson has particularly poignancy in the case of Folkman, who is perhaps best known for advancing the thesis that to grow beyond a certain size, cancers need to acquire their own blood supply, and if you can inhibit the grow of new blood vessels – for example, with drugs targeting VEGF — you might be able to starve and kill cancers.

It now seems, as Scannell points out in his interview, that these anti-VEGF cancer medicines, like Avastin, might work in other ways. As MGH cancer researcher Rakesh Jain wrote in 2014, these “agents could transiently ‘normalize’ the abnormal tumor vasculature, resulting in improved blood perfusion,” and helping other anti-cancer treatments (both drugs and radiation) work better. 

Thus, the medicines Folkman was championing might work, but perhaps not for the reasons he thought.

We might give the last word to former Pixar CEO Ed Catmull, who wrote an entire book, Creativity, Inc., about the challenges of serial creativity, and the need to successively reinvent yourself each time (see my discussion here). 

While readers “often thanked him for sharing his formula for surefire creative success,” the Wall Street Journal reported in 2023, the book conspicuously makes the opposite point: there isn’t “a template” for success – at best, he allows, there is perhaps “a way of thinking.”

Catmull’s insight bears repeating: inconveniently, there just isn’t a ready formula for creative success.  Catmull was talking about original movies in particular, but he could just as easily have been discussing original books, songs, drugs, or even venture investments, which all obey power law dynamics. 

Even if you are part of a team that has delivered an outsized success, or the CEO of the organization responsible, it doesn’t mean that you can now apply what you’ve learned and simply do it again, or that your organization can now apply these tidy “lessons learned.”  

I find it liberating to recognize that there isn’t a secret formula for innovative success in pharma (or any other creative domain ruled by the power law).  It means we don’t need to distract ourselves wondering whether we are doing it “right,” or worry if we’re not following the putative example of previous successes (which would be particularly misguided given the post-hoc narrative biases Scannell describes). 

Novel, impactful medicines – like novel, impactful films – are incredibly difficult to create, and require an exceptional amount of luck. 

What we can control, however, is how we approach this challenge:  with authentic intellectual curiosity, and colleagues who are talented, inquisitive, and nimble, approaching their work with conviction yet able to pivot in response to new information. 

True, we may not succeed.  Yet as screenwriter Charlie Kaufman observed, “If you don’t risk failure, you’re never going to do anything that’s different from what you’ve already done or what somebody else has done.” 

Pharma colleagues: does this complaint sound familiar?

This company is too bloated. It’s too slow. We have all these layers and layers of bosses where leaders at the top would decide on the strategy, and then it would just trickle down to the people who actually did a lot of the day-to-day work…. I am 10 layers below the CEO and I have ideas for how this company could be better, but they’ll never be heard because there are just so many people above me who are making those decisions.

According to Wall Street Journal reporter Chip Cutter, it’s exactly what newly installed Bayer CEO Bill Anderson heard when he joined the company last June and embarked on a listening tour.

A seasoned pharma veteran who was previously CEO of Genentech and then CEO of Roche Pharmaceuticals, Anderson had become “disillusioned over the years by the many approvals and endless rounds of meetings required to get anything done at large companies,” Cutter reports.

Anderson heard the same gripes at Bayer.  He was told that “launching a new product takes years instead of months,” Cutter writes.  “Disputes between departments take too long to resolve. He learned that company rules and procedures fill 1,362 pages, he said, ‘longer than War and Peace, and a lot less exciting.’”

At the same time, Cutter also points out that “Modern corporate hierarchies have persevered because they largely work and attempts to subvert them haven’t.”

Nevertheless, Anderson is trying to “rewire” the company culture, focusing on “fewer bosses, fewer rules.”  The plan – built around a principle Anderson calls “dynamic shared ownership” — involves self-assembling groups of employees deciding on priorities, and working together to accomplish projects for 90 days, and then repeating the self-assortment process. 

The idea, as “The Journal” podcast co-host Ryan Knutson explains, is “to empower employees to make big decisions without having to get the approval of layers and layers of management.”

To guide the process along are leaders/advisors, in roles called “’visionaries,’ ‘architects,’ ‘catalysts’ and ‘coaches,’ positions focused on longer-term strategy and guidance-giving,” according to Cutter.

It’s a radical departure from the usual way of conducting business in large companies, Anderson recognizes.  “The first go round, it’ll be a little messy,” Anderson says, “but that’s okay because the thing is, the thing we’re comparing to is a system that doesn’t work very well. So this is the thing. We don’t actually have to be that good to beat the current system.”

Cutter describes an example of the new way of working, focusing on a self-assembled team focused on expediting the launch of a new line of vitamins.

The team didn’t spend time creating a polished PowerPoint presentation to show company higher-ups. Executives were instead periodically invited to the Garage [a dedicated innovation area] to look at designs and ideas on the walls and offer any suggestions.

Typically, the timeline for a product launch takes into account the multiple layers of approval needed for each stage of the rollout. If eight people gather from different departments, each of them would spend much of their time getting their individual bosses to sign off on an idea.

“They’ve got to convince eight people,” Anderson said. “And when one or two of them says, ‘No, no, actually, I like this better,’ then the other six have to go back and convince their managers about the new plans.”

Not any more, Anderson said, gesturing with cupped hands and making the sound of an explosion. 

The team “hit its mark,” Cutter writes.  “Bayer’s new line of One a Day vitamins, packaged in a palette of pink and purples, went on sale in March, a year ahead of schedule.”

As Cutter observes, “Anybody who has gotten an early taste of this, a lot of former CEOs, management thinkers, and others, they are all captivated by what happens here because Bayer is touching on problems that are so familiar throughout corporate America and so if this works, it could be dramatic.”

The Challenges of Scale, The Drive For Control

Whether or not Anderson’s solution sticks, he is unquestionably getting at a real problem in large corporations: the tendency of entrenched bureaucracies to inhibit agility and dampen innovation (or, to put a somewhat finer point on it: to crush the souls and extinguish the spirit of often highly innovative employees drawn to industry by the desire to have an impact and make a difference).

This challenge also is highlighted in my favorite management book: former Pixar CEO Ed Catmull’s Creativity Inc., as I’ve discussed here.  (An expanded edition was recently released, as Catmull discussed with the WSJ here.)

As Catmull sees it, “full creative engagement” requires us to “uncouple fear and failure – to create an environment in which making mistakes doesn’t strike terror into your employees’ hearts.” 

This sounds great as a mantra, Catmull acknowledges, but in practice, managers also are typically told “the success of our enterprise depends on your group doing its job on time and on budget.”

Consequently, he says, if managers “have to choose between meeting a deadline and some less well-defined mandate to ‘nurture’ their people, they will pick the deadline every time.”

Managers, Catmull explains, “typically want two things: (1) for everything to be tightly controlled, and (2) to appear to be in control.”

And now we get to the crux of the issue:

But when control is the goal, it can negatively affect other parts of your culture.  I’ve known many managers who hate to be surprised in meetings, for example, by which I mean they make it clear they want to be briefed about any unexpected news in advance and in private.  In many workplaces, it is a sign of disrespect if someone surprises a manager with new information in front of other people.  But what does this mean in practice?  It means there are pre-meetings before meetings, and the meetings begin to take on a pro forma tone.  It means wasted time.  It means employees who work with these people walk on eggshells.  It means that fear runs rampant.

I suspect most pharma veterans will recognize these behaviors.  (See also Safi Bahcall’s Loonshots – my WSJ review here, and additional biopharma discussion here.)

The question is whether these patterns of behaviors are inextricably tied to the smooth functioning of massive sprawling corporations, with their need for alignment, their reliance on hierarchy, and their instinctive prioritization of tight control to drive consistency, efficiency, repeatability, and standardization? 

One alternative, presumably, might be a more trust-based cultivation of originality and creativity that Catmull champions. 

There are other challenges related to company size: in a smaller organization, the relationship between your individual contribution and the mission and success of the company is much easier to discern, and often immediately palpable.  But in massive, incredibly complex companies, most of the time, your sphere of control can feel far removed and often detached from the overall trajectory of the company as a whole.  Hence the tendency to keep your head down and focus exclusively on your specific deliverables, which you rely on to maintain your bearing.

Adding to the challenge, employees in large companies typically operate in the disorienting miasma of corporate buzzwords and platitudes, constantly repeated. 

Terms like “innovation” tend to be invoked so often, and applied to the most pedestrian activities, that they quickly lose all meaning in what can feel like a “Successories”-inspired world.   Minor accomplishments, particularly those in line with high profile management initiatives, receive outsized recognition, and highly burnished “success stories” are celebrated and socialized. 

One result of all this is a remarkably hermetic environment within large companies, sort of an alternative, self-consistent universe with its own rules and customs, sustained in large measure by the established structures and defined hierarchy.  Truth is what your manager, and his or her manager, says it is, and you challenge these orthodoxies at your peril.

Speculation

First, I’d argue that big companies lean into process and control because it feels more reliable and scalable than creativity.  Indeed, Catmull’s core thesis, as he tells WSJ reporter Emily Bobrow, is precisely that there is not a “formula” for success, and you need to reinvent yourself creatively each time. 

As I’ve frequently noted, this is the exact antithesis of what anyone in large pharma companies wants to hear or is prepared to hear.  Instead, pharmas characteristically overindex on perceived “success factors,” and may doom future projects by applying with excessive rigor the putative lessons learned from previous blockbusters.

Second, big pharmas will continue to search for tools (including potentially AI) that essentially enable them to leverage their size and process, and industrialize innovation. This basically means they seek to use brute force to produce superior medicines.  So far, based on the high fraction of pharma products born elsewhere, this hasn’t proved especially successful, but the hope is always there.

Third, since I don’t think the cultures of most big pharmas are likely to change meaningfully, I anticipate we will continue to see the pharma version of “the big sort,” the demographic self-assortment that leads to the geographical clustering of like-minded people (e.g. progressives moving to blue states and conservatives moving to red states).  Drug developers who find comfort in process, control, caution, and stability will migrate to and remain in large pharmas, while those who prefer living a bit out over their skis will choose smaller biotechs – provided market conditions enable early-stage companies adequate opportunity to find their footing.  

Most of the top creative physician and scientists I know in drug development are now working in small biotechs – often after previous roles in large pharmas. We have seen a long-term trend of talent migration from large pharma to startups – see Luke’s column from September 2017 on “How’s It Going for Big Pharma Vets at Startups?”

Fourth, remember that while smaller biotechs may be more innovative (or at least embrace more risk), most drug development efforts fail; even with the most creative people in the most supportive environment, science is incredibly, unfathomably, brutally unforgiving.  The single biggest advantage big pharmas have (see here) are the resources to remain in the game long enough to absorb the many inevitable failures – and then run with the very rare success, whenever it arrives.  

Even the most innovative small biotechs struggle to remain independent, and are generally acquired by big pharmas; Genentech, memorably, was fully acquired by Roche in 2009. 

Pixar, incidentally, was no different.  As Pixar Chair and majority shareholder Steve Jobs told Catmull when Jobs was contemplating a sale to Disney, “Pixar is a yacht.  But a merger will put us on a giant ocean liner, where big waves and poor weather won’t affect us as much.  We’ll be protected.” 

The challenge, of course – for Genentech, Pixar, Waze and others — is sustaining their distinct creative culture in the context of the larger corporation. 

Not surprisingly, as Bruce Booth of Atlas Ventures has described, a lot of top R&D talent tends to recycle into the startup ecosystem after an acquisition.  Given the challenges of maintaining (much less retroactively establishing) a culture within large pharmaceutical companies that truly supports creativity, let’s hope market conditions sustain and foster the virtuous cycle Booth describes, as this may most effectively enable the continued, essential cultivation of genuine innovation in the life sciences.