This product has already been purchased.
Developing life-saving technologies comes with unique governance challenges. Four sector experts outline the key stressors directors must navigate and the lessons that are relevant to every boardroom.
No-one sitting on the board of an ASX-listed life-sciences sector company complains about the regulatory scrutiny they’re under. The road to innovations that can change human lives for the better has unique speed humps and dead ends along the way.
“The sector is complex,” says Dr Tim Boyle GAICD, CEO of ARCS, the peak professional body for life sciences professionals in Australia.
“Normally, commercialisation of a product is a pretty narrow, linear path — discovery of an invention, protecting the invention, developing a product around it and taking it to market,” explains Boyle. “In life sciences, a lot of product development is human-centred research — clinical trials to make sure it’s safe.”
Innovation in a complex regulatory landscape
Hitting critical milestones to attract investment is more involved than non-medical tech. “There are complicated regulatory requirements around the assets you’re commercialising,” says Boyle. “It takes up to 20 years, which is also the length of time the patents afford for the technologies in this space.”
This affects governance, a point Boyle wants prospective directors to understand. “It’s not necessarily governing from cash flow and sustainability risk — governance is around optionality,” he says.
“Rather than a single operating plan, there will be a sequence of strategic options to navigate the commercialisation pathway.” Options can range from whether to continue on with development, partner, license, spin out, pause, pivot or exit.
“There’s significant risk and it’s not just scientific and commercial,” says Boyle. “There’s also regulatory risk and execution-related risk that board directors from other sectors might not appreciate.”
Professor Arthur Brandwood GAICD, who is on the ARCS board, has worked in medtech startups for some 40 years and serves on several medical device company boards.
“The very nature of these early-stage medical device companies is they’re always under a lot of financial and technological stress,” he says. “They’re short of funding and always out raising money. They’re developing experimental products with an uncertain future and they’ve usually got no revenue.”
Add to that the necessary but punishing long timelines. “Peter Farrell, the colourful character who founded Resmed, used to call it the 4:2 rule,” says Brandwood. “It’s essentially that medical device development costs twice as much and takes four times as long as you originally thought it would; or you can make it take only twice as long, but then it will cost you four times as much!”
Assembling the right experience mix for life sciences boards
Along the way, Boyle says that life sciences companies need to regularly review and recalibrate the make-up of their boards. “Many ASX-listed asset life sciences companies have highly concentrated ownership with shares held by a small team of people. That creates its own governance implications,” says Boyle.
Often founders have very little governance experience, adds Brandwood. “In the early stages of these companies the directors are the very scientists and engineers who’ve come out of university to start the company — and they’re not trained directors, yet they’re operating in a highly regulated environment with human clinical trials and requirements for safety testing. It’s a high-stress environment for a director.”
As distinct from the organisations supporting medtech and biotech corporates, ARCS supports individuals working in life sciences, including by providing sector-specific guidance and education for serving and prospective directors.
“ASX directors who have the traditional legal, compliance and finance backgrounds might not fully understand the complexities of a life sciences company and the risk,” says Boyle. “I’ve spoken to directors who’ve told me if they’d known the risk they’re assuming going onto those boards, they may not have taken them on. ARCS can help directors go into roles on boards for life sciences companies with their eyes wide open.”
.jpg)
Patient safety — and director risks
The politically stable, well-regulated and resourced Australian ecosystem is also attractive to multinational biotechs, including for clinical trials. “Participant safety and research ethics risk are the first and foremost considerations for directors,” says Anita van der Meer GAICD, a former vice-president of ARCS and a non-executive director with several biotechs, including Linear Clinical Research.
“People volunteer their time and their bodies to participate in scientific development that will hopefully one day improve outcomes for people more broadly,” she says. “They take significant risk, particularly if they’re participating in first-in-human research where a novel therapy, drug or device is trialled in people for the first time.”
Directors also need to be aware of the high failure rate of tech development. “The idea of the product may be fantastic, but does the company have the skillset to bring that product forward?” asks Dino Cercarelli, a medical scientist and now a NED with Patrys after his company Reliis was acquired by the ASX-listed biotech.
Directors must consider what happens if a product fails at any stage, from patient safety to regulatory approval, and have a clear pivot strategy, he says.
As Reliis grew, Cercarelli was at pains to ensure its directors, especially those without a deep scientific sector background, had the risks in sharp focus. “If it fails, how’s it going to fail, and what are our pivot points?” he asks of the considerations.
“That maturity in the company and the board doesn’t just happen. We brought commercialisation expertise into the company and spent a lot of time onboarding our directors. They should ask all those questions.”
Lessons for all directors
“Working in startup ventures of any kind, in any space you will almost inevitably come to the point where you’re running out of money and running into risks of trading insolvent,” says Brandwood. “Professional directors know how to manage that and how to work under safe harbour."
ARCS is striving to ensure all directors working in its sector are equipped with the knowledge to do the same. “We’re lifting the bar of professionalism across the health innovation space,” he adds.
Yes, there are risks and challenges aplenty, but that’s offset by the sense of purpose that comes from working in these companies, says Boyle.
“Profitability, sustainability and shareholder value are all great things, but people working in life sciences have great passion for what they do — building products and services that are interventions or treatments for people who are suffering or have medical needs.”
Latest news
Already a member?
Login to view this content