The Secrets Behind Built-to-Last Companies

Spotlight on Stephane Bancel/Moderna

Two men sitting in chairs talking


Mayfield has a fifty year history of partnering with entrepreneurs who built iconic companies such as Genentech, Amgen, Millenium Pharmaceuticals and Intuitive Surgical.  Starting in the 90s, a lot of biotech investing moved into a model of  creating companies which built assets for other people to buy. We believe that the existing challenges of our healthcare system are not addressed when amazing companies get merged into larger companies. It’s only when we have the next generation of companies that can do things 10x or 100x better, own their commercial paths, reinvent significant parts of the ecosystem, and even do things with newer business models, that can we actually make a big impact.

In the past decade, we have seen a resurgence of the appetite to create built-to-last companies.  One of the great examples of that is Moderna, a next generation life sciences leader founded in 2011 and at the vanguard of creating a vaccine for COVID 19, which leveraged the trend of engineering biology to create a platform company.

In December 2019, I chatted with Stephane Bancel, Moderna’s founding CEO, in preparation for his participation in our Health Innovator Summit alongside the JPM conference.  He reflected on the key drivers that enabled Moderna to grow into a stand-alone leader. Here are the key takeaways from our conversation.

Building a platform company has to be part of the founding DNA:

The founding team and I very quickly agreed that it made no sense to be a one-drug company.  You cannot know if and when you can get a single molecule to work. Whereas with a platform, you can scan and you can move your investment in science, you can move the investment to manufacturing, to really build the business.  We believed that it was never going to be zero or lots of drugs. We were never worried about not having enough drugs. We always worried about, how do you learn, how do you de-risk, how do you find things, how do you get expertise.

This approach profoundly shaped company strategy, how we managed risk, our culture, and the kinds of investors we partnered with. A company with a long-term view has to manage a product portfolio (we have 20 ongoing projects with the government right now), and be willing to deal with multiple technologies for different products. It has to have patient investors, which we did by staying private for eight years, as that let us pick our investors. It has to have a built-to-last versus a build-to-sell culture. It follows a strategy of maximizing the shots on goal vs going after the drug for the largest opportunity, and mitigating risk to prove the platform out.

Balance biology risk with technology risk:

One of the most difficult things is to balance technology risk and biology risk, because if you try something with a new technology and with new biology and it fails, you will have no idea if it failed because the biology was incorrect or because the technology was not ready. And since our technology was so new, we decided not to be too cute to think we knew what application would work best. So we did six different applications, and chose to start with the one with the lowest biology risk. That way if it failed, we could be 100% certain it was because of the technology.

This led us to focus our first product on the flu, where there’s very little money to be made. In fact, many people in the biotech industry called us names. But we weren’t solving for the drug. We were solving for our platform. Because if we could get one drug to the finish line, we would be able to create thousands of other drugs.

Partnering is key to your success:

The right time to partner is basically as soon as you can partner, because how much of the initial assets you own doesn’t really matter, as you are proving the platform out. Partnering helps with validation as well as fundraising. We spent a lot of time thinking of risk, value sharing and getting validation. We have always tried to work with partners when they can help us by funding new technology discovery in new technology applications. That’s why Novartis is funding all our work in the lab. And the other example where we partner is when the biology risk is very high. AZ is running a phase two, injecting mRNA in people’s hearts, hoping to grow brand-new blood vessels in their heart after a heart transplant. We got a quarter billion dollar of cash up front. That was a lot of cash, because I had at that time, $20 million capital. So that was massive for the company, and the quality of the science we could do, and the shots on goal and so on.

You can do that if you believe you have a problem of abundance. But if you have one drug, you might make a mistake selling the company 10 cents on the dollar if it’s wrong. But if you believe you have a golden goose called a platform and you’re going to make thousands and thousands of eggs over the years, you are okay to mess up the pricing of one egg. The egg allows you the capital, the capabilities, the validation of our partner, to take risks that you would not want to take with your own capital.

Staying private can be an advantage:

Besides the benefit of picking investors who align with your vision,  staying private can also help you fulfill your destiny.  For example, CRISPR companies that went public very early on in their life cycle have faced a challenge. If you’re only doing science, people are looking at the science very closely. They are asking – You are investing too much in the science, I want to see drugs. By staying private for eight years or seven years, and being very clear with investors of the type of company we’re going to build helped us. I told people, – I’m not rushing to the clinic. I want to de-risk. I want to build the science. I want to build IP, because I’m playing the long game. I want to own a special market space. So if you want a quick drug in a clinic, don’t invest. This is the company we’re going to build. So staying private was the key strategy I think that got us to where we are today. If we went public within the first two years as a quick clinical company, it would have been a very different company when I look back today.

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