There are two potential ‘valleys of death’ for R&D spin-off companies. One is in translating their research concepts into prototype products. The other is in maturing from prototype to full commercialisation.
Here, leaders of the Top 25 Science Meets Business R&D spin-off companies answer the question: Which valley of death was most difficult for your company, and what was key to getting over the hurdle?
“Taking the prototype through to full commercialisation was probably more difficult for us due to the complexities involved.
This included high-tech scale-up manufacturing, which we do at our bio-manufacturing facility in Malaga. Today, we have the ability to expand production as necessary, as well as refine and develop our processes in-house to accommodate new products and product improvements.
There was also a focus on generating sales once CardioCel was commercialised. Just because a product is approved doesn’t necessarily mean that it will be used straight away by the intended customers.
We’ve focused on educating the market about the benefits of CardioCel, such as its biocompatibility and lack of calcification (hardening) at the site of surgery. We’ve also built a strong global sales and marketing team who work closely with our customers to understand their needs.
As a result, we’ve seen continued quarter-on-quarter growth in CardioCel sales, and the product is now used in over 135 heart centres globally.“
– Dr Julian Chick, Chief Operating Officer
“For pharmaceuticals the so called ‘second valley of death’ is by far the most significant.
Lack of funding often prevents companies from attempting to cross this valley and causes them to license their technology at an earlier stage and to realise rewards as the licensor takes their innovation to market.
For a small company with limited resources, the key to success here is to understand the commercialisation risks, link the higher-risk projects with partners and try to make that step themselves for markets with lower entry costs and higher clinical need.
If done well, they should end up with a portfolio approach with the risks mitigated but still significant opportunity for value appreciation.”
– Gary J Phillips, Chief Executive Officer
“SmartCap Technologies had substantial industry support to develop the prototype products, however even with this it was a very challenging process to deliver working prototypes.
SmartCap was exceedingly fortunate in that CRCMining provided substantially more financial support for SmartCap than originally envisaged, enabling it to finally deploy the prototype products. Those prototypes were sufficiently effective to generate commercial interest from some large mining companies.
So despite having robust plans in place, it always helps to have access to further funding, via investors or other stakeholders with a high level of commitment as well as deep pockets, to overcome unforeseen eventualities.”
– Kevin Greenwood, Chief Operating Officer
“The biggest hurdle may be the combination of the two – translating research concepts (i.e. technical information associated with the technology) following commercialisation into an immature market.
Catapult‘s technology is not a consumer product and therefore is very high touch in terms of its service and client support. Due to the perceived complexity of the information obtained from the technology, part of the trick is to simplify the underlying research concepts to new markets that need a low touch product.”
– Shaun Holthouse, Chief Executive Officer
“I would argue that you should have a prototype – before any spin-off. That way you can at least prove technical viability of your concept. Ideally you would also have done some level of customer validation.
The next step of full commercialisation is definitely the hardest.
In our case it was a matter of finding early customers that were willing to spend time assessing the product and its benefits – even though it was too early to commit to a purchase and full roll-out. This phase was key to understanding the market and adjusting our path.”
– Gary Pennefather, Chief Executive Officer
“The first phase is the most difficult – a poor prototype will show its deficiencies later in development. A prototype needs to demonstrate a safe and efficacious profile, and that it will meet the need you have defined in the target market.”
– Michael Kotsanis, Chief Executive Officer
“Translating research concepts into clinical proof-of-concept [was the most difficult] due to the dearth of venture capital available in Australia at that time.”
– Professor Maree Smith, Executive Director of the Centre for Integrated Preclinical Drug Development and Head of the Pain Research Group at The University of Queensland
“We are in the middle of our valley of death translating our platform into the clinic and we have not yet overcome it. Data is key, but one needs the funds to produce the results! So, we are seeking investors wherever we can find them and buddying up to big pharmaceuticals who have the muscle to progress our technology.”
– Dr Jennifer Macdiarmid, pictured above with Dr. Himanshu Brahmbhatt, joint Chief Executive Officers and Directors
“Both were as difficult – but they had different hurdles. Key for both was having the right staff and people to address each hurdle.”
– Stuart Smith, Chief Executive Officer
Click here to see the full list of Top 25 Science Meets Business R&D spin-off companies.