What Can Netflix Teach You About Corporate Culture?

Below is a summary of the (desired) corporate culture of Netflix, a NASDAQ-listed company with close to 2’000 full-time employees. While some aspects of Netflix’s culture are relevant to many growing companies, others are probably specific to the Internet/IT sector (e.g. relative importance of creativity vs processes).

Overall, Netflix’s so-called “Freedom & Responsibility Culture” aims to support rapid innovation and excellent execution as well as effective team work of high-performance people by focusing on the following 7 aspects:

  1. Values
    - Work with people who embody these nine values: Judgment. Communication. Impact. Curiosity. Innovation. Courage. Passion. Honesty. Selflessness.
  2. High Performance
    - The “Keeper Test” for Managers: “Which of my people would I fight hard to keep, if they told me they were leaving in two months for a similar job at a peer company?”
    - Performance is more important than loyalty or hard work, but “brilliant jerks” are not tolerated if they threaten teamwork.
  3. Freedom & Responsibility
    - Responsible people thrive on freedom and are worthy of freedom.
    - Employee freedom, instead of process focus, attracts and nourishes innovative people and allows the company to adapt to a changing environment.
    - Good processes help talented people get more done. Therefore, increase talent density and minimize complexity/rules as the company grows.
    - Example: Netflix policy for expensing, entertainment, gifts and travel = “Act in Netflix’s best interests” (5 words)
    - However, as for “free speech”, there need to be exceptions to “freedom at work” (preventing irrevocable disaster, respecting moral and legal boundaries).
  4. Context, not Control
    - The best managers figure out how to get great outcomes by setting the appropriate context, rather than by trying to control their people.
    - Exceptions: Emergencies, employees still learning in their roles or employees in wrong position.
  5. Highly Aligned, Loosely Coupled
    - Strategies and goals are clear, specific, broadly understood.
    - Team interactions are on strategies and goals rather than tactics.
  6. Pay Top of Market
    - “We endeavour to have only outstanding employees.”
    - Three tests for “top of market” for a person: What could they get elsewhere? What would we pay for replacement? What would we pay to keep person?
    - Bad Ideas: Linking pay to titles, caring too much about internal parity, giving everyone the same raise.
  7. Promotions & Development
    - Two necessary conditions for promotion: The job has to be big enough (to warrant a newly created position) and the person has to be a superstar in their current role.
    - Develop people by giving them the opportunity to develop themselves, by surrounding them with stunning colleagues and giving them big challenges to work on.

Full presentation at: http://www.slideshare.net/reed2001/culture-1798664

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U.S. Biotech Indices Reach Historic Highs

In Q1/2010, the AMEX Biotech Index (BTK) reached an all-time high at 1254, driven mainly by the performance of Intermune (ITMN, +240%) and OSI Pharmaceuticals (+92%).   >>> BTK Components

Meanwhile, the NASDAQ Biotech Index (NBI) hit its highest mark in more than eight years, at 963.   >>> NBI Components

Both biotech indices stand comfortably above their levels from October 2007 (BTK: +48.2%, NBI + 6.9%), whereas S&P500 subsectors such as energy, utilities, industrials, telecom and financials are down approximately 25-55% over the same period.

Driving forces behind the outperformance of the biotech sector include the resolution of the U.S. healthcare legislation, positive regulatory news, optimism regarding upcoming milestones and the expectation of further M&A activity.

Sources: Inside BIO Blog, BioCentury

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17 Emerging Markets To Spur Pharma Industry Growth

In the new “Pharmerging Shake-Up” report, IMS Health focuses on 17 high-growth emerging markets (with per capita GDP < US$ 25’000). Together, these countries already contributed 37% of global pharma growth in 2009. This proportion is predicted to increase to 48% by 2013.

  • Tier 1 :  China
    exp. pharma market growth 2008-13: US$ 40+ billion
  • Tier 2:  Brazil, Russia, India
    exp. pharma market growth 2008-13: US$ 5-15 billion each
  • Tier 3:  Venezuela, Poland, Argentina, Turkey, Mexico, Vietnam, South Africa, Thailand, Indonesia, Romania, Egypt, Pakistan, Ukraine
    exp. pharma market growth 2008-13: US$ 1-5 billion each

While these 17 emerging markets already accounted for 17% of the world pharma market in 2009, the world’s top 15 pharma manufacturer’s derived just 9.4% of their 2009 sales from them. China, today the 5th largest market in the world (behind France and Germany), is expected to jump to 3rd place by 2011 (topped only by the U.S. and Japan).

By and large, European pharma companies have done better in these new markets than their US-based competitors. Ahead of the pack is Bayer-Schering, deriving over 20% of their 2009 sales from the pharmerging markets (esp. strong in China). Sanofi-Aventis (e.g. Latin America) and Novartis (e.g. China, Russia) also outperformed their industry peers in these geographies.

The growth in the “pharmerging markets” is clearly driven by trends like rising GDP, better access to healthcare and improving patent and regulatory situations. However, these countries also pose their own challenges, including the dominance of local companies and brands, the high proportion of generics and the absence of adequate health insurance for many patients. In addition, some of these countries are beginning to respond to rising healthcare costs with tighter regulations, including price controls. Finally, each of these 17 markets presents a unique environment in terms of its population, healthcare infrastructure and competitive landscape.

Source: “Pharmerging Shake-Up”, IMS Health (March 2010)

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Downturn Changed LP Expectations Of Private Equity

The Coller Private Equity Barometer is a twice-yearly worldwide survey among more than 100 institutional investors in private equity. Here are some highlights from the Winter 2009-10 edition:

  • Perception of private equity has suffered
    50% of European and Asian LPs and 28% of North American LPs view PE less favorably than before the economic downturn
  • LPs have lowered return expectations
    Only 29% of LPs expect annual net returns of more than 16% from PE over the next 3-5 years, compared to 43% a year ago
  • Exit environment is expected to improve
    65% of LPs expect distributions from their portfolios to improve over the next 12 months, compared to just 4% half a year ago
  • 2010 is seen as a good vintage year
    61% of LPs expect 2010 to be a “good” vintage year, another 24% even an “excellent” one (only 2% describe it as “poor”)
  • North America is preferred over Europe for VC
    52% of LPs see North American venture capital as one of the best areas for investment over the next 2 years,  compared to just 10% for European venture capital

Source: Global Private Equity Barometer (Coller Capital, Winter 2009-10)

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Backgrounds of Top Pharma CEOs

On 1 February 2010, Joseph Jimenez will take over as the new CEO of Novartis. Unlike most of the other top 10 pharma CEOs, Jimenez has spent significant parts of his professional life outside of the healthcare industry.

Following the resignation of Daniel Vasella, John C. Lechleiter of Lilly will be the only top 10 pharma CEO with an MD or PhD degree. Most of his CEO colleagues have business or law degrees.

CEO (Company) – Education / Previous Companies

  1. Jeffrey Kindler (Pfizer)
    BA, JD  /  McDonalds, GE
  2. Chris Viehbacher (Sanofi-Aventis)
    BA (Commerce), CPA  /  GSK, PwC
  3. Andrew Witty (GSK)
    BA (Economics)  /  GSK
  4. Joseph Jimenez (Novartis)
    BA, MBA  /  Blackstone, Heinz, Clorox
  5. Severin Schwan (Roche)
    MA (Economics), JD  /  Roche
  6. David Brennan (AstraZeneca)
    BA (Business)  /  AstraZeneca, Merck
  7. William C. Weldon (Johnson&Johnson)
     BSc (Biology)  /  Johnson&Johnson
  8. Richard T. Clark (Merck & Co)
    BA, MBA  /  Merck & Co
  9. John C. Lechleiter (Lilly)
    BSc, PhD (Chemistry)  /  Lilly   
  10. James M. Cornelius (BMS)
    BA (Accounting), MBA  /  Guidant, Lilly

Source: internal analysis

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Top 25 Pharma Companies

The top 25 pharmaceutical firms in the world (ranked by 2008 pharma sales):

  1. $ 44 B  Pfizer
  2. $ 41 B  Sanofi-Aventis
  3. $ 38 B  GSK
  4. $ 34 B  Novartis
  5. $ 33 B  Roche
  6. $ 32 B  AstraZeneca
  7. $ 25 B  J&J
  8. $ 24 B  Merck & Co
  9. $ 19 B  Lilly
  10. $ 19 B  Wyeth (1)
  11. $ 18 B  BMS
  12. $ 17 B  Abbott
  13. $ 17 B  Boehringer Ingelheim
  14. $ 16 B  Bayer
  15. $ 15 B  Amgen
  16. $ 15 B  Procter & Gamble
  17. $ 14 B  Schering-Plough (2)
  18. $ 14 B  Takeda
  19. $ 11 B  Teva
  20. $   9 B  Astellas
  21. $   9 B  Novo Nordisk
  22. $   8 B  Daichi Sankyo
  23. $   7 B  Merck KGaA
  24. $   7 B  Eisai
  25. $   7 B  Baxter

 (1) now part of Pfizer, (2) now part of Merck & Co

Source: Scrip 100 (Jan 2010)

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Largest Private Biotech Financings of 2009

In 2009, there were 10 equity financing rounds of private biotech companies with total volumes of USD 50 M or more worldwide. Nine of these companies were based in the United States, one in Germany:

  1. $ 145 M  Clovis Oncology (USA)
    [May 2009, Series A, oncology ]
  2. $ 77 M  Oceana Therapeutics (USA)
    [Jun 2009, Series B, specialty]
  3. $ 71 M  Zogenix (USA)
    [Dec 2009, Series B, specialty]
  4. $ 70 M  BioVex (USA)
    [Nov 2009, Series E, oncology]
  5. $ 68 M  Pacific Biosciences (USA)
    [Jul 2009, Series E, DNA sequencing]
  6. $ 60 M  Hyperion Therapeutics (USA) 
    [Jun 2009, Series C, orphan disease/GI]
  7. $ 54 M  Probiodrug (D) 
    [Nov 2009, Series B, CNS]
  8. $ 50 M  Sangart (USA)
    [Jan 2009, Series F, oxygen delivery]
  9. $ 50 M  Xanodyne Pharma (USA)
    [Oct 2009, Series E, specialty]
  10. $ 50 M  PTC Therapeutics (USA)
    [Dec 2009, Series G, orphan diseases]

Sources: VentureSource, internal analysis

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