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The Pharma Startup Playbook: Advice from the Field with Taggart McGurrin

We sat down with Tagg McGurrin, MBA, JD, to lay out the essential strategies for starting and growing a pharma firm in 2024.

In the most recent episode of our podcast, The Life Science Rundown, The FDA Group's Nick Capman sat down with Tagg McGurrin. Tagg most recently served as the President and Chief Business Officer (COO/CFO) at Neumentum, Inc., where he led corporate strategy, capital markets, corporate financing, accounting, legal, investor relations, and business development.

They discuss the critical elements of planning, governance, and capital access necessary to build a strong foundation for a pharmaceutical startup in today’s economic environment.

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Summary, Key Points, and Practical Takeaways

I. Access to Capital: Building a Strong Financial Foundation

Tagg acknowledges that in 2024, access to capital is fundamental for starting a pharmaceutical company. Founders need to identify and cultivate relationships with high-net-worth investors or specialized investment groups. Tagg shares an anecdote about a tax attorney friend who leveraged his network to secure capital before starting his pharmaceutical venture, highlighting the importance of having a robust financial strategy from day one.

Even if you don't initially have a network, actively expanding it is crucial before moving forward with a venture. Engaging with boutique investment banks and groups specializing in healthcare investments can open doors to essential funding. Tagg suggests reaching out to individuals who have successfully raised money and created value for investors, as their insights can be invaluable. Prioritize "smart money" — investors who understand the long-term nature of pharmaceutical investments over those seeking quick returns.

II. Savvy Board and Leadership Structure for Strong Governance

A committed board with proper governance and checks and balances is essential. Tagg recommends separating the roles of CEO and executive chairman to ensure accountability and objective performance reviews — a dynamic that naturally breeds transparency and effective oversight.

A dedicated full-time team with a long-term vision is also crucial. Tagg stresses that part-time or fractional roles are generally less effective in the complex pharmaceutical industry. The team you stake your investment to should be fully committed and incentivized appropriately, with clear goals and roles. Tagg also advises against relying heavily on part-time CFOs or CEOs, as these roles require full-time dedication to navigate the industry's complexities.

III. Maintaining Focus and Progress Through a Clear Mission, Objectives, and Meeting Structure

Tagg emphasizes the importance of establishing clear, dynamic annual goals and objectives aligned with value inflection points. Regular reviews and adjustments based on performance and investor expectations help maintain momentum and accountability. He recommends setting specific, measurable, attainable, relevant, and timely (SMART) goals and revisiting them regularly to ensure alignment with the company's progress and market conditions.

Tagg also suggests implementing a strong meeting structure with weekly, annual, and substantive quarterly meetings. Set SMART goals for each quarter to maintain progress and enthusiasm. Use these meetings to celebrate successes and address challenges transparently. Tagg highlights the value of having quarterly meetings to keep everyone on track and ensure that the team is aligned with the company's objectives.

IV. Investor Pitches and Relationships

When pitching to investors, highlight the executive team, commercial opportunity, and technical aspects of the asset. Define clear value inflection points with realistic timelines and outcomes to secure investor confidence. Tagg advises being transparent and objective to build and maintain trust. He also suggests including a detailed business model in the pitch, outlining the expected outcomes and the company's strategy for achieving them.

Be wary of nefarious individuals posing as well-connected investors. Maintain transparency and objectivity throughout the investment process to avoid overpromising and underdelivering. Tagg recommends asking potential investors detailed questions to understand their past performance and approach to supporting companies. He also advises seeking references from other companies the investors have supported to gain insights into their reliability and support.

V. Team Synergy and Conflict Management

The management team should have strong convictions and stay true to the company's mission and strategy. Avoid letting outside opinions hijack the corporate strategy. Tagg again stresses the importance of having a management team that is aligned in their convictions and committed to the company's long-term vision.

Ensure independence in both fact and appearance to prevent personal motives from hijacking investor value. Vet the leadership team's past successes and conflicts of interest thoroughly. Regularly check the company's culture and make adjustments as new people and partners join to maintain a cohesive and focused team. Tagg advises being proactive in addressing potential conflicts of interest to avoid any impact on the company's integrity and performance.

VI. Stages of Funding and Company Growth

Keep investors informed with regular updates, even if there isn't significant progress, to maintain trust and support. Stay nimble and efficient, avoiding the complexities and inefficiencies of larger pharmaceutical companies. Tagg highlights the importance of regular communication with investors to keep them informed and engaged. He also emphasizes the need to stay efficient and avoid becoming bogged down by bureaucracy.

Use creative incentive structures, such as reverse vesting, to keep key players committed to the company’s long-term success. This approach helps ensure that team members are motivated to achieve long-term goals, aligning their interests with those of the company and its investors. Tagg suggests using innovative compensation strategies to retain top talent and ensure their continued commitment to the company's success.

VII. Combining Experience with Young Talent

Tagg emphasizes the importance of combining experienced leadership with young talent to bridge gaps and ensure a dynamic startup environment. This synergy can drive innovation and success, blending the wisdom of experience with the energy and creativity of younger team members. Tag believes that this combination can create a powerful dynamic, driving the company forward and achieving its goals.

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