Biotech Royalty

David Blech earned the title "The King of Biotech". Armed with a Masters degree in Music Education, he became a member of the Forbes 400 investing in companies like Genetic Systems Corporation, Icos, and Celgene. In 1990 he founded D. Blech and Co., a registered broker-dealer involved in underwriting biotechnology issues. On September 22, 1994 the company was deep in debt and ceased operations due to net capital rule violations. The day is known as Blech Thursday.

The uniform net capital rule is a rule created by the U.S. Securities and Exchange Commission ("SEC") in 1975 to regulate directly the ability of broker-dealers to meet their financial obligations to customers and other creditors. Broker-dealers are companies that trade securities for customers (i.e., brokers) and for their own accounts (i.e., dealers).

Blech was given a five year probation sentence in 1998 for criminal fraud. In May 2012 he pleaded guilty to manipulating shares of biopharmaceutical companies Pluristem Therapeutics Inc and Intellect Neurosciences Inc in 2007 and 2008. 

The Cargo Cult message of the story is that success in biotech financial matters does not require a PhD from MIT. It does not require bend-over-backwards scientific honesty. It requires the mind of a gambler. Remember the successes, but not the failures. Remember random events around your successes and tout them as skillful tricks of the trade you are in. 

In Seattle there is a building with four numbers in front. 

Inside this building are people who have chosen the same career path as David Blech. Carl Weissman and Steven Quay have been at the helm of several costly biotech investment decisions. Neither has found themselves on the Forbes 400 but they have had lucrative careers in biotechnology. The investments they have attracted have not been lucrative. Weissman is now the former CEO of Accelerator and Quay is in charge of a sinking ship known as Atossa Genetics. 

I don't want to go into further details about these investment opportunities. I've written about them before. Each man is a leader, as defined by the terms of a CEO. You are investing in them and the decisions they make with your money. Like David Blech, they are not scientists, as defined by the terms of a CSO. They seek money and use it to build biotechnology companies. The science is none  of their  business. Their careers have seen hundreds of millions come and go. They want you to focus in their ability to make the money come, never mind how it goes away.

The takeaway from  Blech, Weissman and Quay is that leadership matters. What makes a good biotech leader? In 1992 David Blech would have been considered a great leader. In their rise, Weissman and Quay were considered worthy of stewardship over millions and millions and the careers of many very smart people. In the ruins of their management is the loss of that money and the ruined careers of too many scientists. True, Blech (the music education master) started companies that made money and continue to do so. But he did not do the work that made these companies long term successes. These three individuals are prime examples of the short term mentality. Start company, get out before the fall. They are prime examples of why we need standardization, certified laboratories with certified lab workers. We need to create an career path for scientists who have the power of science to help investors avoid the song and dance of these three men. One of these men is in prison, one is looking for work, and one is draining $600,000 per year (CEO and CSO salaries for he and his wife) until the latest round of financing is depleted. Be assured that all three will continue to fight for their livelihood and raise money to spend on short term money making biotechnology companies.  

There is a little bakery on the bottom floor is 1616 Eastlake called Grand Central Baking Company. They are the most profitable company that has ever done business out of 1616 Eastlake. They have outlasted all of the Accelerator companies. They have a passion for what they do. 

More than two decades after our founder Gwen Bassetti introduced the Como loaf in Seattle’s historic Pioneer Square, we are still locally owned, led by a unique mixture of family and friends, and dedicated to the craft of artisan baking.

Biotech royalty, like Bech, Weissman and Quay, have a passion for the deal. They love being the biggest boy at the big boy table. But this isn't the craft that makes biotech success stories. The craft of "the deal" has led to many a lawsuit, jail time, and high unemployment. What makes any technology company succeed is a dedication to the science and technology behind the product. For this, you need someone outside the royal families.