Health Tech Management By Movie: Why Quanterix Outshines Insys
by Peter Cohan
Plenty of lists have been made to highlight movies with great lessons for executives. Bloomberg even asked business school deans for their favorites and here are their top 30.
But this week I learned something new — CEOs manage by requiring their people to watch movies. And two of them are in the health care industry.
The first is a Chandler, Arizona-based pharmaceutical company — which used to peddle fentanyl spray — whose former top executives are being sued in Massachusetts and the other is a publicly-traded Lexington, Mass.-based maker of protein diagnosis technology.
The takeaway is that managers use movies to motivate their people — and depending on the movie and the intent, a company can move its people to do good or bad things.
(I have no financial interest in the companies mentioned).
Before getting into these examples of management by movies, let’s take a look at their businesses.
Chandler, Ariz.-based Insys Therapeutics– which now bills itself as “a specialty pharmaceutical company focused on cannabinoids and novel drug delivery systems that address unmet patient needs,” is now in its 23rd year as a public company. It has has enjoyed rapidly rising revenues — while suffering from a huge net losses and a plunging stock price.
In the five years ending 2017, Insys saw its revenues grow at a 55% compound annual rate to $141 million. It posted a whopping $228 million net loss in 2017 and its stock trades at 99% below its September 2000 high of $660, according to Morningstar.
Lexington based Quanterix — which makes a protein detector — has enjoyed rising revenues and stock price, despite net losses. Its revenues have increased at a 40% annual rate since 2015 to $33 million in the 12 months ending September 2018 — when it posted a net loss of $30 million.
Since its December 2017 IPO, Quanterix shares have increased 54% to $25.13, according to Morningstar, yielding a $558 million stock market capitalization.
Insys Therapeutics and ‘The Wolf Of Wall Street’
Insys is dealing with some nasty legal problems. And there is some connection between those problems and its use of ‘The Wolf Of Wall Street’ for nefarious purposes, according to the Boston Globe.
First let’s look at those legal problems. According to NBC News, five former company executives were charged with multiple conspiracies in October 2017, including racketeering, kickbacks and fraud, along with two other former executives who pleaded guilty and have become cooperating witnesses.”
The Massachusetts attorney general’s office is prosecuting the former executives in Federal court on charges that they “defrauded insurance companies and bribed doctors to prescribe a highly addictive fentanyl-based pain drug when it wasn’t needed,” according to NBC News.
Prosecutors allege Insys paid hundreds of thousands of dollars to doctors in exchange for prescribing Subsys — which is “up to 100 times stronger than morphine.”
Three of the top Subsys prescribers have been convicted of taking bribes from Insys — which is “under new management, is still operating after agreeing to pay $150 million to settle related claims in August.” according to NBC News.
In its statement the company said, “INSYS Therapeutics in no way defends the past misconduct of former employees and is fully cooperating with the government.”
This brings us to the March 1 court testimony of Alec Burlakoff — who in November pleaded guilty to racketeering and faces anywhere from no time in prison to 20 years. He’s described by the Globe as
The larger-than-life executive who told his employees to watch the film, “Wolf of Wall Street,” for sales tips. [He called the movie “the best sales training video in history,” according to a 2016 Arizona class action lawsuit against Insys]. He smoked pot with doctors and paid for their lap dances at strip clubs, bragging in texts to fellow [Insys] executives about what a good time he had showed them.
Burlakoff — who hauled in more than $5 million in stock options working for Insys — instructed sales representatives to “identify one practitioner willing to prescribe heavily in exchange for payments and strive to maintain that relationship,” wrote the Globe.
Quanterix and Its Four Movies: ‘Moneyball,’ ‘Secretariat,’ ‘Invictus,’ and ‘Hidden Figures’
Just because a company manages by movies to motivate its people, doesn’t make the company bad. Indeed Quanterix uses movies to different ends.
Before getting into that, let’s look at the company’s CEO, Kevin Hrusovsky. He became CEO of Quanterix in 2015 after stints at PerkinElmer — who bought Caliper, a company he built by merging six companies (Scitec, Lab-o-Tec, Zymark, Caliper, Xenogen and Cambridge Research institute) — and DuPont.
He was brought in to execute what looked like a good strategy. As Hrusovsky explained in a February 26 interview, “The company had the idea that testing proteins in the blood could disrupt medicine. But when the investors approached me about joining Quanterix, it had gone through four CEOs in five years — they could not get this idea realized.”
Six months after joining the company as chairman, Hrusovsky was instated as CEO and brought in people he had worked with over the previous 15 years. “We hired 65 people who would have never joined if they didn’t have a big belief in what might happen [at Quanterix]. Our success has been 85% to 90% culture. 95% of the companies never make it through regulatory approval. But we did because we inspired employees to commercialize our product which overcame the investor fatigue that so often leads to failure.”
Hrusovsky believes that in order to succeed, a business must change the world in a positive way. As he said, “We believe that by powering precision health, we are helping to eradicate the causes of Alzheimer’s, ALS, and Parkinson’s disease.”
He sees disruptive innovation as a five step process. “First, your organization must have a greater purpose. Then the organization must immerse itself in the transition to that greater purpose. Third, you must achieve greatness through leadership — attracting people to the company who can move the needle. Fourth is creating a strategy for disruption and fifth is superb execution,” he said.
Cultural transformation to hold people accountable is crucial in his view. As Hrusovsky said, “We do a radical blamectomy — meaning through a culture of accountability, teamwork, and trust [– people stop blaming others and take responsibility for achieving results].”
This is where the management by movies comes into Quanterix’s story.
In January 2018, Quanterix acquired a company that enabled it to test 10 to 20 proteins simultaneously. The 25 employees hired through the acquisition took on important roles in the company. This prompted Quanterix’s first movie watching session — Boost 1.0.
As Hrusovsky explained, “Multiplexing was important because it helps to detect cancers. We asked everyone to watch the movie, Moneyball, to get them thinking about how we were playing a new game.”
Boost 2.0 was about changing the way Quanterix sold its products. “Next we reinvented how we did selling. We wanted to get investors who owned the stock to be realize that we were going to boost the probability of getting our product approved by regulators. We asked our people to watch Secretariat, about the horse that won the triple crown in 1973,” he explained.
Boost 3.0 was to inspire people to work towards a higher valuation for Quanterix. “The movie was Invictus, about Nelson Mandela who [initiates a venture to unite South Africa by enlisting the national rugby team on a mission to win the 1995 Rugby World Cup]. It was to motivate people to get our valuation higher by targeting solutions to cancer and Alzheimer’s disease.”
In 2019, Quanterix has a new initiative called Propel 1.0. “We are looking beyond the figures to see brain health in blood. The movie was Hidden Figures [the story of a team of female African-American mathematicians who served a vital role in NASA during the early years of the U.S. space program]. We identify the elephant in the room and kill it,” said Hrusovsky.
Along with his movie-based leadership style, Hrusovsky has ideas about how Quanterix can make money. As he said, “We’ve increased value 10 to 12-fold. We have a Keurig coffee machine business model with our protein testing machines — we test 80 different proteins and provide 80 different flavors of coffee. 60% of our customers are pharmaceutical and biotechnology companies like Merck, Novartis, and Roche. The other 40% are medical researchers and academic hospitals.”
Quanterix intends to grow revenues 15-fold. “We are going global; we are targeting the $1.5 billion market for cancer testing and the $500 million market for neurology testing. We will invent new technologies and acquire them,” noted Hrusovsky.
Just based on its movies alone, I’d pick Quanterix over Insys. But I think Quanterix also has a clearer growth strategy and Insys has huge challenges ahead as it tries to overcome its legal problems and achieve top-line growth from cannabis and new ways to deliver drugs.
Share this page