How Companies Can Emerge from Stealth with Their Secrets Intact

Pictured: An egg hatches, revealing a light bulb inside/iStock, Fahmi Ruddin Hidayat

Early-stage biotechs often choose to remain for a time in what’s known as stealth mode, during which they refrain from publicly sharing the nature of their work. It’s only when these companies decide to emerge from stealth that they begin to tout their innovations via press releases, website explainers and other outreach. But this precise moment of coming out of stealth mode is ripe for biotechs to stumble, and whether that stumble is not fully securing trade secrets or marketing with too much information, it’s a prime time for competition to swoop in and compete.

Ron Gutman, founder and CEO of digital healthcare platform Intrivo, has worked on a variety of initiatives surrounding healthcare, medical devices and technological innovations. “Getting out of stealth mode is always tricky,” he said. “You want to get publicity but don’t want people to take your secrets and replicate [them].”

The threat of competition coming out of stealth has only grown in recent years, said John Bennett, IP Litigation partner with Allen & Overy in Boston, who has represented clients who allege that competitors have stolen trade secrets from them, as well as others that are actively maintaining secrecy around IP like gene therapy and small molecule platforms.

“We are seeing more activity in this space given increased employee mobility between companies and the complexity around biotechnology processes and characterization,” Bennett said. This is especially true because what some biotechnology companies are developing extends beyond what patents can protect. Bennett has seen the most severe cases of IP infringement end in both civil and criminal liability, he said.

Marketing, legal and leadership considerations are necessary for any biotech seeking to protect itself from stumbling as it exits stealth to avoid accidentally entering a legal mess.

A tactical way that biotechs can evade competition coming out of stealth is choosing to work on innovations that are the hardest to solve.

“If you’re doing something that is too easy to replicate, you need to think twice about whether you’re in the right place,” Gutman said. Once you’ve settled on a challenging problem, “Developing quicker is the best protection for IP [because it] gets the innovation machine working really fast [so that you can] let people chase you.”

If your work is complex enough to stump competitors for long enough, by the time they catch up to follow in your footsteps, you’ll already be protected by patent laws.

While any product is in development, compartmentalization is key. R&D staff may be the first to be in the know on a new product, but then comes engineering, quality assurance, marketing, business development and sales.

All along the way, leaders must be aware of which teams strategically need to know what information at a given time. The timing on all fronts, from development to exiting stealth, has to be just right.

“When timing is closer to when you want to market but far enough to prevent people from replicating what you’re doing, that’s the sweet spot,” Gutman explained.

While IP protection is a risk coming out of stealth, just as important is how biotechs maximize their dollars when their product is still in development. Daniel Lofaso, CEO of Digital Elevator, runs a marketing agency that represents companies across life sciences categories, from biotech to clinical research. He has seen firsthand how excitement around marketing a drug before it’s fully realized can end up draining biotechs when those dollars could have gone further in research.

Plus, if it becomes well-known that a biotech chose to heavily advertise a drug before it’s fully vetted, that can lead to reputational damage.

“For an emerging biotech with no actual product to sell, we often reinforce the idea that identifying where your buyer personas are—and concentrating there—is where you should invest your marketing dollars,” Lofaso said. “There is a delicate balance of allocated marketing funds to generate exposure and understanding what that return on investment might be.”

The adage “don’t reinvent the wheel” applies to getting the word out about biotech innovations. Resources such as clinical trial results and publications are ways to tell the story of a product without saying just how it’s made.

Beyond marketing with publicly available data, Lofaso recommends that biotechs apply a laser-focus on their website’s science and technology pages and make them interactive in nature to boost engagement without divulging too much proprietary information. It’s key, he said, to identify what information is really important for various communities to know about a product and keep oversharing to a minimum.

“Oversharing creates noise and muddies the water with more information than there needs to be,” Gutman added. “Figuring out what is the essential information you want to share—that will be favorable to you.”

Coming out of stealth mode whole fundamentally requires collaboration between marketing and legal. Whenever clients big or small have concerns about their trade secrets and going public with drugs, Lofaso insists on bringing in IP experts or patent attorneys. It’s especially common for smaller biotechs to overlook the value of this step, he said.

“These experts review all marketing materials and messaging before it gets published so that any potential oversight by a non-IP expert can be avoided,” Lofaso said.

While some may think the degree of vigilance around biotech IP depends on the investment climate, leaders need to be constantly conscious of risks, Lofaso noted. “The IP of biotechs and the patent laws that surround them seem to be constantly changing, so I think any good leader will have an IP protection plan in place and remain vigilant.”

The stakes are even higher from Bennett’s perspective if a biotech’s competitive edge hinges on very specific trade secrets. “Making sure that information is adequately protected and theft of the information is deterred should be a top priority for leadership,” he concluded.

Beyond protecting trade secrets legally via NDAs and other documentation, the final piece of exiting the stealth puzzle is the culture leaders build within their own companies. It’s a fact of life that some employees may leave to work at competitors, but creating a culture of integrity goes a long way in preventing disasters.

“People come and go and work somewhere else, and you want to make sure they understand that it’s hard work that goes into these things,” Gutman said. “It’s a lot of money and energy, and it’s important for the company to protect.”

Karen Fischer is a freelance science writer based in New Mexico. Reach her at kfischerwrites.com.