finance

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AEROGEN: MANAGEMENT CONTROL IN A SCALING ORGANISATION1

Decision background Founded in 1997, Aerogen is a medical device company based in Galway, Ireland and a pioneer in devices that deliver drugs in aerosol form. By mid-2019, Aerogen had grown substantially, employing over 200 employees and generating €70m revenue per annum. The future prospects for Aerogen were exciting with plans to grow to €100 m in sales and employ 320 people by the end of 20202. John Power, founder and CEO, was looking forward to opening a second building – located a short stroll from the first one, at the end of 2019. This upcoming milestone made him reflect on the scale of growth in the company. In the early days, John knew exactly how much Aerogen had in the bank and was involved in every recruitment interview. He did however realise that if the company was to develop and achieve its full potential he would need to pull back on his involvement in many activities of the company. He had no problem in doing this and once he felt he had the right leaders in functional roles he was able to apply more of his time to the longer term strategy of the business. He had developed a tight team culture in the company and the opening of the second building gave him food for thought as he had to decide which teams would be located in the ‘old’ and ‘new’ building. In addition, nearly half of Aerogen’s employees were now located internationally, and managing them all was increasingly challenging. He wondered how the existing management control systems could be strengthened to equip Aerogen for its next phase of scaling, but also what effect this might have on innovation at the company. Company background It was while working for a global medical device company that John realised that existing methods of delivering drugs to critically ill patients on life support were very poor. While a huge amount of technology had gone into the design of ventilators, methods of drug delivery had not changed much since the 1960s3. John recognised a need and an opportunity to transform drug delivery for the most vulnerable patients in an acute care setting: “roughly one in three people in intensive care units (ICU) anywhere in the world are there because of respiratory-related conditions. Air is pumped into their lungs through a ventilator, and the challenge was how to get drugs effectively into that airflow”4. Whilst bootstrapping the company by doing contract design work, John searched for potential enabling technologies that could be used in his ventilator application. He initially licensed an early stage technology, originally used by a Silicon Valley micro-combustion engine company called Aerogen, that following VC funding had pivoted into aerosolised insulin development.

1 This draft confidential case was written by Professors Breda Sweeney, Esther Tippmann and Jonathan Levie as a teaching aid only. Certain statistics in this case have been altered. 2 Irish Times, December 19 2019, ‘Galway-based medtech company Aerogen to create 80 new jobs’ 3 Irish Times, May 31 2016, ‘Inside an Irish medical tech company...Aerogen’ 4 Irish Times, May 31 2016, ‘Inside an Irish medical tech company...Aerogen’

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The unique palladium vibrating mesh technology developed under the license agreement allowed Cerus to become the first company in the world to develop an aerosol system that could deliver drugs effectively to respirators and neonates and pre-terms5. The patented vibrating mesh technology turns liquid medication into a fine particle mist, gently and effectively delivering drugs to the lungs of critically ill patients of all ages. The mist droplets are optimal in size: any smaller and they would be exhaled in the next breath; any larger and they would clump together and not reach deep enough into the lungs. After a successful period of joint development Cerus joined with Aerogen Inc. in 2000, before the newly merged business went public under the Aerogen name on NASDAQ later that year. After a turbulent time in the public markets following the DotCom-triggered market crash, Aerogen was eventually acquired by Nektar Therapeutics in 2005. Not wanting to have his product vision curtailed within a much larger Bio Pharma company, John led a management buyout of Aerogen from the parent company in 2008. He wanted to capitalise on direct business development opportunities he saw rather than be locked into supplying its products to the parent company. He felt that his technology “had potential applications in other sectors”6. The company became highly successful, expanding globally and achieving revenue growth of thirty percent year-on-year (Exhibit 1). John recognised that Aerogen needed to be a global business at an early stage: “Med-tech firms by their very nature are born global”7. “With a small home market, we had to think international from day one. That means your product needs from day one to have international specifications. That also means you need to adapt to markets locally – to understand how your market changes around the world.”8 Aerogen’s success is reflected in its accolades winning the American Association for Respiratory Care Zenith Award for the fifth time in 2019 (the AARC Zenith Award is the “people’s choice” award of the respiratory care profession because its recipients are chosen respiratory therapists). John also won the RSM European Entrepreneur of the Year in 2016, highlighting his achievements as an entrepreneur at the helm of Aerogen. By 2019, seven million patients had benefited from Aerogen technology9, and with 98 of the top one hundred hospitals in the world using Aerogen technology10, Aerogen products were sold in 75 countries worldwide11. Power was a strong believer in the power of brand equity, and was prepared to walk away from “white label” deals. Borrowing from Intel, he developed a strategy of “Aerogen inside”, where Aerogen’s nebulisers would become a valuable feature of ventilators manufactured by leading MNCs such as GE Healthcare, Philips Medical, Maquet and Hamilton amongst others. Aerogen had over one hundred international patents12, signifying their commitment to achieving excellence through innovation. John had a passion for new product development and innovation from early in his career, and having left school at !6 he trained as a Draughtsman and completed his engineering qualifications at night, and later, an MBA by distance learning. He found what Aerogen had

5 Irish Times, May 31 2016, ‘Inside an Irish medical tech company...Aerogen’ 6 Irish Times, Jan 18 2008, ‘Management buyout at Aerogen’ 7 YouTube – ‘Irish Business Aerogen tell their Global Ambition Story’. 8 Presentation by John Power, Aerogen, Galway,16 January 2020 9 www.aerogen.com 10 www.aerogen.com 11 Irish Times, December 19 2019, ‘Galway-based medtech company Aerogen to create 80 new jobs’ 12 www.aerogen.com

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achieved very rewarding personally; “really, when you see your designs being used, and when they’re used in the most critical area, acute care, and patients are depending on them, you won’t get that buzz or that reward from any other type of product”13. This was also evident in the values statement of Aerogen: “we take pride in the knowledge that every day, we are working for the greater good and well-being of respiratory patients worldwide”14 (Exhibit 2) and in the way John measured performance: “we talk in terms of number of patients treated rather than revenue generated. If you impact on patients’ lives, revenues look after themselves”15. He took great pride in its success to date: “My intent is to grow a great Irish company and that’s what I’m doing. We could sell this company any day we wanted, but we have no intention of doing that – we intend to back ourselves and grow the business organically”16. Strategy of Aerogen Aerogen’s strategy was to be number one in a market and to go after radical innovations: “I don’t really see much point in doing something to be second or third, if you want to really get an advantage in business, you should lead”… I think the thing to do is go after a market you can attain but go after it with the intention of being number one in it… I wouldn’t do it if someone said to me, you can go in there and get a big chunk of market, and you’ll be a number three or number four player. I would only do it on the basis that we can be the leader of the market”17. Accordingly, Aerogen adopted a ‘blue ocean’ strategy18 whereby they created an opportunity by positioning disruptive technology in an uncontested market space; they placed their aerosol drug-delivery technology in a space where the only alternative was an inferior liquid drug-delivery system. Their disruptive technology had a strongly differentiated value proposition: more of the drug would reach the target area, and operational complexity was reduced. John Power described the approach as follows: “The best solutions are where there are unrecognized, unmet clinical needs. The customer will tell you their immediate need. But Blue Ocean tells you to create brand new opportunities, look past the voice of the customer – ‘Think past’ – there’s nothing better than creating your own market space.”19 A key factor in delivering on Aerogen’s strategy was quality of the product: “it must be significantly superior to products already offered in the advanced med-tech markets of the likes of Germany and France to penetrate such markets”20. Also key was early market entry which was achieved by forming partnerships with multinational corporations regarding distribution. Next, once Aerogen products had traction, they would appoint independent distributors to support the market. Then, as sales grew, Aerogen would put its own people on the ground: “nothing beats having your own people on the ground to achieve the sales

13 YouTube – Aerogen Profile 14 https://www.aerogen.com/our-story/ 15 Presentation by John Power, Aerogen, Galway,16 January 2020 16 Fora.ie April 2016. 17 YouTube – ‘John Power – Aerogen (Profile)’ 18 See Kim, W.C. and Maubergne, R. (2004). Blue Ocean Strategy. Harvard Business Review (October): 76-84. 19 Presentation by John Power, Aerogen, Galway,16 January 2020 20 YouTube – ‘Irish Business Aerogen tell their Global Ambition Story’)

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with your distributor”21. In 2019, 70 sales people were placed in foreign markets, and Aerogen had offices in India and China. Following the successful technology adoption strategy described by Geoffrey Moore in Crossing the Chasm and Inside the Tornado22, once Aerogen had secured itself in a market, it pursued a “diffusion strategy; leveraging the expertise, reputation and experience that the company have built up to enter into new market segments within the acute care setting, such as A&E etc. – thereby diversifying from solely ICU-related deployments of its products.”23 As John Power explained: “It might not be economical to develop our technology just for the initial space, you need to diffuse into other spaces; make a beachhead in one market, become a recognise expert in that market, then leverage into other markets.”24 John identified with Peter Drucker’s argument that a business enterprise has two basic functions: marketing and innovation25 and saw how we innovate and how we market as the key strategic issues26: “I really believe that those are the two differentiators in your business. If you said, we’ve got great quality systems, and we’ve got great manufacturing capabilities and we’ve got ... no one’s going to buy your product for that. They’ll buy the product because of how innovative it is and the value innovation it’s got built into it, and then how you market”27. The company was “totally innovation driven”28 and invested heavily in research and development. For example, in 2017, it “ploughed €10.2 million into research and development”29 representing nearly 19 percent of revenue. John believed that being ‘locked on’ to end user feedback on their product was key to success because the time lag between user dissatisfaction and feedback from their distribution partners was too long: “Feedback from critical care providers is crucial for product development and design processes. Although manufacturers are the experts in medical devices, they are not the experts in patient therapy. Manufacturers must rely on critical care providers to help ensure that products meet their clinical needs and expectations.”30“We have 100 people out in the marketplace every day”.31 Reflecting this, Aerogen’s marketing department developed three brand values - expert, mindful and responsive (Exhibit 2), that underpinned their commitment to developing better technologies and better patient outcomes. A key strategic decision was made in 2015 when Aerogen got out of supplying the home care nebuliser market directly, and instead licensed to Philips. This enabled Aerogen to focus solely on acute care. “The problem was creating a brand name in home care. I don’t

21 John Power - YouTube – ‘Irish Business Aerogen tell their Global Ambition Story’) 22 Moore, G. (1991). Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. New York: Harper Business. Moore, G. (1995). Inside the Tornado: Strategies for Developing, Leveraging, and Surviving Hypergrowth Markets. New York: Harper Business. 23 YouTube – ‘Irish Medical Technology Industry Excellence Awards 2011 – Aerogen. 24 Presentation by John Power, Aerogen, Galway,16 January 2020 25 Drucker, P. (1955). The Practice of Management. Oxford: Butterworth Heinemann, p.32. 26 YouTube – ‘Aerogen John Power Irish Times Innovation Awards.mp4 27 Interview with John Power – 11th Dec 2019. 28 YouTube – ‘Aerogen John Power Irish Times Innovation Awards.mp4 29 Irish Times Oct 2018 30 John Power – RT Magazine 2008 31 Presentation by John Power, Aerogen, Galway,16 January 2020

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have clear boundaries, other than we are an acute care drug delivery company. We let the market define acute care drug delivery, but we are staying within the acute care environment.”32 Whilst scaling, Aerogen faced a decision regarding its manufacturing strategy: whether to manufacture in-house or contract out manufacturing operations. In the early days it was an easy decision for John: “Although I had done it in the past I was never into running operations, manufacturing plants, what have you, I didn’t want that distraction to happen, the hassle, that’s not going to differentiate you. If you can get someone that will give you the quality product on time, then why do it yourself? It’s not worth it and if you save a few points in gross margin, the amount of effort you put into doing that, you’d be far better off making that extra couple of points in margin on your commercial side”33. Aerogen developed a hybrid system in which they kept control of the supply chain and quality but outsourced direct labour to local manufacturing partners. As Micheál Casey, Product Development manager at Aerogen explained: “We now do everything here from concept developments onwards. We do full automation internally. We spent a lot of money on automation to bring the manufacturing back into Ireland.” From his prior career in MNCs, and from studying growth and scaling for his MBA, John saw his role was to articulate a clear vision for the company, set out a bold strategy to achieve it, maintain a strong brand, and around this to build a committed team. He was also acutely aware of the need for management control systems as an organisation scales and that entrepreneurs must eventually substitute early improvisation skills with a more structured planning process in order to be successful34. People and culture People and culture were distinctive in Aerogen. In John’s view, without a committed team in a great environment “none of this great success could have been achieved”35. He was a strong believer in ‘leading by example’ – to not ask people to do something that you would not do yourself and to live a strong work ethic. Aerogen focused on hiring employees who were self-managing. John saw this as very important for a high growth company that needs to focus on seizing opportunities as they arise rather than tediously monitoring personnel. John sought to recruit “people who are hard-working and have a work ethic; that’s key, I’d rather have less people, and good people, rather than have more people with mediocre ability.” Aerogen don’t do ordinary… If you come here, what’s expected is not ordinary, we expect extraordinary, we give people the opportunity to really take their career forward”36. He also recognised that working in Aerogen required people to be comfortable with ambiguity and fast adjustments: “with the smaller business if you’re to be successful you don’t want to be over restrained, you’ve got to be able to move on opportunities when you see them and I always say to people joining us from big companies, ‘one of the things you’ve got to learn with here is a bit of ambiguity and how to live with that’ because things change… we’ll change if we see, you know, trends or

32 Presentation by John Power, Aerogen, Galway,16 January 2020 33 Interview with John Power, August 12th, 2019 34 Power, J. (2001) MBA Thesis, Oxford Brookes University. 35 YouTube – ‘Ruban d’Honneur Winner - John Power, CEO Aerogen’ 36 Interview with John Power, August 12th, 2019

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market opportunity elsewhere that we should concentrate on, we’ll deploy our resources and move them there”37. James Langan, QA/RA Director, compared his experience of working in Aerogen with working in large multinationals: “In a multinational, you have a narrow job spec – loads of access to specialists, but you are pigeonholed. Here, you don’t have access to all those resources, and you are working in an environment where everything is changing, whereas in the multinational environment, you can plan it out into the future. From a quality and regulatory perspective, you have a lot of freedom and you are responsible for it, whereas in a multinational environment, you might not get to make a decision at all - you can get lost in a mass of voices…”38 John Power’s executive leadership team comprised Paul McGowan (CFO), Brendan Hogan (SVP of Operations and Engineering) and Eileen Duffy (SVP of Global Sales and Marketing) (Exhibit 3). His executive team, while different in backgrounds and personalities, were high on integrity. This was important to John as he could trust them in leading and building out their areas in a way that reflected his values. In addition to “think past”, commonly used slogans at Aerogen included “inspired to deliver”39 and “we don’t do ordinary”. In terms of technology, everything Aerogen did was leading edge, driven by the desire to be seen as the best in the world in their niche40. In 2019, John committed about 20% of his time to product development. He was a firm believer in getting his product engineers into the field to experience what customers really wanted – see the problem and seek to find a solution. This had been his approach to developing Aerogen’s first products, and in 2019 John still spent about 40-50% of his time involved in commercial activities, including many international trips to meet customers at trade shows. However, as the business grew, John knew he needed to replicate an inquiring and problem-solving mindset across the engineering teams. John believed in the importance of culture and creating a culture that “encourages the team of terrific young engineers and scientists to be bold and to strive to create great new products and clinical solutions. Work is important, and so is enjoying your place of work and the people who work with you”41. Trust and autonomy were part of the Aerogen culture and John saw his role as inspirational and facilitating rather than as micro-managing the organisation: “I set the stall out, where we’re going, the ideas around how to get there, and then I’ll work with the various departments, but I don’t try running their departments for them.”42 John was aware of the challenges of a culture built on trust and autonomy: “The flip side of this somewhat unstructured style of management is that you must ensure you keep your finger on the pulse of the business by continuous open dialogue and communications across

37 Interview with John Power, 11th Dec 2019. 38 Presentation by James Langan, Aerogen, Galway,16 January 2020 39 enterpriseireland.com 40 Interview with John Power, 11th Dec 2019 41 YouTube – ‘Aerogen Commercial Video. 42 Interview with John Power, August 12th, 2019

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the business” 43. This could create challenges with new recruits who were used to working in a more structured management environment: “some of the people that come in from that multinational world, that’s what they want as well, almost like “well I’m not getting enough time”… The door’s there, open, come in any time you want to chat to me about something, but they’re used to a more formal meeting”44 . John preferred his “open-door” policy whereby; “there’s nobody in the building who I can’t call on, or who is afraid to call on me…kind of a family approach”45. John only got involved in day-to-day management within functions where he thought he could “add most value” or where his advice was requested. This was typically in commercial, R&D and external brand building “…that’s where I spend most of my time, in commercial and R&D working with the teams there”46. This contrasted with his management of the finance function; “I’ve got a great finance guy, I’m never leaning on him, he does what’s required and more, and he keeps me informed when he thinks I need to be informed about something”47. He kept his diary open, rather than having it filled up with scheduled meetings. “I’m not big into reoccurring meetings. I try and cut them down as much as possible. I need a bit of time to think as well.48” John adopted a decision-making approach that he thought best utilised his time: “small decisions, make them fast and get them out of the way, big decisions, don’t make them until you need to make them49”. Regarding his diary, “most of my engagements on my calendar are with external customers and commercial activities50”. John felt that managing by exception enabled him to efficiently utilise his time; “if it was moving along and the KPIs were running alright, I’d leave it alone. I would only get involved when I had to… my operations and financial management teams largely leave me alone unless there is something specific I need to be involved or updated with.’51 He laid the foundation for this style of management by building a team of competent senior management to lead departments. “So they have management meetings, and the management team will meet, senior management, but I don’t go into it unless I have something to say or they want me in for something”52. The commitment to saving lives was a powerful motivating factor within Aerogen. The company culture was reinforced by making stories personal, creating attachment to the mission of the company, and actively managing the communication of success stories: “there’s always stories coming across from doctors and medical staff of how our tech…we had one there just on last Friday on how a doctor wrote to say he’s 100% convinced it saved his patient’s life, we bang that out there, let everybody see it”53. John Power also stressed the importance of the product; “how many of them would have died, literally if they didn’t

43 Irish Times, May 31 2016, ‘Inside an Irish medical tech company...Aerogen’ 44 Interview with John Power, August 12th, 2019 45 YouTube – ‘Aerogen Commercial Video. 46 Interview with John Power, August 12th, 2019 47 Interview with John Power, August 12th, 2019 48 Interview with John Power, August 12th, 2019 49 Interview with John Power, August 12th, 2019 50 Interview with John Power, August 12th, 2019 51 Irish Times, May 31 2016, ‘Inside an Irish medical tech company...Aerogen’ 52 Interview with John Power, August 12th, 2019 53 Interview with John Power, August 12th, 2019

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have our technology available to them?54” “… when we talk about the company, one of the things I talk most about is how many millions of patients we treat, not how many millions of dollars or euros we’ve made… you can be sure there are a lot of kids running around today who know nothing about Aerogen but probably wouldn’t be alive if it wasn’t for Aerogen… All of that, you just can’t buy that, right? You can’t get that if you’re making cardboard boxes or cans of beer.55” Innovation management By background, John was a design engineer and was still deeply committed to product design. He found that R&D personnel were not always commercially focused and he had to develop controls to gauge progression: “it just gets too loose, because development people like to develop, and develop, and develop, but you’ve got to get products to markets so you’ve got to put a framework around it56”. Aerogen had boundaries on product development that aligned with its strategy of positioning itself as the market leader; “the thing that I’m stricter about is that we aren’t doing “me too”, I don’t mind trying to develop something and it not working and losing money on it. I don’t want to go developing something that’s just another gismo57”. R&D performance was evaluated using a one page spreadsheet with costs and timelines. A traffic light system (green, amber, red) displayed where the risks were and what the organisation was doing to contain and mitigate risk. These one page spreadsheets were reported at regular meetings which John frequently attended. As with all research and development, some Aerogen projects failed and John adopted an attitude of: “there’s always risk in R&D, I wouldn’t worry about if it’s successful or not because you can’t foretell that58”. Belief in Aerogen’s ability to make a difference was a key part of the innovation culture of the organisation; “…that’s being persistent, that’s key to being successful, don’t give up, be persistent, keep on it, and if you really believe something, keep at it, endurance is a huge part of all this… you’ve got to have resilience and belief in what you’re doing. Not mindless, blind belief, you’ve got to know that what you’re doing can make a huge difference and believe that you’ve got the ability to get it there.59” John radiated a strong belief in Aerogen’s ability to create and develop breakthrough life-saving products. For example, in referring to a project focused on developing a product that could cut mortality rates among premature babies born without surfactant in their lungs, for which the only cure was a highly risky, traumatic intervention, John commented “people have tried, but no-one’s been successful - but I think we can be60”. Performance measures and other management controls John was very aware of the limits of an individual entrepreneur’s capabilities and focused on building a strong team of advisors, a strong board of directors (Exhibit 4), and a strong

54 Interview with John Power, August 12th, 2019 55 Interview with John Power, August 12th, 2019 56 Interview with John Power, August 12th, 2019 57 Interview with John Power, August 12th, 2019 58 Interview with John Power, August 12th, 2019 59 Interview with John Power, August 12th, 2019 60 Interview with John Power, August 12th, 2019

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management team (Exhibit 3), all with senior management experience in multinational businesses: “It’s very important to have a good board, and have well connected people— both on the financial side and on the industrial side. A lot of times people don’t think they need that; they think they’re clever enough themselves. That’s a mistake. So getting good people interested in your company and having good advisors are key enablers for sustained growth.” He coupled this with control systems in key areas: “having great quality systems, having great regulatory systems, having great operations, having well controlled finances, they’re a given. You just can’t play in the game, you’re not at the table if you don’t have those to start with.61” Quality and clean FDA inspections were crucial for the success of the company and as John pointed out "A clean audit by FDA is a strong endorsement of our core intent to ensure our customers and patients will continue to receive the very best aerosol drug treatment available in the world. "62 Despite the inherently volatile and risky nature of running an innovation-focused organisation, John did not set vague financial targets: “I present to the board, every year, about 3 pages of objectives generated from middle management up, that say ‘this is what we think we can achieve”. First, John set broad targets for R&D, operations and commercial, such as the 30-60-20 goal rule: 30% Year-On-Year revenue growth, 60% gross margin, and 20% EBITDA. “These are clear, concise guidelines that help dictate the company’s future development.”63 They were also ambitious: for example, in 2015 with €35 million in revenues, Power set a target of €100 million by 2020. However, maintaining profitable growth was also key to Aerogen’s growth strategy; for 10 years, all Aerogen’s profits were reinvested back into R&D and clinical development: “growth is hugely important, but I would never sacrifice profitability for growth64”. These guidelines were not used strictly nor assessed on a daily basis, allowing management ample flexibility to develop objectives for their own areas of responsibility: “it’s not like they’re every day thinking “oh, I’ve got this strict budget…there’s a lot of flexibility65”. At the same time, they created accountability, requiring middle management to come up with more precise SMART objectives that would attain the overall guidelines: “they’re always sort of SMART in terms of we put numbers, they have to be measurable66.” Management would meet several times to iterate their objectives before agreeing them. “An example of objectives that would not be acceptable would be ‘in QA, we are going to improve our efficiency of process design changes’; or ‘we are going to improve customer service’. I’ll say: how are you going to measure that? Them, every year we measure how we did, examine our objectives and ask how we are doing on these objectives.” Profitable growth was reflected in Aerogen’s financial targets and fiscal results demonstrated the speed at which the company was growing. John was aware of the pitfalls of getting comfortable, and relaxing on growth; “I see companies stall on growth and they get happy 61 Interview with John Power, August 12th, 2019 62 Aerogen press release, 14 May 2018 63 YouTube – ‘Ruban d’Honneur Winner - John Power, CEO Aerogen’. 64 Interview with John Power, August 12th, 2019 65 Interview with John Power, August 12th, 2019 66 Interview with John Power, August 12th, 2019

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with where they’re at and then they get overtaken”. Aerogen adopted a “land-grab” strategy - – “to try and grab fast as much [as possible], when they have an idea on something67” in order to capture market share quickly because “there’ll be fast followers in behind them if it’s a successful idea68”. As part of the performance measurement system, there was an incentive scheme for employees based on whether the company meets its targets: “we pay people well here, and they’ve got a bonus scheme as well and we took 10 million euro that came from a secondary share purchase… and we put that into a fund for the staff, so like there’s 10 million euro gone in that will go out to staff on us hitting various objectives”69. However, John wondered whether rewarding for objectives achieved could create game-playing, where staff might set targets that are not sufficiently stretching to be sure to gain the reward70. John had also tried to reward his sales people for giving customer feedback to inform product development, but retracted on this as it frustrated many of his sales people. He found that many of them were excellent at hitting sales targets, but not necessarily strong on generating new product ideas based on customer insights that would inform new product development for long-term value creation71. As John considered the likely future growth of Aerogen and his role in the company, he wondered whether Aerogen’s mission, vision and values were fit for the journey: “I’ve worked in American big multinationals, and they’re all into their values and mission statements; I’ve not been one for it. … When you’ve got a smaller team, the values you espouse yourself are picked up by the people, whereas when you go to a bigger team you don’t have quite the reach”72. He felt that the company was getting to a stage where the core values required more articulation as it would be harder to instil and reinforce them across multiple buildings at home and among staff in international markets. Aerogen was also diversifying its activities; with Aerogen Pharma having two drugs about to go into clinical trials, Power had ambitions for Aerogen to become a speciality pharma company as well as a medical device company. He needed to make sure that the pharma side did not jeopardise the device business; pharma was much higher risk in that the drug was either going to work or it wasn’t, but they would not know that for years to come. Meanwhile, pharma would continue to consume cash.

67 Interview with John Power, August 12th, 2019 68 Interview with John Power, August 12th, 2019 69 Interview with John Power, August 12th, 2019 70 See Doerr, J. (2018). Measure What Matters. New York: Penguin. 71 Interview with John Power, 11th Dec 2019 72 Interview with John Power, 11th Dec 2019

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Exhibit 1: Aerogen financials and employment growth, 2006 to 2018

Source: Companies Registration Office, Dublin

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Exhibit 2: Aerogen brand values

Source: Company website - https://www.aerogen.com/our-story/ [accessed: 18th December 2019]

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Exhibit 3: Aerogen Executive Team

Sources: Company website - https://www.aerogen.com/our-story/ [accessed: 18th December 2019]; LinkedIN profiles [accessed: 18th December 2019] and interview with John Power, Dec 2019.

CEO - John Power - Technology and innovation focused career spanning over 30 years - Held executive positions in R&D, Operations, Sales and General Management in the SME and MNC environment - Serial entrepreneur - founder or co-founder of several ‘Blue Ocean’ technology start-ups the last three of these in the life-science sector - Entrepreneur of the Year in 2016

CFO - Paul McGowan

> 15 years experience in senior finance roles in biopharma and healthcare sectors

Described as commercially focused, hard-working, with an ability to solve compex problems, likes challenges

SVP of Operations and Enginneering - Brendan Hogan

> 30 years experience in engineering, operations and production

Described as very technical, planning 2- 3 years ahead, recently completed a Phd

in Pulmonary Drug Delivery

SVP of Global Sales and Marketing - Eileen Duffy

> 20 years experience in marekting and sales in helath care sector

Described as very analytical, structured and target oriented

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Exhibit 4: Aerogen Board of Directors

Dr Bernard Collins - Chairman  Serves on the Board of Directors of several U.S. and Irish life-science companies  10 years’ experience as Vice President of International Operations at Boston Scientific

Corporation; held senior executive positions in life-science companies including Baxter Corporation

 Experience spans startups, turnarounds, leveraged buyouts and IPOs for large and small businesses

 Recipient of the prestigious RDS Gold Medal for Industry in recognition of his extraordinary contribution to the development of the biomedical industry in Ireland

Dr Jane E. Shaw (U.S.)

 Also serves on the Board of Lucile Packard Children’s Hospital at Stanford and Grace Cathedral, in San Francisco; served on the Boards of McKesson and Yahoo

 Was Director of Intel from 1993-2012, Chairman of the Board from 2009-2012;  Chairman and CEO of Aerogen, Inc from 1998-2005  President and COO of ALZA Corporation, a pharmaceutical company, from 1987-1994;

joined as a Research Scientist in 1970  Received many honors including the 2010 ODX Outstanding Director Award and the

Outstanding Woman of Silicon Valley in 2009; inducted into the Bay Area Business Hall of Fame in 2016.

Charlie Mulligan

 Involved with Aerogen since inception, a member of the Board since 2007, Chair of the Remuneration Committee

 40+ years industry experience spans a broad range of sectors, including Life Sciences, IT and Telecommunications and has been an investor in, and served on the Board of several successful businesses

 Experience in acquisitions, start ups, fund raising, company restructuring and divestment.

 Was CEO of Digital Equipment’s European Operations and a member of their European BOD.

Thomas Lynch

 Extensive experience in life sciences and is Chair or Director of a number of biotechnology companies in the US, Ireland and the U.K.

 Led Elan Corporation’s transition from drug delivery to biotechnology  Founded a company that became Warner Chilcott plc (acquired by Allergen plc). Was

Chairman and Chief Executive of Amarin Corporation plc which he successfully repositioned as a cardiovascular company.

 Served on the Board of Directors and Chairman of several bioscience and pharmaceutical companies

Steve Gannon

 Was CFO, SVP of Finance and Treasurer at Aptalis Pharma until its acquisition by Forest Laboratories in 2014. Previously, Mr. Gannon was the CFO of CryoCath

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Technologies, acquired by Medtronic in 2007. Prior to Cryocath, Mr. Gannon was Head of Finance and Administration of the Research Division of AstraZeneca Canada and CFO of Mallinckrodt’s Canadian operations.

 Serves on the board of Xenon Pharmaceuticals (Nasdaq:XENE), as well as Laborie Medical Technologies and Engene. He served on the board of Advanced Accelerator Applications, acquired by Novartis in 2018.

Abhijeet Lele

 Managing Director at Temasek, a global investment firm based in Singapore.  Served as Managing Director and Head of Healthcare Investing at Investor Growth

Capital/Patricia Industries, leading their North American venture/growth equity and subsequently buyout efforts.

 Was a Managing Member of a healthcare investment firm. Previously, he was at McKinsey & Company, and held operating positions with Lederle Laboratories, Progenics Pharmaceuticals and Clontech Laboratories.

 Served on numerous healthcare company boards Source: Company website - https://www.aerogen.com/our-story/ [accessed: 18th December 2019]