Part 2: 2009 and Biotech Financing: How To Stay Afloat in Turbulent Economic Waters




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Video title: Part 2: 2009 and Biotech Financing: How To Stay Afloat in Turbulent Economic Waters
Released on: July 28, 2009. © PharmaVentures Ltd
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  • Summary
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2009 is a tough year in the business world and for many biotech companies finding essential funding is proving to be harder than ever. In this comprehensive discussion Paul Hastings, CEO, OncoMed Pharmaceuticals and Steve Parkinson, CEO, Lakewood Amedex tell of the innovative ways that companies can use to secure the cash they need to operate and of the pros and cons of new financing sources.
Product focus and Alternative sources of financing from foundations.
Steve Parkinson:
Making these milestones, it's about getting them to the clinic.
Fintan Walton:
Right.
Steve Parkinson:
So they're getting value added to your company by getting through those.
Fintan Walton:
But when you focus your, your you no longer spreading your bets. So you are more likely to fail, so they get into a dilemma there?
Steve Parkinson:
Well yes but we like think in the biotech industry at least we are not shot gunning this you know we bring a product forward to the clinic if we really have confidence in it. So I think it's the case of that's just a little bit intensified.
Fintan Walton:
Right.
Steve Parkinson:
Where as a company might try and bring two products forward before I think they will bring one and they will make sure that they've got the data really, really solid and as you said Paul J. Hastings, it's all about data. If you got you know really, really solid data though medically the risk is much as possible because that's in the end what sells investors and that's in the end what gets investment into the companies.
Paul J. Hastings:
Well there is another way to do that though in terms of if you have a portfolio of products and you want to keep your, you wanna keep hedging your bet sort to speak and that is you may take your main product forward on your own or in a partnership and you may try to fund some of the other products through partnerships and collaborations. And what might be changing in our business model is what those partnerships and collaborations look like. For instance we talked about alternative sources of financing and there are organizations now, there are patient organizations now it was basically led by the Cystic Fibrosis Foundation but now know you are seeing it with The Leukemia & Lymphoma Foundation, The Multiple Myeloma Foundation.
Fintan Walton:
The Michael J. Fox Parksinson?
Paul J. Hastings:
Yeah, all those foundations I was actually presenting at an investor conference and our company focuses on solid tumors treating cancers like colon cancer, breast cancer. But our products may have applicability in Hematological malignancies, liquid tumors, lymphoma's, leukemia's and I was approached by patient organizations who's representatives were sitting in the office, who came and suggested that they could consider granting moneys so that we would develop our product in that area and at the end of the Phase II trials or at the end of the clinical trials get a modest return in their investment, so there are new people entering the partnering arena.
Fintan Walton:
Right.
Paul J. Hastings:
Like that and there are the traditional pharmaceutical partners there is also the mid size biotech companies so you can spread your risk by partnering.
Fintan Walton:
Yeah.
Paul J. Hastings:
And moving some products forward for example.
The significance of relationships between CEO and the board for success of a company.
Fintan Walton:
Well patient groups are the ones who find the drug development most frustrating. They are ones that are trying to watch these molecules come through and put great hope on those. But I want to come back to with another question Paul J. Hastings, which is we are talking about flexibilities of CEO's and so forth but in the with your experience of being CEO of many biotech companies, the CEO on the board, Is the relationship between CEO's and boards how important is that? And how important is the flexibility that management have and have to work together to make sure that company actually succeeds in other words isn't that really down to the CEO and the board to make company a succeed?
Paul J. Hastings:
I think the CEO and the board are definitely a component of the success of the company absolutely. Again I go back to my original thought which is without data the board and the CEO can't succeed either. So the board and the CEO together with the management team need to make sure that they are working on projects which got a great data , which gonna allow them to raise money or create value. But that interaction with the CEO and the board is absolutely important and there's been a lot of � I think a lot of enhancements in the way people communicate with their boards. There's been a lot more expectation put on board members, I am on the board of couple of companies, the amount of time and effort you spend today on a board is vastly increased to what it was a few years ago. And getting to � know a little bit more about how the company is running? what the projects are? the people on the management team or is before the board looked at itself as just managing the CEO and now he is just responsible for making sure the executive team is working in conjunction with the CEO and getting the work done.
Fintan Walton:
But isn't there a danger that they are deflecting their responsibility from the strategic perspective to potentially meddling in the company?
Paul J. Hastings:
Sure there, there is always that danger and that's the delicate balance. I mean I have a � what I try to do is make sure that I never surprise my board. So you don't want to wait for board meeting to tell them something happened three months ago, just constant communication the way you have to communicate with your executive team. Something happens let the board know. if it's a material event let them know it's material and there needs to be an action, I mean if it's just a FYI send them an FYI and I think that way they can stay involved in the operations of the company without meddling in what's going on in the company, while also by the time they get to their next board meeting then I just coming in cold they have got a little bit of history and they � and they can now see what's going on operation as well.
Fintan Walton:
And what's your view Steve Parkinson?
Steve Parkinson:
Well, yeah there is no question. I mean the board can play a very critical part in the company, I mean difficult boards make it very difficult for the CEO and makes it difficult for the management team and so the company tends to go through this rather stilted process where as a great board that's functioning well with the CEO can make a � go forward well. But Paul, is absolutely right. I mean a great board with the great CEO and a terrible product is not going to succeed.
Fintan Walton:
Right.
Steve Parkinson:
You know where is the a terrible board and a terrible CEO with a great product can still fail, so you really need combination of good people and good products.
Fintan Walton:
Board compositions often reflect the investors that are putting money into the into the organizations So it's is it important to select the right investors to?
Steve Parkinson:
Well that's always been the, the doubt mark of our industry is that you know it's not any money is the right money, is the right investors. You know I think I've been pretty lucky, I don't know about Paul J. Hastings as you know usually my investors have been on the same page and at the same objectives. But yeah that can that can get out of line sometimes and and you go separate ways because your objectives changed.
Is Pharma companies setting up own venture funds a good thing?
Fintan Walton:
One of the things that's changing, I ask Paul J. Hastings this question one of the thing that's changing is the pharmaceutical companies themselves are now setting up VC or venture funds and investing in into biotech companies. Do you see that as a positive thing, a good thing or is it creating additional conflicts?
Paul J. Hastings:
It depends on the circumstance. So one probably doesn't want to take we call that strategic
Fintan Walton:
Investment?
Paul J. Hastings:
Private investment money coming from strategic investors. I tend to prefer to do deal with the pharmaceutical company and get equity in as part of the deal and work with the people who are working on the project, that's their investment and working with a strategic venture firm that comes out of the pharmaceutical company. But a lot of people use these very effectively. So I think the key is to not have the � and they don't do this but not have you know necessarily board representation from the pharma VC, it's gonna discourage another pharma from looking at that product to doing a deal is gonna kind a � potentially inhibit your ability to go out get partnerships with other companies. On the other hand sometimes it's doesn't bother people at all. So it's just depends again on how that person if he is on the board or she is on the board interacts with the other board members. But I would tend to have them coming on the investment where they weren't actually on the board may be they had some observer rights, so that there was a there was a there is some independence of the company to go out and do strategic options. Look a company A, company B, company C in terms of partnerships and not just a company that invested in.
VC's and the symbiotic relationship between pharma and biotech industries.
Fintan Walton:
Right, but I think also that what's gonna happen and is happening is that VC's themselves won't go in unless they know that the pharmaceutical companies is equally prepare to invest, so we may actually see as see biotech companies be increasingly locked into into the interest of the pharmaceutical company. If you like to make a comment on that?
Paul J. Hastings:
I don't necessarily agree with that. I think you know there is a symbiotic relationship between the biotech industry and the pharmaceutical industry and this is just in a different flavor of that. And you know there are rules and regulations that those VC's have to follow but you know no doubt that could be a situation but I also think there is � there is a benefit to, to that money particularly if the pharma company, so lot of pharma companies set up these VC firms to go look for new technologies with may not to do a partnership yet but they wanna invest in the company. And generally if they are gonna invest in an A round they are gonna reserve for a B round potentially a C round along with other investors. It goes back to what you said before about picking the right investors. If you gonna bring in a strategic investor a J&J Development Corp or a SR one from GSK or somebody like that Genzyme has a has a venture, Genzyme ventures you bring them in, in the syndicate in the beginning or even if you bring them in you know when you go into your next round you bring them in and make sure that they all agree. The one thing you don't want is a board of VC's that aren't in the same page. One has this opinion, one has that opinion, it's okay to different opinions but as long as they're all thinking strategically in the same direction, the things tend to work out. So if you don't assure that then you gonna end up with different opinions and I think that is probably what Steve was referring to as the terrible, difficult board.
Steve Parkinson:
Right.
Fintan Walton:
Okay.
Paul J. Hastings:
Where one investor is thinking one thing and the other investor is thinking another. And then you are talking to two investors or both calling the CEO you know simultaneously saying this is what I want to do, this is what I want to do, well I've invested 20 million, I've invested you know 25 million, So I've invested more so I have more say. You get into those conversations and you know they don't happen often but when they do happen it could be difficult and you want to try to
Fintan Walton:
Major distraction?
Paul J. Hastings:
Yeah.
Steve Parkinson:
Can I jump in it as well?
Fintan Walton:
Yes of course.
Steve Parkinson:
I don't disagree with Paul J. Hastings but I do agree with you a little bit as well, in the end what this is all about is investment and return. And at the moment and I've been talking to VC's recently and at the moment you know VC's want o know like all investors what's my exit? and if you go to VC today and say well we gonna take this company pubic they won't they won't even get to the next sentence with you because as we all know there is no public market. When is the public market coming back? Who knows. It could be a long way we don't knows where we are in the cycle. So right now a strategy that says yes we want to be partnered with a pharma company or taken out by a pharma company is actually quite attractive to them and you know that's I guess what we are looking at now is alternative of ways to make return on the investment for the investors.
Fintan Walton:
Yeah, well that was gonna be one of my question obviously on the public markets because are we are we ever likely to see a return on the public markets?
Steve Parkinson:
Well you know after the sort of events of 9/11 we thought you know we never gonna see investment again in anything. And of course it did come back and so I think even in this terrible economic cycle it will come back, it's a question of when? Ultimately the money is going to drive it, I mean you know people are going to be looking for bigger returns on money you know, you're not getting a return on your money in the bank at the moment. So you know I think it will drive it but it's just a question of when. It's going to take time.
Acquisitions of companies and shape of the industry going forward.
Fintan Walton:
Okay. And the shape of the industry going forward Paul J. Hastings, you know when we look back at our industry and the emergence of the biotech industry some of these companies becoming very big, and very large, fully integrated pharmaceutical companies effectively like Amgen, are we ever likely to see that or we now just going to see the evolution of companies that reached the certain stage and they either remain there and disappear because they are acquired and we just gonna see a cycle of new biotech companies coming through. When you � when you look at the industry and look forward into what it could be like or it's gonna shape out to be. What do you see?
Paul J. Hastings:
Yeah, so I don't think it as those companies disappear when they are acquired. . you look at Medimmune, AstraZeneca [PharmaDeals ID = 27024] or Millennium, Takeda [PharmaDeals ID = 30116] those companies get acquired and become Genentech, Roche [PharmaDeals ID = 30853]. I was at the bio board meeting last weekend where we told that Roche in the United States is Genentech and all Roche subsidiaries in the United States will be Genentech subsidiaries. So I think Genentech while the company that we knew maybe disappearing is becoming now part of the culture, Roche incurring all the value for Roche. Roche is also public trading company. So I think our industry may morph into a consolidated industry. It doesn't necessarily mean that the industry goes away. What is very important is that there are always innovative companies fueling you know the pipeline here so that there are things for people to acquire.
Can biotech and pharma companies retain entrepreneurism?
Fintan Walton:
But biotech companies and subsidiaries and major pharmaceutical companies can they actually retain entrepreneurism?
Paul J. Hastings:
You know, I don't work for one so I can't tell you. But I, you know I would hope that they would be but again I don't think that the innovative part of our industry is gonna go away. So I think as people you know some people are thinking oh well, if your company gets acquired you won't be able to find another job, there won't be other companies starting up because of the terrible economic times we are in. These economic times will go away and there will be more start ups. Is there gonna be an IPO market? There maybe, we don't know. If there is one, can companies become fully integrated companies? Perhaps it depends on the data, the company has, how investors are looking at. What that company, sooner or later investors or gonna have a appetite for risk again and that's when biotech companies become fully integrated companies. When they have � when they have an appetite for risk and want to see the biggest return, whether that happens this year, next year, or two years from now one doesn't know, making sure that one can manage through that, managing turbulent times is pretty important.
Steve Parkinson:
Can I comment on your question as well?
Fintan Walton:
Of course.
Steve Parkinson:
I think that is one of the lessons that has been learned is the you know the acquisition of biotech companies by pharma and this process of integration, I mean the whole, the whole reason that the pharma companies acquiring the biotech companies because of that innovation that entrepreneurism which can be lost by making a part of the bigger bigger corporate organizations, so I think you know Roche has actually managed the Genentech situation well in that respect and trying to maintain that autonomy and allow that entrepreneurism to continue. And I think if you know in this � in this environment, in this economic environment I think that's a really good model for pharma to follow.
Fintan Walton:
And also GSKRoche is trying to create entrepreneurism within it's own organization?
Steve Parkinson:
Right.
Fintan Walton:
At research and development level as well?
Steve Parkinson:
I was
Fintan Walton:
So there are requirements going on?
Paul J. Hastings:
I was gonna mention I was gonna mention the GSK, Sirtris [PharmaDeals ID = 30190] acquisition because Sirtris now functions within GSK as a 70% company the way it was when it was Sirtris. Now it's sitting in the same building doing the same innovative research and that's part of GSK's model it is to develop these 70, 80% I think they call them DPU's, DFU's where these units are actually now doing research and development as if they were small biotech company. In the case of Sirtris it was and it still is but it's within side of the GSK family and I think they are looking at that model as a way to acquire technologies, sometimes buying them, sometimes just staying in partnerships with them and keeping those units small so that they can remain nimble and entrepreneurial. So that's that's another part of this acquisition.
Steve Parkinson:
And I think that's a great thing from a CEO's point of view you got the best of both worlds, you've got the guaranteed funding but you've still got the autonomy, you still got the the control of pushing these products forward.
Steve Parkinson, and Paul J. Hastings's perspective on the future of industry in next 10 years.
Fintan Walton:
So when both of you look at where we're going to go in the future and our industry, How do you feel? Do you think all that that it's going to good next 10-years?
Steve Parkinson:
I think it's going to be tough. I think there is going to be a lot of rationalization. I think there is going to be a lot less new companies springing up and that's that's kind of sad because you know that's gonna stay for of generation of new products coming through. I think we were gonna see companies closing down. I think we are gonna see companies merging together but probably see a lot of M&A activity. I think in the next year or two but hopefully you know the money will come back to the innovation because in the end I think this is still the most dynamic field, probably the most active field you know going forward.
Fintan Walton:
Paul J. Hastings?
Paul J. Hastings:
I am bullish on the industry as I've always been and I probably always will be. I think there are no guaranties and that's just the way our industry works and so one has to operate in the mode of knowing that what one might expect to happen may not and how can one adapt if it doesn't happen.
Fintan Walton:
Gentlemen, thank you very much indeed for coming on the show. Thank you.
Steve Parkinson:
Thank you.
Paul J. Hastings:
Thank you.
Paul J. Hastings
President and CEO
Steve Parkinson, President and CEO at Lakewood Amedex, has over 25 years experience in the biopharmaceutical industry, including four CEO roles over the last eleven years, one of them as founder and CEO of TranXenoGen, a company he took public on London AIM. As President and CEO of CereMedix, a drug discovery and development company, he advanced their first product to clinical trials. Previously he was with Advanced Cell Technology, Johnson & Johnson, PPL Therapeutics (Dolly the Sheep) and Genzyme Transgenics. Born and raised in Scotland he has lived and worked in the US for the past 20 years. Mr. Paul J. Hastings brings more than 20 years of experience as a biotechnology and pharmaceutical industry executive. He has served as President and CEO of OncoMed Pharmaceuticals since January 2006. Prior to joining OncoMed Pharmaceuticals, Mr. Paul J. Hastings was President and Chief Executive Officer of QLT, Inc. Previous to that, Mr. Paul J. Hastings served as President and Chief Executive Officer of Axys Pharmaceuticals, which was acquired by Celera Corporation in 2001. From 1999 to 2001, Mr. Paul J. Hastings served as the President of Chiron BioPharmaceuticals, a division of Chiron BioPharmaceuticals. Prior to that, he was President and Chief Executive Officer of LXR Biotechnology. Mr. Paul J. Hastings also held a series of management positions of increasing responsibility at Genzyme Corporation, including serving as President of Genzyme Therapeutics Europe as well as President of Worldwide Therapeutics. Mr. Paul J. Hastings also served as Vice President, Marketing and Sales and General Manager, Europe for Synergen, Inc., and previously held a series of marketing and sales management positions with Hoffmann-La Roche. Mr. Paul J. Hastings currently serves as Chairman of the Board of Directors of Proteolix, and also serves on the board of directors of Cerimon Pharmaceuticals. He received a Bachelor of Science degree in pharmacy from the University of Rhode Island.
Lakewood Amedex
Lakewood Amedex, a private development stage biopharmaceutical company, headquartered in Sarasota, Florida, has a diverse portfolio of targeted therapeutics, broad spectrum anti-bacterials, and anti-viral technologies. The lead product, LPI007, is a fully human toxin-neutralizing monoclonal antibody shown to be effective in the treatment of hemolytic uremic syndrome (HUS) caused by pathogenic EcoliO157:H7 and will be entering Phase I clinical trials in late 2008. Nubiotics are a broad spectrum first in class group of anti-bacterial compounds that represent a first line defense against the increasing number of antibiotic resistant bacteria. A proprietary nanoRNA technology developed for the treatment of viral diseases, such as avian influenza and hepatitis. OncoMed PharmaceuticalsOncoMed Pharmaceuticals was founded in August 2004, by Drs. Michael F. Clarke and Max Wicha who led the discovery of cancerstem cells, in solid tumors. The ability to isolate and monitor tumor initiating cells using specific surface markers and flow cytometry has allowed OncoMed to carefully evaluate the importance of specific targets associated with key biologic pathways implicated in both stem cell biology and cancer. Antibodies against these targets have been developed and tested within xenograft models derived from freshly resected human cancers. Using these approaches, OncoMedhas a portfolio of active antibodies that target biologic pathways critical for survival of tumor initiating cells. OncoMed's first antibody targeting the pathways critical to cancerstem cells has now entered clinical trials. Details of the initial Phase I study, which is now recruiting patients, may be found at ClinicalTrials.gov. Multiple additional promising therapeutic candidates that target other critical pathways are also being developed. OncoMed Pharmaceuticals has attracted significant funding from a prominent group of investors, that include, US Venture Partners, Latterell Venture Partners, The Vertical Group, Morgenthaler Ventures, Nomura Phase4 Ventures, Delphi Ventures, Adams Street Partners, De Novo Ventures and Bay Partners.