May 8, 2018 – Richard Glickman, LLD “Biotech in BC”

Dr. Glickman is the founder, CEO and chairman of Aurinia Pharmaceuticals.  He was a co-founder, chairman and CEO of Aspreva Pharmaceuticals, playing an integral role in the development and establishment of CellCept®, or MMF, as the current standard of care for lupus nephritis. Aspreva Pharmaceuticals was acquired by Swiss pharmaceutical company Galenica for nearly $1B in 2008.  He currently serves as founding chairman of Essa Pharmaceuticals Inc., chairman of Engene Corporation and a director of Cardiome Pharma. He is also a partner at Lumira Capital, one of Canada’s most successful healthcare focused venture capital firms. Dr. Glickman has served on numerous biotechnology and community boards, including member of the federal government’s National Biotechnology Advisory Committee, director of the Canadian Genetic Disease Network, chairman of Life Sciences B.C. and a member of the British Columbia Innovation Council. Dr. Glickman is the recipient of numerous awards including the Ernst and Young Entrepreneur of the Year, a recipient of both BC and Canada’s Top 40 under 40 award, the BC Lifesciences Leadership Award and the Corporate Leadership Award from the Lupus Foundation of America (LFA).

Transcript of “Biotech in BC”

Editor’s Note: Dr. Glickman had a soft voice and spoke very fast. He didn’t use any notes or visuals. Consequently, it was very difficult for Mash, our scribe, to convert the audio file to text. So you may find the following to be occasionally a bit disjointed.

It’s true, it was a battle. I often talk about this being the Wild West. It’s still the Wild West, especially when it comes to being an entrepreneur and I think that’s what makes this community so very special. So, David, by the way, is iconic as a venture capitalist in this community. He was very instrumental in the team discovery at MDS and helping us build the robotics sector when we were investing in the companies and we actually did quite well. He also was prepared to stand up and fight when fights did happen. No one likes a proxy. But we sure did have fun having a proxy fight and we won! We cleaned up a bit of the situation and had a bit of history – I won’t go too much into that today because I want to try to be more positive. But, there were some dark times and, in this business, there always are. It’s very cyclical in nature. I’m going to speak about the sector, but I don’t want to bore you with just talking about the actual sector, because that’s just a bunch of statistics. Instead I’m going to walk you through a little bit of my career and building businesses and how the environment looked, what the environment was like while we were building those businesses and what drove certain things and then tie it back to BC.

Starting out with a little bit of my background, my undergraduate work was in microbiology. My graduate work was in molecular virology, where I worked on viruses – Paramyxoviruses and Orthomyxoviruses, so flu, by the way, the most important thing about flu is to know that whisky kills flu, so if you’ve got the flu, drink lots of whisky! Now, I remember back when molecular biology was in its early days, and you had to do everything yourself. You’d spend three or four weeks just preparing the reagents to do one half of the experiment. Nowadays, you pick up the phone and you call 1-800-clone this, clone that and they deliver to your office and you do your experiments. Now you still have a lot of work to do but it’s just such a different feel than it was when I started out. I was actually pretty good at experimental design, but I hated being in the lab. It was like almost cooking the same meal over and over again, and it didn’t enjoy that. I enjoyed designing experiments, but not executing them. So, I would actually have this habit, I’d go down and have this creative experimental idea, go down the hall and meet my thesis supervisor and he had these glasses on, and he was a fairly famous, old, infectious disease guy and he’d look over at me and he’d look at my idea and he’d go, “Bah, the world’s full of good ideas,” and he’d usher me off. It was kind of depressing as a graduate student, I’d go back to the lab. I think after awhile, at first, I was offended, and then I realised that he was actually teaching me a very important lesson, which is “it doesn’t matter how good your ideas are, or how great your ideas are, but executing them, you’ve got to go and do them.” Come back when you’ve got some data. I eventually learned ‘screw what he had to say about my experimental design, do the experiment and come blow his mind with data.’ It was a very important lesson that carried through in all the work that I’ve done since then.

So, I got tired of being in graduate school, decided it was time to actually do something more fun, like build a business. So, I moved to Toronto actually to start one of my first Biotech companies. I’m going to talk a little bit about this company and then the move out west. But this was a company called Probtec Corporation. So, I was at York University, and we decided to create one of the first concept companies in Canada. This was really, really, really early days in biotech. What we were looking at, at the time, was how DNA gets damaged when you’re trying to kill a cancer cell and whether we can direct targets to cancer cells by damaging the DNA specifically. We’re talking about research science, not something that would be normally commercialized today. What I found was, we were so far from the clinic, that while I could raise money, we were still so far from the clinic and there had to be another way to raise money.

So, I had to find a way to raise money. I was attending a birth defects conference in New York state and these guys got up and presented the same technology we use in our genetics work, but they were using it for forensic work and paternity analysis and I thought hmm…no one in Canada is doing that. So, I went to their Fortune 500 Company and picked up (name obscured by mic feedback) for being able to do forensic work and paternity analysis in Canada. And I’ll talk a bit about that, but it was the balancing with all my businesses early on, with early-stage revenue potential along with the long-term therapeutic big win. A lot of venture groups hated that, because they saw this as a distraction from their big win – the therapeutic. But I actually like revenue, I think it’s good for companies to have revenue. *laughter* I was pretty much alone okay?

So, we had all of this technology, and when we’re looking at the environment around us at that point in time, basically biotech was almost non-existent in Canada. It was back in the days when you would literally see magazines with pictures of pigs with wings on them. I would specifically see people making fun of the sector, and they were somewhat scared of the sector, as well, at the same time. There was actually one biotech company at the time that was actually substandard which was Allelix and that was put together actually by Labatt’s so it’s not surprising that my funding came from Molson’s – and a shared venture which was actually basically an oil and gas combination of groups that were willing to take a risk. That first million dollars to finance this program, as a seed business.

This was one of the earliest biotech companies in Canada, but I got to tell you I was bored to death, absolutely bored to death. Because paternity and forensic work, which was really the only revenue is really an unhappy business. It doesn’t matter what you’re doing in it, it’s unhappy. So, when you’re doing these analysis, if it’s paternity, someone comes into your office and says, ” I’ll pay you anything to tell me it’s my baby,” and usually it isn’t. Or they come, and they often tell you, I’ll pay you anything to tell me it’s not my baby and it is. *laughter*. It was never what they wanted. And then there was the forensic side, And I actually worked on the Scarborough rapist case, and I remember getting a call from Sergeant Wendy Ward, who ran the rape kit in Toronto and she goes, “I think we got him, I think we got him, he changed his M.O., I think we got him” and I said, “okay, calm down.” She says, “but I don’t know what to do he used a condom.” I say, “okay, calm down, we need to preserve a sample of the condom, but I need to know how much is in the condom, because it makes a difference in how you preserve it.” She goes, “Well, I’m not very good at this.” I go, “well, just guess”. She goes “uhuh, mm, ha, maybe a litre?” *laughter* I say “okay, is there teaspoons or something that you could work with?”, turns out it was Paul Barnardo, and it was used in the actual case against him. So that was one of the early uses of forensics in Canada.

Now, I at the same time was so bored with forensic type work and paternity tests, that same technology was useful in diagnosing inherited disorders. And so, I launched what is now the largest genetic diagnostic test facility in Canada which was at North York General Hospital with a chap named Phil Wyatt who was just a brilliant scientist, a very dedicated physician as well. And so, what we did there, was, I got tired of the fact that there were 11 different laboratories offering a genetic diagnostic test in different places. But when you got that genetic diagnostic test and you chose to abort a child, it was with no support. There was no one there to look after you, there was no one there to provide counselling. and so, I felt, no we want to be the right place, with all of the support – cytogenetics, DNA work, as well as all the counselling. And so, we created this facility. Not for profit, largest in the country, different means to measure it. But I found out a lot more interesting, a lot more rewarding, than the forensic work. And eventually I decided, you know what? I really don’t like this work and I sold that part of the business, and I made the move out west.

I’ll talk a little bit about my move west. I make this decision to move west. I looked all over the country. I had job offers in Boston and San Francisco, where a part of me wanted to be, because that’s where all the excitement was, but instead I also had kids. So, I thought you know West Coast, clean air, this is where I’m going to raise my family. In my wisdom, I moved to Vancouver. Like who does that? I had a career opportunity elsewhere, I move to Vancouver where there’s absolutely no industry at all. And I joined a little company, and I arrived there and in fact, Paul Reider came up to me within a week of arriving from Discovery Capital and he looked at me and he goes, “what the hell are you doing here?” and he felt sorry for me. I moved out, I had my fourth child, I found this all the way when I was in my hotel room. I found out that the company I had moved to couldn’t afford to pay my move and I had made this move, and I had these children on the way and had bought a house. So, I was on the West Coast, that was my arrival. It was interesting, because I got lucky, because the company I went to was a total disaster. But, they had some interesting financial backers. and they trotted me up in front of their investors and I just told them the way it was. What was going to work, what wasn’t going to work, and investors called me back later and said to me, “Well, you know, we’d like you to consider being CEO of that company.” And I thought, “hell, this thing needs to be blown somewhere on the island”. Which happened. But I said it started something new, and this was on a Friday. And they said to me, “well you know we like you, you seem like an honest guy.” They put a million dollars into QLT at a buck a share and sold it for a hundred dollars a share, so they had a little bit of cash hanging around. You know I like this sector, these are oil-fortunate guys, gold… And they go, we’ll back you and I said okay, yeah, I’ll write a business plan and this is Friday. I ask “when would you like this business plan?” And they go, can you have it like Monday afternoon? *laughter* The next business I’m going to show you was with a plan that I wrote over a weekend.

The company was called StressGen, and this was the company where Discover Capital and, at that time, MDS was really critical in helping launch the company in a very strategic course. The company focused on what we call stress proteins. I made the mistake of using the slogan “out there is the cellular stress response company.” Sounds like a great name, StressGen, work on stress proteins. My phone would not stop ringing with people who have cell phone problems. *laughter* I was like “great!” We’ve got orders, because we had a reagent business. This is one of those companies where I felt… a new area of science. It was, once again, a platform company. Platforms are really hard to finance. Back then, was one of the only really good you know, platform companies around, where you didn’t have any specific product, but you had a group of proteins we thought were important and we really didn’t know what they did, but they made up 10 to 20% of every single cell in your body. So clearly, they have to be somewhat important, so we’ll study those, and they actually financed that, and I can’t believe it today. I want to go back and go, “what were you guys thinking, financing that?” But, they did, and we actually found use this for these so-called stress proteins.

The technology came out of MIT in the Whitehead and this is an example of where we’re bringing technology into British Columbia. We have incredible universities here. We’ve come a long way. We produce a lot of our own homegrown technology that we export around the world. But, back in these days, universities still weren’t very heavy into tech transfer – they were just beginning. So, a lot of what I did was to bring people and technology into British Columbia. and a lot of people who run these companies actually came into the country through some of our programs. In this case, we developed the vaccine to treat Human Papillomavirus, we’ll soon call it Intraepithelial Neoplasia. The drug was absolutely spectacular. That’s another example of a drug being spectacular but never actually making its way to patients. I’ll explain that in a moment. We put together this incredible team with the most world-renowned group in all of this. It was the who’s who of the world and they all came to work with us. I treated them to fishing. I felt something in common with many renowned scientists, which was fishing. and I bring them out here and I take them fishing. We do our scientific advisory meetings and they just grew in love with the company and they actually committed and brought a lot of technology from around the world with this team of people.

I’ll talk a little bit of the wild west of financing this sort of concept company on stress proteins and a little bit about what the drug did. Our first Angel money came in with that $400,000 that I told you that came from that group, but on the condition that we go public early. And one of the things that made a huge difference about being in British Columbia was having the Vancouver Stock Exchange. You have this environment or this culture of risk. People are willing to take a chance with their money that you just didn’t have an Ontario. Quebec tried to buy it and was successful in buying it into their community to some extent, but BC had it naturally. Because you had this oil and gas sector. People who are used to drilling holes and actually coming up empty at times. Well biotech is no different. You drill a hole, sometimes you’re successful, sometimes you’re not. So QLT, there was a wave because of QLT because it was very successful for a period of time. It kept changing its name I don’t know if any of you noticed that. Whatever became popular, Via Pharma Company, they had a pharmaceutical name, and then they became the company Via Technologies, they became QLT technologies, it was just constantly changing. A little history. Another thing we had going for us, is a very strong North-South axis. We were really interacting more with California as a province as we were with Ontario. Ontario had all the big Pharma companies but no creativity. Quebec had a lot of money and they spent it heavily on recruiting but had issues in people to build their industry there. Eventually they did okay, but it’s still a struggle there in particular. And then Engene had done its big move, and so they called it the Engene Wave – where everyone seemed to do well after that. This is the type of industry where they say the rising tide lifts all. That’s exactly the same thing when it falls here.

So, we’ve hit that financing. I wanted to point out again things are different now. Where there was a lot of homegrown technology, we really do have world class science here in BC right now, which made a huge difference. But, that was the early days. In ’92 we did that venture capital financing that was led by MDS and David and his team, and I remember that was quite a challenge and getting that one over the finish line was really tough. Really because of MDS Discovery out here that did get over the finish line. and I remember, I don’t know if you guys remember Michael Brown from Ventures West. Michael calls me into his office and he sits me down one day and he’s telling me everything I’ve got to do, everything I was doing wrong, and everything I could be doing better. I finally stopped him, and I said you know what? You’d be one hell of a mentor if I wasn’t so far ahead of you. *laughter* And he shut up, and that’s what he told me later, that’s the reason why I gave you the money. You finally had grown enough for me to be comfortable with financing you, going back to the bearded, mis-shaven…

We migrated that company after that to the Vancouver Stock Exchange. You know, nowadays a 25 million-dollar IPO is small, back then it was an okay IPO for our sector, back in the early 90’s. That’s a long time ago now. And so, as I said, one of the first true concept companies, one of the early public companies. I was there for 10 years as CEO. The company grew, I think at the day that they terminated me – and they did fire me – the company was valued at about $670,000,000. I thought, you know, I wrote that plan in a weekend, imagine what it would have been if I had had a week. Better. The old plan was just a weekend. But, when the Venture Capital board of directors at some point made the decision, after the second time they decided to fire me – I came back the first time, I decided not to come back the second time… But, at the time there was this belief that the company had gotten to the point where we needed US CEO / leadership, and they decided it was time for me to go and I graciously left the board. Actually, graciously left the company, stayed on the board. Never do that. You guys already know that I can tell. There’s enough gray hair in the room to know this. When you get fired as a CEO, don’t stick around at the boardroom, that’s the stupid place for you to be, just leave the company. Lesson learned. Anyhow, the company did the largest deal at that point in time in history in biotech, which was about a $300,000,000 transaction with Roche for that drug for treating human papillomavirus. Probably the biggest disappointment in my career is that drug, it’s not on the market today. It has nothing to do with whether the drug worked, the drug was actually quite spectacular, but they wanted it manufactured a certain way, and delivered a certain way. And it was not as commercially viable as delivering it the way we were delivering it as a young company, we had limited resources. But the drug was incredibly efficacious. Well at the end of the day they put it on the shelf and eventually it cycled its way through, but it never actually made it to be commercialized. but it was one of the most efficacious drugs treating cervical cancer attacking the human papillomavirus infected cells and assisting the body to kill them. Today immunotherapy is huge. That was one of the earliest immunotherapy products, way before its time. But the drug actually worked, it worked beautifully. There were lessons in this business, sometimes even with a successful drug they don’t make it to the actual market.

I have to tell you a little funny story. This is a picture of Ed Rygiel. Ed Rygiel was the CEO of MDS. So, when we had just about closed that deal, Ed, well he had to come out and visit us. As the CEO, he had to make a personal hands-on visit to the company in Victoria and walk through our operation. But we worked until about 4 in the morning. I went home after prepping for this meeting. Our CFO stayed back, and he was an insomniac. So, he actually stayed back, and he made …a bunch of posters, everywhere you know. Even though I’ve walked through the valley of death, we had the best damn patent in the valley, and all this type of stuff everywhere. I walked in there and I’m like, “you got to get rid of this crap.” I took down all these posters, like 10 of them, alright? I bring him into our boardroom, Ed Rygiel, the CEO of MDS, bring him in there and close the door and there’s one poster left, and it’s a picture of him with “we have seen the enemy and he is Ed Rygiel”. *laughter* It’s on the door behind me! You should have seen me throw myself against the door to try to pull this thing down before he saw it, and I actually did get it before he actually saw it. That same CFO had an $11,000,000-dollar financial charge for telephone bills that he took up with us when he came with financials and call me when he got back to Toronto and goes, “Hey, how come you guys have an $11,000,000 phone bill in the financials?” And he was like, “the CFO didn’t last forever did he?” Anyhow, lesson learned. That’s Ed Rygiel.

Now, I’m going to talk a little bit about the next phase of what we developed. After leaving StressGen, I went to Hawaii with my family and it really was a great break, a chance to think a little bit about what’s next. Came up with a few ideas on our next business venture. Part of that came from the fact that I was the longest any director of the National Centre of Excellence of Canada particularly the Genetic Diseases Network. The Genetic Diseases Network was renowned for its work in developing and identifying gene defects. One of the challenges we had was we had to find out the gene defect, but no one would invest in actually going for the gene defect to actually a therapy when you are treating a disease for a smaller population, a more rare disease. It was conceived to be at that point in time. even though the world has changed, there was no money in treating a patient with a rare disease. So, no money to finance these patients. In fact, if you look between 1975 and 1999, there were almost 1,400 drugs developed for various diseases, but only 16 were actually for a rare disease. So, it shows you, this whole area of medicine, whether you’re dealing with patients with cysts or sacs, or whatever, made this discovery but no one was developing therapies for them, because it wasn’t considered to be financially viable. We didn’t like that, we wanted to change that, we wanted to find some way to actually focus on their diseases. Having made money at StressGen I had some flexibility, I had some time we could actually build a different business, on a completely different business model that nobody understood at the time.

So, we built a company called Aspreva. We named it, and I’m really proud of the name because it’s still my favorite name of any company I’ve named. Aspreva was named that for aspirations, which were actually a Latin term, dreams in French, and hope, spero. So, hope is aspirations for patients who have less common diseases so Aspreva. We launched a Aspreva, it was a feel-good company, and everything we did in this company was just fun. Fun to go to work, and there were times where I held management meetings where things went so well I said, “you know, things are going so well, let’s just not have a management meeting because we’re going to screw it up.” Don’t manage. *laughter* Our whole purpose of this company was to develop evidence-based medicine for patients suffering rare diseases. It was done in two stages. One stage we wanted to have a research program, which was longer term, the earlier stage we wanted to do was to actually look at existing medicines and say, “hey that medicine over here is being used occasionally in the patient over here and it looks interesting, but we don’t know if it’s safe, we don’t know if it really works.” So, we came up with a model to go into a big pharma company and say “we’ll finance for hundreds of millions of dollars to actually fund that drug that you’re using in, let’s say transplantation, and we’re going to test it in this other disease, an autoimmune disorder, and if it works, we’ll share the profits, 50/50. And everyone said that’ll never work and no one would finance us. It was a new business model and we were really, really, really beat up, but we tried to raise money for it and we went out and this is 2001, I’ll point out the dates here, the IPO Market was closed, venture financings were negligible that year, Canadian follow-up financing were just a fraction of what they were – dropping from 5 billion in the first half to 1.2 billion so, the economic environment around this was horrendous. And then we wanted to go after Canadian Venture groups because we figured, we’ll start at home, they know us, they made some money with us, it’s probably safer place to start. The target to raise was 3 to 5 million with a 4-6 million pre-money valuation. It’s a relatively a low valuation, because it was a concept, there wasn’t anything there yet except for people.

This is the reaction I got to the deal. First one was, “no one’s ever done this before, especially in the United States”. Of course, it’s not, we’re leading the world to something here, they don’t like that idea. Oh, “we don’t practice venture philanthropy”. When you look at the returns later, you’ll come back on that, but that was what I was told. And I was told that by several groups who just don’t do that, that’s probably too nice. I got “this business plan won’t work” all the time, which is fine, their opinions were fine. I had one group say to me “well, I like the concept of the idea, but if I do this I want to take control of the work, I’m going to fire you”. Any doubt from my employees, well I was actually really relying on them. I pulled him into another room and I said, “what do you think:”, he goes, “well, I’m jet-lagged.” That was a poor excuse for that kind of behaviour. And that really did happen. I had one group that actually did three goes and actually took it to the committee, and they were standing in front of the committee presenting the presentation and all of the sudden this guy wakes up and he goes, “Rare diseases? Is that a new twist on the business plan?” This is after three rounds, when he’s bringing us to committee for actual approval to finance the company. And there was more but I wanted to be a little bit polite, but that’s how this ambitious model was actually viewed. So instead we went a family and friends route because that way wasn’t going to work. Just two years later, $1.75 million raised, $0.67/share, evaluation: $6.2 million, with no venture capital participation. That was our seed. And then we went off to execute our business plan.

Then we went to these three guys: Michael Hayden, who you guys may know from the Centre for Molecular Medicine, he’s very renowned, and Noel Hall and myself were the three co-founders along with our spouses were really founders who deserve credit too. We flew off to Basel and met with some of the management of Roche, one of the largest pharmaceutical companies in the world, we had three employees they had 70,000 employees, it was an equal match for us. *laughter* So, went in here with this new business model and believe it or not, they said yes. They gave us a drug that we’re doing $1.4 billion on in transplantation and they gave us rights to use that drug to try to develop therapies for treating patients with autoimmune diseases. A little later, I’ll talk a little bit more about the diseases themselves and the impact on patients. I geared this mostly to financial, giving the background here but it will come back to why we do what we do in a moment. This drug had been approved heart disease and liver transplant, it has been used in over 600,000 patients, was well-known, and we knew that it has potential to be used elsewhere. We made a deal where we got 47 cents on every single dollar it increased in sales. That drug blew past 2 billion dollars per year with our work and we were rewarded very, very handsomely in building this business.

We announced this partnership, it went global, after we did this deal everyone, there’s a term out there in the industry, “we want to pull in a spray gun”. Everywhere you go in the US, it was all over; we became very well known for this transaction because no one has ever done anything like this before. It became the basis of many new businesses. So, they all wound up pulling the spray gun. We were responsible for paying for all of the clinical development, the preclinical work, the post-commercialization, the pre-commercialization, they provided the distribution globally… It was really easy, we didn’t have to build any infrastructure. I didn’t have to hire a salesperson, I just got paid. It was an incredibly interesting structure deal and they doubled the sale of their product, which was huge for them. We got a lot of media coverage, in both ways, I was the poster boy in their partnering page of their company, but I also knew that being a private company when they started paying us $400,000,000-$500,000,000/year, that it doesn’t matter how much they like you, they’re going to look at the contract real closely. So, I decided that maybe we should be a partner pretty quickly.

I’ll now talk about the next part. So, you close the deal and then we need to finance the company. I needed to finance it quickly, but I also didn’t want to set a price because of having to do it quickly. So, I used a convertible tool, I used the time-based discount and, in fact, if you look it was 2003 and it took me 2 weeks to do the financing. And you look after the two years it took me to do the seed, basically 15% discount if the deal closed before a certain date, 25% afterwards, 20% warrant coverage, actually, a pretty tame deal. Then I used to go out and find the time to initiate a clinical program and to go out and raise our money from venture groups and this time targeting the largest of the US venture community. Then we went out and raised, very shortly afterwards, you’ll see no time between the two, $79,000,000. Our post-money valuation of $156,000,000. The environment was going at an improved overall market, there was limited IPO activity, there was one IPO at that time frame, and there was a very busy private placement sort of PIPE market going on. I use a banker to create this financing because I wanted to create the anxiety, but I didn’t use a classic banker, I went to a very small bank boutique that a very good, little reputation. My board was absolutely pissed at me because, all these big banks wanted to represent us, and I went to this little, tiny bank. That was because they were doing a hundred deals and I wanted a bank that was doing a very few, very select, good deals and so I chose that smaller bank. And they did an incredible job. Now I have five term sheets, I have more than 40 US-based venture capital groups interested trying to finance us. So now, this is just a couple years later, I couldn’t even finance the company. Of course now I had a deal on hand, I’ve got a drug, and now all the sudden everyone wants to finance it. And I can actually pick who I wanted, and so I took the cream of the crop of the US that I liked, where the people were really good people, had good exit strategies, and brought them on board. It was really the culture. I had some term sheets that were 71 pages long, they’d call me up and try to explain to me, and I couldn’t understand how the deal worked, and so I was approached by one guy who said to me, “my team wants to lead this deal and will do whatever it takes to lead it”. And I said to him, “I want it simple, I don’t want my existing shareholders crushed” because that’s often-what newbies will do, they’ll come in and crush the existing ones and I said, “this is the valuation range, you got to have them in this range or I’m not doing a deal, and I want it simple”. “And he says well when do you want your deal?” And I said, “Tuesday?” And he says, “Tuesday at noon, it’ll be on your fax machine.” We had those rolling paper fax machines back then. So, all of us in the company, which were like seven of us, we’re standing by that machine and it came in, 3 pages long, if that, maybe two? It was an offer to finance the company, and I signed it right away, and we were financed now by the top tier US venture community and that opened up wonderful doors for the company but, worrying about it a little bit, although, they were paying us, I also felt that we should probably move on fairly quickly to be public. Now in a moment, I’m going to be coming back and talking about the disease that we’re treating, Lupus Erythematosus, and how this particular drug, CellCept, became the standard of care for treating these patients, and how serious this disease is. I want to repeat myself twice here, but I’m going to try to save time on this to give people this discussion right now for one moment and when I get to Aurinia, which is a company we’re doing now, I’ll talk a little bit more in depth about it. I can tell you though, that CellCept, the drug we developed, is the standard of care for treating these patients. It’s a horrible inflammation of the kidneys, it’s very damaging, women get on dialysis mostly, because it’s mostly women that have this disease, transplantation and they die from their disease, but we’ll come back.
Immediately because I was worried, I did the public offer, because being a public company and they’re big partner of choice for rare diseases, they weren’t going to do anything to us, and so being public was a defensive act at the time, but also a way to grow the business. So, we made $112,000,000 in our public offering, the largest cross-border financing that had already been done. $484,000,000 market cap and going back if you think, do the math to the seed round we did now took this round, those were in Canadian dollars versus US dollars. And we used a NASDAQ company because I’ve always been varied, at that time, more so today, because Canadian investors are negligent, they’re not even there. The institutional groups are barely around now. But back then, the institutional groups were there, and so I wanted a cross-border listing, I wanted to have representation in Canada, because a strong domestic market is important to me. I had a choice of any bank I wanted in the U.S., I chose Merrill Lynch because they were the top-rated bank and they had only done two transactions, both of which were huge successes. I was lucky in that wonderful position. I used Bank of America, Pacific Growth Equity and Nesbitt Burns as a cross-border.

Everything that could go wrong on our road show went wrong. Literally, I went down in Texas, we were flooded and shut down, although Texas seems to flood every year now, but back then it was a big deal. California flooded at the time as well, snowstorms in Boston that were just … but the worst thing that happened while I was out on the road raising our capital on our roadshow was a BioGen blowing up with a company called Culture Savvy. And it took off billions and billions of dollars in the marked capital one day, everyone was hiding underneath their desks. You could not find an investor in biotech for that week, that’s the week we’re pricing our deal. Anyhow, we did get offers financing in the range here. I chose to price it slightly below range, after watching Facebook I’m sort of thinking I didn’t do the right thing, because they were the opposite. But I thought it would be better to leave some money on the table for investors to be able to make some money and have a good feeling when they make their investment. And in fact, that actually did work. The deal was spread across three territories. Well, you can see what the market was doing, we’re launching, and the market was just crashing at that time, just as we went out the door. But actually, we fared very, very well and that stock actually ran right up to about $36/share in the US and very, very strong…I was standing in a watch shop, because I like looking at watches, I usually just look at watches. For years I’ve just looked at watches, too damned expensive. So, I’m standing in the shop and my Blackberry, we had Blackberries back then, rings and it goes, have you looked at your stock today? I hadn’t, so I looked at my stock and instead of being at $500 million or whatever, something like that it was just 1B. I had passed up that billion-dollar mark and it went up to 1.6 billion. and I was sitting there looking at it, and my wife looked at it and she took out her credit card and she bought me a nice watch *laughter*.

So, we sold the Aspreva to Galenica, a Swiss company, for over a billion dollars in 2008 and I retired. That’s going back to the reality that we look at the valuation difference between where those original investors came in, where those venture groups used to say to us that you’ll never have a business here, you’ll never make any money and the number of people that have come back and said, “oh geez, I really wish we had been there.” Well that’s easy then, but things are different, things are better now than they used to be, they’re more sophisticated now here in Canada than they were, but that was the challenge back then. And the question was really was that a perfect storm? Yeah probably, in a lot of ways it was because it was a new business model, it was a new time, but it doesn’t mean that one can’t reproduce success and take from that success.

I’m going to talk to you really briefly now about what I’m doing today and put it back in the context of BC and then I’m done. So, the new company is called Aurinia Pharmaceuticals. I was retired for 11 years, I founded this company along with a couple of others over the last few years and I never intended on being a operating officer again, just the easy job, just sitting on the board which turns out to be not as easy as I thought it was. What happened was, Aspreva was acquired by Galenica and then Galenica became Vifor Pharma, the same company but different sort of structure. And when they finished the program in Lupus Nephritis they had all these staff, but I had built this entire team, basically hundreds of scientists, clinicians and business development people who had expertise in Lupus, but they had finished the Lupus program, it was already the standard of care. There was a patent running out, there was no reason for them to invest anymore. So, I got a phone call saying “We’re Swiss, we’re not really creative would you help us launch a new business? I said “yes, but you’ve got to finance it because I’m not going to do a seed round again” and they said, “yeah we’ll do that for you” and so we launched this company, Aurinia. I did it with a couple of colleagues that had worked with the chief medical officer and the chief business officer that I had worked with previously. This time, we launched the company, and instead of that seed round they just kept us going, I did a Series A financing for $64 million just to launch the company and that took probably about 6 months or so in that range, to raise the money, actually if that. Then we acquired another little company because there’s loose ends. I don’t know if you guys know but there’s some weird rule in Canada that’s really bad which is if a company goes bankrupt its licensees are not protected for their licenses, and people don’t know that. So, if you’re a licensee and the licensor goes bankrupt it’s up to the receiver whether that contract stays in place. Well you’re out raising money, I don’t want to put my investors in jeopardy, so I wanted to clean it up. The way to clean it up for me was to go buy the company that we had licensed technology from, so we just bought it because they were in financial trouble. And that’s where Aurinia was created from.

So, a late-stage clinical program wants to get focused on nephrology and autoimmune diseases. The team was the one I just described of course which was used to develop CellCept. CellCept is used around the world as standard of care but we only get about a 10% complete remission rate and I’ll talk about that in a minute. Now we have a new generation product that actually goes on top of CellCept. We’re in late-stage clinical development, we’re in the Final Phase, we are in Phase 3, a single Phase 3 is all that is required, The Phase 2 data was strong. I’m going to show you a bit of data, because I haven’t shown you a single bit of data today. So, this is a disease that I was talking about earlier called Lupus and it’s an autoimmune disease and it can affect any part of your body. It can affect your neurological system, it can affect your skin, it can affect your blood, but one of the most serious aspects is when it causes your kidneys to get inflamed. When the kidneys get inflamed they get damaged and as they get damaged, time goes on, you lose renal function and as you lose renal function you need dialysis and if that doesn’t work, you need a transplant, and if you’re lucky enough, you get the transplant. Many patients will die. It’s typical that during a study of these patients we will lose 4-6% of our patients in a two-year period. So, this is a really, really nasty disease, people just don’t know about it. Mostly women, childbearing age, 85%. There’s somewhere between half million and 1.5 million in the US with this disease. It’s embarrassing at this stage time that you’d have a spread that wide. It hasn’t changed since the day I started in this area like 17 years ago. It’s still the same. Of the patients that have Lupus, half of them develop this kidney inflammation. But it’s easy to see because what happens is there’s protein in the urine and a lot of protein in the urine, and that’s how you pick it up. It’s easy to pick up. But it has also been shown that if you can actually control this disease, you have a very major outcome long-term. And so, if you measure the changes of proteinuria in the urine, it correlates with how a patient will do 10 years from now.

I talked about the severity of this disease but just to put it in fold, 60-70 times more likely to die young with this disease than a regular individual. That was what you call the Standardized Mortality Ratio. Bottom line this is a very, very, severe disease. And it’s a very expensive disease. People don’t recognize it but Lupus Nephritis, when you take a look at this disease, relative to heart disease for rheumatoid arthritis about $75,000 per patient per year and hundreds of thousands of dollars if you have to do a transplant on that patient. So, this is a market that has not been served very well even by CellCept. But, what’s really hard about this disease it’s mostly women, mostly childbearing age. They lose their lives. They can’t work often, they lose their relationships, they can’t have families and they die from their disease. It is a horrible disease and it literally steals life away from them and the patients could be as young as five or six years old and they can be really all through the range to elderly, but the reality is most of the women are childbearing age. Every therapy out there right now is toxic and is also toxic for their babies if they’re trying to have one. Some are mutagenic, causing deforms some just make them sterile. So that is how harsh it is out there. So, this is a disease that comes and goes. So sometimes we’ll see the patient and they’ll be feeling better and then a week later they’ll be down, and all their proteinuria levels will be up, and they’ll be flaring. What I said earlier which is very important, is if we can get a patient to respond and drop that proteinuria quickly, there’s a 90% chance that they won’t need a transplant. And they won’t need dialysis. Conversely if they don’t respond to the therapy, there’s a 90% chance they will need a transplant. So, getting involved here and controlling this disease quickly, doing it without steroids, most of you have been around long enough to know that steroids are really, really bad for you and they’re terrible for women and long-term use of steroids is how they treat these diseases. So massive amounts of Prednisone. If you can get rid of that you have this huge impact on a patient’s well-being. It’s easy to take.

The drug we have is called Voclosporin. It’s a modified engineered molecule that has shown a very unique profile, I won’t go into the profile for this, but it’s actually been very different from any of the so-called legacy type drugs in the space. It is much more potent, it has much fewer side effects than anything that anyone’s had in the clinic in this area. This was a study we ran, a Phase 2B study which means it’s late-stage development, but we ran it very in-depth, three arms, every single patient got the standard of care which was the old drug of ours, CellCept, which was MMF, and steroids. Above that they also had a control, like a placebo or they got a low dose of our new drug or a high dose of our new drug on top of that. So, this is additive therapy, we’re adding it on top of the existing therapy and then were forcing the patient off of steroids down to the low physiological level. So, we’re getting rid of the toxic steroids for them. And here’s the type of data we generated, data that has never been generated like this before. We hit every single endpoint, every primary endpoint, every secondary endpoint and generated the best data ever generated treating this disease we’re 11 or 12 or 15 drugs or something like that have failed. So, what we’ve done here is to show that one out of every two patients was in complete remission a P-value of less than 0.001 and 100% of the patients that went into remission stayed in remission for the entire trial. Only 19% of the patients originally got into remission with the control, only 24% with CellCept + that previous therapy which is much higher than the 10% we used to get, but that’s also because we’ve gotten better at treating patients. So, I think lowering the steroids in those patients actually makes the drugs work better, with 70% of the patients responding to therapy. So even if you don’t get a high percent response, pressure makes a difference in therapy. So, this data was just blown out of the park, it was better than I ever expected.

I was sitting in Mexico in a pool when I got the note, I got the call. Do you ever see those pictures with the guys with the cigars and the Scotch? And they’re smiling, and you don’t know why they’re smiling. I couldn’t tell anyone why I was smiling, but I was smiling. It was a very special moment. And not only did it improve over time, but when we stopped the trial, it was still improving, and so we really don’t know where we can get to with this drug and this new trial is slightly longer. So right now, we have shown that we hit every endpoint, that we had high response rate, we were faster at getting response rates, but also, we showed that we had impact on overall Lupus, not just Nephritis of the kidney, but overall the skin, other implications neurologically and we saw safety signals. We still lost a lot of patients, we lost I think 14 patients during the study, and that’s hard, these are young women mostly.

Based on that, and I’ve got to remember, I came out of retirement to do this after I hired two CEOs and I didn’t hire great CEOs, I’m better at building businesses I think than choosing CEOs. So, I came back out, I think it was on February 6th, I went back to work, first week, I went to Mexico on vacation because I promised my family, but I worked from there. Went to New York for a quick visit, came back, reviewed the clinical data, prepared everything, press releases went out, raised the money, and then went on vacation again for another two weeks and the company went from $80,000,000 to over a billion in value over that short period of time. I was telling my boy that they should put me on vacation more often *laughter*. Based on those results we raised $174,000,000 very, very quickly. We had $600,000,000 offered to us. Top US banks backed the company but purchased and the institutional investors were the Fidelity’s, the T. Rowe Prices, the top tier in all the US. They told me they wouldn’t be our investors, I said, no I want to go see them, they said only small companies go see people nowadays, everyone else does it on the telephone. I said no I want to go look my investors in the eye and I’m going to ask them for money directly. So, we did that, and I asked them a bunch on the phone now. Things have changed so much, you can do this $100,000,000 financing from your office now, and you don’t even have to leave your office. I still like old-fashioned investors, where you actually go meet them and they make a decision to invest in you and your company. So, we fully financed this company right through the regulatory approval. So now, Phase 3 is up and running, it looks exactly like the Phase 2 only it’s got two arms and we now know the go-forward dose that we’re using, which is a low dose of the drug, same steroid, it’s going really, really well, patients are really well enrolled and we’re going to have data from this the end of next year. That’s how long it takes, the end of next year, hopefully this will become the first approved medication for treating these patients on top of CellCept which CellCept is the standard of care today, but it’s actually not even approved for this disease. It’s a complicated regulatory story, but it is used everywhere in the world for treating this disease, this is a much better drug and it’s much more exciting. We have 212 sites around the world that are active in enrolling patients, it’s one of the largest studies ever done and we still, we work on the sickest patients ever studied in this as well. and we have the highest outcome measures, we put the bar really high and yet, patients are hitting that bar. This isn’t a commercial, we’re fully financed, the company, but I just want to point out that here’s another BC company bringing technology in this time again, building on the people that we actually have resident in this province and then building beyond that, a global operation.

So, summary, hurray! It’s a unique environment for this business that we live in, Biotech. So it’s very, very well in British Columbia and in ways a lot better than it has an Ontario or Quebec for a variety of reasons. And it did so with very little direct subventions from the government. We used to complain about this, but the reality is what we have as a community, whether it’s the service provider, whether it’s professors at the University, whether it’s the Venture community which comes and goes in the province, it’s not always here, for whether it’s the Vancouver Exchange, or whether it’s the type of investor that’s willing to take risk and now, that chemistry together even without government subsidies has been incredibly successful compared to elsewhere. Once again, but north-south axis with California has been really important to us. Right now, I think it’s incredible the amount of money that has flowed into the sector in the province. There’s probably about 100 real biotech companies in the province right now. They employ probably a 180,000 people in the province. They contributed about $14 billion to Gross Domestic Product and a lot in terms of direct taxes, that number is growing really, really quickly. The sector has actually made an important contribution to the economy here and it’s slow to grow but it’s a very important business and it feels good doing something that really matters. I can tell you, in closing, that all the years I’ve done this, the most important thing for me hasn’t been all the awards, and we’ve won whether it’s Entrepreneur of the Year, or the Lupus Foundation of America, leadership awards, I mean we’ve got walls of awards in our organizations. But, I was sitting at a table with the chairman of the Ways and Means Committee in the US, I was in Washington and I had Ted Kennedy at that table and we were all sitting there together and this woman comes up with this 9 or 10 year old girl in her hands, holding her hand and I stood up and she tapped on my shoulder and said to her daughter, “I want you to meet the man who gave you your life back.” That was for me the most important moment in my entire career. I had the chance to see a patient who has actually directly benefited from being on one of our drug, whose life as a child was actually back. That’s why we do what we do, I know I spend a lot of time talking about numbers guys, but that’s the reason, where the money goes and what it can do.

Questions and Answers

Question: Do you have any comments on the federal government’s proposal to build these centres of excellence? You didn’t need any help, you just did it. Is this money likely to add to this [sector]?

Answer: It’s a good question and I think if you think the next generation ahead, when I was younger, I was part of the biotechnic advisory committee for the federal government and I wrote a commercialization paper at that time, and at that time we recommended, in the really early days, if you guys own manufacturing, if you don’t build that infrastructure here in BC, in Canada in general, what’s going to happen is we’ll develop these technologies and then this gets to a certain point and they’ll transfer them off abroad and things are going to happen there. And the government chose not to be supportive of that. Whereas governments in Ireland and other places and nowadays, South Korea for example. So, I think that there is a role for that, and I think it’s important, I think the issue is two things. One, is capturing the science and then creating an environment where you can take advantage of the excellence centres and then have the technology remain somewhat resident in Canada, with the idea that as you grow these businesses that they don’t have to leave. You know it happens to every major company right now, that I work with, is that you get to a success stage where they get acquired or you migrate to the US. Because of the tax changes that are occurring in the states right now, it’s even easier to migrate. But these centres, with a relatively small amount of money can actually produce incredible science and it’s really a question then of if you take that next step can you actually, kind of what I used to call technology anchoring, can you actually find a way to keep it here? But I think you need to do both when you’re thinking of a strategy and I think our government misses this.

Follow-up Question: The Liberals have declared a war on saving, you know with huge increases in tax rates. So, my question would be, are we going to get stuck with the cost of developing the centres of excellence, so that the benefits that ultimately flow from them are going to be acquired by people outside of Canada, and the technology is going to leave, and we’ll get stuck with the start-up cost and not benefit from the ultimate.

Answer: You know, I think that’s always a risk, but I think when we actually study and do the math on the sort of spin out, the people, that usually those are a genesis of much more to come, and it’s not just that single event. So, when you’re bringing people in, they’re developing, something gets acquired, they don’t all leave, they often stay here because they love living here, they then are able to raise more money because they have a track record and pick up the next bit of technology because there’s always new technology and developments happening here. We have a very robust scientific program in the province. So that’s always a risk oh, and you can’t legislate what happens because if you try to legislate where that money goes eventually, it’s a disincentive for people to invest here because the upside often is with the acquisitions and with the change of control that goes into the US as well as elsewhere. So, the trick is improving the incentives to actually keep people here, that’s becoming more of a problem in the context of recruiting people here simply because the most recent tax changes in the US made it even harder to bring people here to control our businesses and will have a greater migration elsewhere which is the bigger issue. So, point well taken, I think it’s a legitimate concern and I think the benefits for me I think outweigh the risk, but if they’re done in the absence of other plans on how to keep people here and how to grow businesses, I don’t think they’re going to be as effective.

Question: Shifting gears a little bit to the medical aspects, do you have any idea of the target population you’re looking at with regards to the incidence of this disease, the Lupus and carrying on the separateness concept do you foresee extrapolating this to other more (word obscured by coughing) processes.

Answer: So, first question in terms of looking at the size of the market itself. Probably, you know we model somewhere between 200,000 and 250,000 patients because we tend to model more conservatively…if I model against the penetration that CellCept had and that market was about 50%. We don’t have a model even close to that. When you look at the pricing of a drug like this you’re probably looking at between $50,000 and $80,000 per year per patient. it’s an expensive therapy, it’s an expensive disease to look after, but that’s where the so-called experts based on reimbursement have priced this drug for their expectations, so let me stop talking about math let me start talking about patients. Patients, when they’re on the drug, will likely stay on the drug, they will stay on for 6 months, but actually stay on a reduced dose for long-term, it’ll keep their disease in remission, so we have our studies, they’ll be a year in duration, followed by two years of follow-up to try to create the long-term safety database you need for a drug. We’ve had drug patients on the drug for as long as 10 years, so we know quite a bit about safety. And this particular study there’s 324 patients, so for Lupus Nephritis that’s actually a fairly large study. These rare diseases are tough, that takes over 200 centres around the world to find patients who are actually flaring at that moment where you catch them before someone puts them on Prednisone and actually make them less eligible to be in our study. So yeah, about 324 patients, it was 256 in our last patients, CellCept study was 364 patients… and the data by the way, the follow-up data with CellCept which made it so successful, was its long-term use in patients. and over time, CellCept’s performance increased over time. we get as many as 50% of patients over time, but the problem is patients cycling in and out of remission, they’re constantly unable to control their disease, and the drug is Teratogenic, which was an issue.

We’re using an FSGS right now in a clinical program that will be starting up in June, we already have regulatory approval to begin the Phase 2 there. That’s basically sort of like a Proteinuria kidney disease, but it’s mostly in men, very similar outcome measures. We have a dry eye program, dry eye is a bout a $2 billion market, that’s been regulatory approved, the FDA has reviewed that, that’ll start in June. We haven’t had a lot of news lately and our stock actually reflects that lack of news flow and in the next little while we’ll start having a bit of news again. Once we have the clinical development program, we’ll have something to talk about. So, I watched our stock kind of dwindle and I suspect with news it should improve. Those two indications are coming, there are other indications, but somewhat limited by balancing the, how long your IP is for a drug to how much you invest in initial indications. We have written for a bunch of new patents which, if they come through then I can continue to invest in longer term, additional indications. Our protections, roughly, in the US is 2028, which is plenty of time for people to make money, in Europe, 2031. If we take advantage of some of the additional patents we’ve written it could be considerably longer than that if they’re successful.

Question: What is the overall mortality? And second question, where is the biotech as far as CRISPR for the damaged DNA that you mentioned?

Answer: In every study done, even with an approved drug, in this disease you generally see between 4-6% of your patients will die and that’s usually over, depending on the length of the trial, but we see it in our trials which were usually, you know, 2 years in length roughly. About that number, so like 12, 14 patients out of 300 or so patients, really 18 patients, it’s in that kind of range and its pretty consistent across the board. We have a really good safety profile in this particular trial we’re in right now to date, it’s going really well. That’s generally because the patients that are coming to these trials are so, so sick, and actually what we find is most patients die within the first four weeks, six weeks, and what we learned is, and maybe what’s different in this trial is, if they show any signs, and they’re so malnourished, or they’re coming in with some infection of some type, we actually don’t let them into trial and we have to wait until, we try to treat them until, they’re ready to be put into the trial and then they go into the trial, and that significantly reduces mortality overall it’s a different (word obscured by coughing) much tighter than we used to be, we used to leave it a lot more to the individual physicians to make certain judgement. They still, of course, have the right to manage their patient, but we’re much more involved. And your second question related to CRISPR. When you look at these types of diseases, particularly something like Lupus, when I came back to work after 10 years of being retired, I said, “here, give me the genetics update”. It was like 11 pages long under one line for each gene that might be involved, and so any new approach to being able to look at modifying any genes is completely, at this point in time, not possible because there isn’t that good of an understanding. CRISPR, on the other hand, is fascinating.

Question: Have you ever spent much time thinking about what kind of a business model a drug company would have to have in order to develop a cure for a disease?

Answer: I know there’s a lot of skepticism about stuff like this, but I think the skepticism is, quite frankly, it’s total bullshit. The reason is, is because as you approach your modelling of your business you take the example of a friend of mine, a company called Pharmacept, and my friend wanted desperately to be wealthy, and you know he came to me and said, you know, I wish I was successful like you, you’ve been retired, and you’ve done this, and he was building this little company, well they developed a Hep C treatment which was bought by Gilead for $11 billion, and he made $600 million and now he’s, the one I look at and I say, ” you know, I really wish I could think like you because then I could have a mega yacht with a helicopter on it. What I’m getting at, is as we approach our businesses we will try to develop the best possible drug, whether its a therapy or whether its a cure. Our goal is for curing, it’s not a financial discussion, it’s purely about what a technology will do, and the reality is that most of these diseases are so complicated that cures don’t generally work. In that case, in the Hep C program, it does appear to be a cure. It’s very rare. In most of our programs, we just aren’t sophisticated. The same thing goes for oncology, people who think that people are actually stonewalling on the development of drugs because pharma companies make more money, absolutely not true. All of us have relatives that are dying from these diseases, all of us want to be able to prevent people from being killed. I really fight hard sometimes and then I, you know I sort of get a lot of push back on how the business models relate to profitability. The biggest challenge we face in our business models is when we’re successful. I know that it sounds like counter intuitive, but you go from being a company that’s actually losing money all the time, and everyone’s not looking at your balance sheet that way, they’re looking at your balance sheet, “oh, how much money do you have left?” But, they’re not looking at your income. And then you all of the sudden make money, now all of the sudden some of your investors want you to make more money, and more money, and more money. That stalls you, that kills the businesses and then all of the sudden you can’t develop performance research, you can’t make those investments, you’re stuck in this in dealing with industry this quarter after quarter and that’s the downside. People come and give me the argument about well you’re not doing enough rare disease work, I say, (word obscured by coughing) I owe him lots of stock. They say, “Well you’re part of the problem, because you’re holding our industry to a different standard than you do an oil company.” Our CEO’s get fired if they don’t deliver profits, our CEO’s gets fired if you don’t get growth. There’s a reality of what the market is asking for, but you as shareholders in many cases demand and what we would love to do in our companies if we had the freedom to do so. To your point, I really do believe that any time we can actually develop a cure, I’ll tell you the energy and the commitment is extraordinary, and the business models do work when you have the opportunity.

Question: Can you comment about the state of research and treatment of rare diseases in general. Those so severe, that they’re beyond recognition, as compared to ten years ago? What’s your take?

Answer: It’s totally different. When I was starting a rare disease, we were one of the only true rare disease companies that existed. There had been a previous company, Genzyme that had about $3000 and rights to a drug from the government and sold that product for between $500 and $1 million per year per patient. Whether they made it again using genetic engineering and the cost was actually negligible, it didn’t change the cost of the drug. So, they were sort of the first rare disease company in a way, it was hate, and the CEO used to live in a bubble, and security levels were 3 measured because that’s how much people detested what they had done, but they were hugely successful, and their company was Genzyme. They were one of the early ones. Now since that time, their diseases have become very focused. We’ve got price ranging up to a $1 million per patient with gene therapy type applications, it’s not uncommon to see $200,000 type therapeutic costs or $8000, well Hep C is a big market, it’s not a rare disease, but you see these prices move up considerably based on cost-benefit and analysis what (word obscured by coughing) are willing to pay in the long term for patients to actually prevent the additional payments they would have to make, and that’s the balancing act that we’re seeing. So, the whole world has changed, rare diseases are in vogue everywhere, everyone is looking for a rare disease application of an existing drug because not only can you get it into the market quicker, you get special treatment on the way into that market. You get the drug in there, and then you go for your bigger potential target after. The whole model has been turned upside down by the whole development of rare disease, which is great for rare disease patients. I gave a talk a little while back to Lupus patients, I was at St. Paul’s, I came in for that, I rarely get a chance to talk to patients like this. It was a room full of patients and they looked at one slide, and the one slide said something like $1.4 billion and the organizer said to me, don’t you dare put that slide up there, don’t you dare, that’ so insulting for these patients. I said, “No, I’m going to do it.” and we fought, literally for like 15 minutes about it and I said, “I’m doing it.” I put the slide up, $1.4 billion in this room full of patients and I said, look at that slide, I said look at that number, I said, that number is your friend. Because that’s the reason why every big pharma company out there now has any interest in renal franchise is investing in your disease, because without that number you’re not going to get the help you need. You should love that number, and don’t be offended by it. That’s just disappointing.

Question: How did you select drugs, so they’d be used for specific purposes for other applications?

Answer: Well, I think we got lucky. We do a process. When physicians working in a field you look at mechanisms, and you look at disease mechanisms, you can match the two up together, that helps us. But, quite often it’s just the physicians experience. We’ll just read a paper here or there, where someone has written about 3 or 5 patients where they treated with a particular drug, and they look at that and you go, that kind of makes sense, and you look at the mechanism and if the two actually match up together and the market makes sense, even if it’s a small market, maybe you can develop a program. That’s what we did historically. This last company is a one product type company and it was not really based on that, it was based on the fact that we knew that calcineurin inhibition was going to hep these patients and we just wanted to find the best possible calcineurin inhibitor to help the patient, it was much simpler.

Question: Immunization therapy for brain cancer, how effective is that?

Answer: I have no idea. That’s my short answer. I will say this; the world is changing quickly when it comes to oncology. It is still a high priority of financing today in the industry. The immunotherapy, and the concept of using your immune system, which came into vogue 30 years ago and then disappeared is now the mainstay for many of the new therapies being developed and it will be whether it’s preventative or whether it’s therapeutic, absolutely essential to the outcome of many of us and for our children, in dealing with these diseases. It’s critically important, understanding which T-cells to turn off, understanding which T-cells to turn on, understanding why the immune system doesn’t respond, and understanding how to make it respond when you want to is where the science is today and it’s changing really quickly. So, if you know the reason why a person develops a cancer, sometimes cancers are caused by certain viruses, there’s all sorts of mechanisms that in the future we can apply to help prevent that.


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