Serial CEOs come back for 2nds (and 3rds, and 4ths)
By Brian Orelli
Rather than riding off into the sunset after successfully developing a biotech company and getting it sold to a big pharma, many CEOs start anew, trying to show that lightning can strike twice (or more).
"People either take to this or they don't," said Michael Gilman, former CEO of Stromedix Inc. and current CEO of Atlas Venture-backed Padlock Therapeutics Inc. and Raze Therapeutics Inc., all of Cambridge, Mass. "Running a start up, you're working without a net. If you're OK with that, it becomes a very exhilarating experience."
FINDING NEW OPPORTUNITIES
Biogen Idec Inc. bought Stromedix in 2012 for $75 million up front and up to $487.5 million in milestone payments. The deal brought idiopathic pulmonary fibrosis drug STX-100 back under the fold of Weston, Mass.-based Biogen Idec, which out-licensed the drug to Stromedix after being previously shelved for strategic regions. (See BioWorld Today, Feb. 15, 2012.)
After the acquisition, Gilman did a second stint at Biogen Idec before joining Atlas Venture as an executive-in-residence. "It took me 58 years to figure out I'm a small company guy," Gilman told BioWorld Insight.
"I didn't have any really burning scientific problems that I needed to solve," Gilman said of why he went to Atlas where the venture firm's company-formation model provided multiple opportunities to develop new technology. "Over the course of the first few weeks of sitting there and listening to all these things, I just waited until I fell in love with something."
Dennis Podlesak started a couple of companies and then joined venture capital firm Domain Associates LLC and founded a few more.
He served as CEO of Alameda, Calif.-based Peninsula Pharmaceuticals, which was sold to Ortho-McNeil Pharmaceutical Inc., a subsidiary of New Brunswick, N.J.-based Johnson & Johnson. (See BioWorld Today, April 20, 2005.)
Johnson & Johnson was mostly interested in Peninsula's Doribax (doripenem), so as part of the deal, one of the compounds Peninsula was working on, Teflaro (ceftaroline fosamil), was spun out into Cerexa Inc., also based in Alameda, Calif. Under Podlesak's leadership as CEO, Cerexa was eventually sold to New York-based Forest Laboratories. (See BioWorld Today, Dec. 15, 2006.)
And the list goes on. At Domain, Podlesak established San Diego-based Calixa Therapeutics Inc., which was sold to Lexington, Mass.-based Cubist Pharmaceuticals Inc. for $92.5 million in cash and up to $310 million in milestones. And he's formed companies where he's served as chairman that have had successful M&A exits. (See BioWorld Today, Dec. 15, 2009.)
"What we're most proud of is that a lot of these companies have gone on very successfully," Podlesak said. All three of the companies were sold before FDA approval with Doribax gaining approval in the hands of Johnson & Johnson and Teflaro by Forest. Ceftolozane/tazobactam, which Cubist got in the Calixa deal, is currently under review by the FDA.
At the other end of the spectrum, Johnathan Goodman is building a new company to commercialize already-approved products or those that are close to approval as CEO of Knight Therapeutics Inc.
He did it once before at Paladin Labs Inc., which was sold to Endo Health Solutions for $1 .6 billion in stock and cash. As part of that deal, Goodman held onto Impavido (miltefosine), Paldin's therapy for leishmaniasis, because it was about to gain FDA approval, which would give the company a neglected tropical disease Priority Review Voucher. (See BioWorld Today, Nov. 6, 2013.)
"I asked Endo if they'd pay me more money for the voucher and they said, 'no.' So I said, 'Well then you don't care if I give it to my shareholders,'" Goodman explained. "It was about a 30 second conversation."
Earlier this month, Knight entered into an agreement to purchase Orphan Canada Inc., gaining Canadian rights for Atryn (antithrombin III, recombinant) and Photofrin (porfimer sodium). The company plans to continue to acquire approved drugs and is willing to look at drugs that are in phase III as well as those that might be approved elsewhere that it can shepherd through Health Canada.
"It took about 19 years for Paladin to become an overnight success." Goodman joked. "And I'm hoping to do it [with Knight] in about 10."
INVESTING IN EXPERIENCE
A 2010 study by Paul Gompers of Harvard Business School and colleagues backs up the intuitive expectation that successful CEOs would continue their track records. Across all industries, successful entrepreneurs have a 30 percent chance of succeeding in their next venture while first-time entrepreneurs only succeed 21 percent of the time. Failing the first time doesn't offer much experience that can help to increase the likelihood to change things the second time. Only 22 percent of those that failed previously succeeded on their second chance.
There are certainly a lot of factors that go into why one might be more successful on the return trip: not making the same mistake twice and having a network of people to help solve problems, for example. "The nuances of running a venture-backed company aren't new to them," said Atlas Venture partner Bruce Booth, "They have what I like to call scar tissue."
Domain also likes to use experienced people to fund companies they establish. "Almost 50 percent of our companies are run by successful repeat entrepreneurs," Podlesak told BioWorld Insight. "When we find these talented executives, we try to keep them in the Domain family."
But perhaps the most helpful trait of successful entrepreneurs is the ability to raise capital because investors like to invest in management teams with proven track records.
"If you've made money for investors in the past, they're only too happy to give you money again," Gilman said. "Investors operate on the principal that lightning does strike twice." In the last four months, between Padlock and Raze, Gilman has raised "quite a bit more money" than in five years at Stromedix.
At Knight, with just the voucher in hand, which the company hasn't sold yet, Goodman raised C$255 million (US$203 million) in its first three weeks, a clear endorsement in Goodman's ability to find drugs and make investments that will increase shareholder value.
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