By Randall Osborne


NEW YORK Introduced as a "master of what not very many people can do that is, turn bust into boom," Centocor Inc. CEO David Holveck provided survival tips from his years on the battlefield of biotechnology financing, at the third annual Biotechnology Industry Organization (BIO) CEO & Investor Conference last week.

"We've had some good days and some bad days," Holveck said. "But certainly in the last 10 years, it's been good." Holveck spoke to conference attendees as a member of the panel on "Strategies for Successful Biotech Investing."

Opening the panel, Wolfgang Stoiber, founder and managing director of JSB Partners LP in Concord, Mass., credited Holveck with "an incredible turnaround of an almost hopeless situation."

BIO President Carl Feldbaum said Centocor proved itself in some of the worst circumstances. The company "took a hard left to the chin," Feldbaum told BioWorld Financial Watch, but got up to keep scrapping, and win.

Centocor's history is acknowledged as one of the industry's more inspiring success stories. After various setbacks that might have been fatal, the firm whose arsenal of products includes anti-clotting agents ReoPro and Retavase, plus Remicade, for rheumatoid arthritis (with methotrexate) and Crohn's disease was bought by New Brunswick, N.J.-based Johnson & Johnson (J&J) in 1999.

Luck figured into the equation, Holveck conceded. But Centocor also has benefited from fighting as a soldier on both sides of the battle for biotechnology financing, he said.

The company first toiled to make itself attractive enough to the likes of J&J. Now, strengthened by product sales and by the presence of a high-caliber collaborator, Centocor is making its own investments in firms that have met similar standards, Holveck said.

"I remember looking up in 1997 and saying, 'The good news is, we're successful, and the bad news is, we're successful,'" he recalled. "We studied very hard, and did an evaluation, and we saw our capability was probably our strong suit."

He said many "looked at us in terms of how our products were valued, and certainly that's not trivial and insignificant, when you look at the markets they were serving and continued to serve," but the infrastructure was and remains critical.

Seeing the need to keep the foundation strong, Centocor pumped money into increased plant capacity and funneled resources into antibody compounds that might lead to more products.

"I think what we're seeing more and more is [investors looking at] the depth of the capability to execute," Holveck said, advising audience members to do likewise. The product pipeline matters, but sorting compound candidates and scrutinizing clinical trials require the kind of care not always applied, he added.

"It's a subtlety that goes overlooked by many investors," Holveck said.

"Simply put, Phase I [trials are for] safety," he said. "A lot of times, it's extrapolated that this is somewhat of a proof point for efficacy. I don't believe it. I discount that entirely."

Phase II stage is "really looking at dosing," he said. "You may get a hint of efficacy here but, again, [it's] not all that important. Who, as a group, designed the protocol? Today, the structuring of a clinical trial is the real valuation linchpin. People who design solid trials and power them properly are not going to put themselves at undue risk."

By Phase III, "which is really where the money is, that's pure efficacy," Holveck said. Other questions, though, have to do with keeping track of the study.

"Are there interim analyses that come through, besides the scheduled one for safety?" he said. The ability to scale up the trial if necessary is vital, Holveck added.

"Too many investors don't spend enough time studying the points in the trial design, and the [capacity for more] power," he said. "I think that, as an educated investor, if you spend more time on that, you can get a handle on it."

Weaknesses may show up as early as Phase II, Holveck said. "Many times the cells, meaning the cells you are looking at per dose, are small and very underpowered," he said.

Feldbaum aimed a wider-angle lens on the industry's prospects, given the political climate. The new administration seems hospitable to biotechnology, he said, although questions linger. "I was invited to participate in the [Department of Health and Human Services] advisory board, the transition team," he said.

"It's not me [the board wanted]," Feldbaum added. "They want biotech involved in the creation of their administration. We've been working with them on policies as well as personnel."

Still, such topics as embryonic stem cell research bear watching, he said.

"I am not complacent about that," he said. "The question is whether the administration feels it needs to give more acknowledgement to the religious conservatives, who laid low during the campaign and allowed Bush to take a more middle-of-the-road stance. Whether we will veer toward that vortex of the abortion issue, and bring us to some stem cell issues, that's still a question."

But the skirmish over cloning definitions in 1998 which the biotechnology lobby finally won remains a fresh memory.

"No one wants to go back to that," Feldbaum said.

Nor does President Bush look forward to having the first part of his term marred by a single, headline-making controversy, as former President Bill Clinton's was by the hoopla over gays in the military, he said.

"Bush does not want to spend his first six months pinned to the stem cell and abortion issues, when he's got so many other ideas," he said.

The mood otherwise seems open to biotechnology, Feldbaum said.

"Food and [agricultural] challenges are still there," he said. "I debated Greenpeace, a couple of weeks ago in France. Their emphasis has switched completely away from the biomedical applications, or bioethics. They even seem to have narrowed their objections to food. It's not to food safety anymore, because there's so much food out there being gobbled every day, with absolutely no adverse health effects. So, they figure that's probably a loser."

Activists these days are saying, "Somewhere, sometime out in the future, [genetically modified organisms in crops] may have an unanticipated effect on the environment," Feldbaum said. "That's where they are now. That one's hard to disprove, but they've worked themselves into a corner."

Meanwhile, the situation seems bright in the U.S., he said, noting that Sen. Tim Hutchison (R.-Ark.) showed up at the conference. "So did Newt Gingrich, and they were up there extolling the virtues of biotechnology and the new economy," Feldbaum said. "It's a whole different level of political support. Higher, much higher."