Sequel Pharmaceuticals’ CEO on How to Start a Biotech and Sell it For a Bundle, and Repeat
I’ve heard about serial entrepreneurs who start a company, build it up to a certain point, sell it to someone bigger, and then repeat the whole cycle again. But I had never heard of a true biotech sequel until I met Randall Woods a couple weeks ago.
Woods is the CEO of San Diego-based Sequel Pharmaceuticals, and a well-known entrepreneur who’s also the chairman of Biocom, the local biotech trade association. The two-year-old startup is literally the sequel to his previous company, Novacardia, a company that Woods led until it was sold for $350 million to Merck on Sept. 6, 2007.
Sequel came less than 24 hours later. The same nine employees, in the same office, with the same management team, and the same board (except for one), set their sights on a new goal. The idea was to take a drug in the early stage of development, steer it to the later stage of trials until the concept is more proven, and then sell it for a bundle to big drugmaker. Novacardia took a drug into pivotal studies for congestive heart failure, then passed the baton to Merck for the final phase of development. Sequel aspires to do the same thing with a different drug for a different heart ailment—atrial fibrillation.
“We didn’t even have a 24-hour break,” Woods says. “We just changed the sign on the door.”
This group of people clearly has skill in cardiovascular disease, so it knows something about the new problem. Atrial fibrillation is an abnormal heart rhythm that can cause acute attacks, or a chronic condition whose symptoms include shortness of breath, chest pain, or stroke.
About 2.2 million people in the U.S. are estimated to be affected, and it caused 470,000 people to be hospitalized in 2003, according to the American Heart Association. The incidence is thought to be increasing as the Baby Boomers get older. There haven’t been many new developments in treatment either, except Sanofi-Aventis’ dronederone (Multaq), which first won FDA approval in July. That drug showed it could reduce hospitalizations from cardiovascular disease and deaths from all causes by 24 percent when compared to a placebo. Other than that, patients sometimes take beta-blockers to slow down their heart, or warfarin to thin their blood, Woods says. Another treatment from Vancouver, BC-based Cardiome Pharma is seeking FDA approval.
Sequel’s drug, called K201, is designed to block multiple ion channels that are thought to be related to heart rhythm. Another generic drug, amiodarone, has been shown to be effective through this multi-ion channel mechanism, although that drug is toxic, Woods says.
Sequel isn’t saying much about the data it has to prove that its drug can be effective without the toxic side effects of the generic. The Sequel drug is currently in a study designed to select the right dose, which should generate results by the end of this year, Woods says. If the data are positive, the company will be out raising money to run a pivotal trial. This is doable for a company as tiny as Sequel, because it will initially focus on a few hundred patients with acute disease, and it won’t need to show the FDA data from thousands of patients followed over the long-term to assess their “outcomes.” With an acute drug, patients who are rushed to the hospital with racing hearts can be given an IV drug, and measurements can be taken within hours to see if it’s bringing their heart rhythm back to normal. Sequel is also working on an oral treatment, the kind that’s more suitable for chronic conditions, but that’s the bigger arena where a pharma partner (or acquirer) would have to get involved.
Woods figures the market for the acute drug is probably worth $500 million a year, while the oral drug could generate $1 billion to $2 billion in annual sales.
That’s not too shabby if this kind of value can be created by just nine people operating a virtual company that leans heavily on outsourced contractors. This model certainly has its critics, who generally don’t get that excited about how it usually requires plucking a drug off some other pharma company’s shelf and trying it for a new use that hasn’t been fully explored.
But to hear Woods tell the story, he likes being lean and mean. Earlier in his career, he worked at big companies like Boehringer Mannheim, and the pharmaceutical giant Eli Lilly, before he spent eight years as CEO of Corvas International, a more traditional R&D-based biotech in San Diego. Corvas had 120 employees at one point, but eventually ended up getting acquired by Seattle-based Dendreon, which really took over it over just to scoop up Corvas’ cash.
“If you have a hiccup or a delay at a bigger company, you have a big building, and 120 people working for you who are college graduates, with a burn rate that’s still high, even though you’re not creating value,” Woods says. “Our burn [at Sequel] is very low. We make decisions quickly. We’re nimble.”
It’s also laid back, just the way Woods likes it. He insisted that I wear a T-shirt on my visit to his office, because, well that’s how he was dressed, and he likes it that way. Since he doesn’t report through some out-of-town Human Resources bureaucracy, they can do what they want.
“Fewer people equals fewer problems,” Woods says. “There are no office politics.” And yes, of course, being small means being allowed to dream big. “The Sequel will be better than the original movie,” Woods says.