After years in the lab, a new generation of pharmaceutical firms is poised for a payoff.
I n recent years, Ottawa’s pharmaceutical sector appeared to be on life support.
Once-promising firms that attracted investors and scientific attention to their work failed to make commercial breakthroughs and folded.
Such experiences highlighted the unique challenges of the pharmaceuticals sector, such as its large capital requirements and long development cycles, and raised questions about whether the industry had a future locally.
But as 2014 draws to a close, several startups appear poised to become new standard bearers for the sector after spending years on clinical trials, honing new markets and, in some cases, pivoting multiple times.
“It’s a lot more like a marathon than a sprint,” says Artenga founder and CEO James Keenan.
Artenga spent more than a decade developing micro-bubble technology that works with ultrasounds to open up cells and deliver less invasive medical treatments at the cellular level.
The Ottawa-based company was looking into potential applications in cancer treatment until it secured funding several years ago from an investor who wanted to look further into the bubble technology’s potential to treat cellulite. It was an unexpected change of direction, but not an unwanted one.
However, its cellulite treatment has since been abandoned. The company got as far as human testing in 2010, but due to other competitive treatment options on the market their partner was unable to find the funding they needed to move forward.
Now, Artenga has come full circle. With the help of Toronto’s Sunnybrook Research Institute, the company is once again developing its bubbles as a potential cancer treatment, used with chemotherapy to damage tumours and deliver the drug in one shot, Mr. Keenan explains. Artenga was also recently awarded a grant from the Michael J. Fox Foundation to develop, with the help of the National Research Council, a non-invasive targeted treatment for Parkinson’s disease.
“There’s no point in trying to develop a new technology that’s five per cent better than what’s
out there,” says Mr. Keenan. “We need to come up with something significant. And in both the Parkinson’s and oncology areas, our test results are indicating that.”
Artenga was fortunate enough to have a solid seed financing round, but the search for funding is never- ending, he says. In Ottawa, investors are more likely to look for faster returns in other tech sectors than to wait it out in biopharma. That makes it harder for companies to make it through clinical trials.
“The length of time is an issue in Ottawa,” says Mr. Keenan. “We’ve been able to hang in there, continue to advance the technology, and just keep working away at the business development.”
Part of the sector’s resilience is the city’s talent pool that tends to stick around, jumping from company to company, lab to lab, and enduring the odd acquisition or shut- down along the way.
That extends to senior executives and company founders.
Six years ago, Bill Dickie was the CEO of Liponex. An OBJ Startup to Watch in 2007, Liponex developed a drug that increased the amount of high- density lipoprotein, or “good cholesterol,” in patients. It was a drug with huge market potential as rates of heart disease and other illnesses climbed.
A setback in clinical trials was followed by a $10-million merger and Mr. Dickie’s departure. Two years later, Liponex’s intellectual property was sold for just $75,000 to a French firm.
Not long after leaving Liponex, Mr. Dickie – who had previously spent two decades at local life sciences firm Nordion – joined Atreus Pharmaceuticals. The firm is developing a new type of in-body radiopharmaceutical product that can be used in molecular imaging, allowing doctors to study debilitating or fatal medical conditions such as rheumatoid arthritis, Alzheimer’s and Crohn’s disease.
The company has attempted to stay lean, contracting out where possible rather than building a large bricks-and-mortar footprint.
It scored $6 million in funding in 2010 and was poised to bring its product to market next year, but various hurdles have set them back by about two years. Atreus is now in clinical trials and expects a product on the market by 2017. Regardless, that $6 million has made a big difference.
“To have a strong strategic partner at an early stage was a very positive thing for us,” says Mr. Dickie.
SURVIVING BY GETTING SIDETRACKED
While sheer perseverance is an obvious ingredient of success, some local biotech firms have also found success getting sidetracked.
Like many biomedical companies before it, Chemaphor’s original plan was to develop a cure
“The life sciences people that are prospering right now are the post-apocalyptic survivors that the radiation couldn’t kill. We’re a pretty hardcore bunch that I think are in the industry for the right reasons.” – Cameron Groome, CEO, Avivagen
for cancer. While testing the compound on pigs, the company found their test subjects grew faster, used their feed more efficiently and fought off infections, much like they would on antibiotics. One of the company’s co-founders began giving the product to his own dog, and noticed the canine developed a very shiny coat as a result.
By 2011, the parent company had taken a back seat to the subsidiary, Avivagen, and adopted its name. It’s now marketing its product as an alternative to antibiotics in the animal livestock industry and believes it will reach $50 million in gross annual sales.
But making it that far is a challenging process for most firms, according to Avivagen CEO Cameron Groome.
“It’s never an easy field,” he says. “The life sciences people that are prospering right now are the post-apocalyptic survivors that the radiation couldn’t kill. We’re a pretty hardcore bunch that I think are in the industry for the right reasons.”
CROSSING THE ‘ VALLEY OF DEATH’
The multiyear product development cycle means biotechnology firms are particularly capital intensive. Delays in getting a product to market, or producing sufficiently positive results to woo new investors, can have serious repercussions.
That was one of the challenges faced by PharmaGap, which raised millions of dollars to develop a cancer-fighting drug but was forced to shut its doors last year after being unable to secure additional financing.
Mr. Dickie says startups often struggle to raise enough money to get through the “valley of death” that spans the area between a good idea and clinical trials.
He noted that many of Ottawa’s investors made their money in the hightech sector, and they’re generally more comfortable with technology-based investments, such as medical devices and health IT – sectors that are closer to what they know. But that’s not always the case. Ron Vered may be better known locally for his work in real estate as the CEO of developer Arnon Corp. and past-president of Ron Engineering and Construction. However, he’s also an active investor in Canadian biotechnology companies and sits on Atreus’ board of directors.
The company also went abroad searching for funds and landed US$6 million from a strategic partner in France – proving that it is possible to raise money with the proper marketing.
“Despite the challenges in investment, it’s still a sector where blockbusters are common,” says Mr. Keenan. “You see people develop a new technology, and if it works and it serves an unmet need, then there’s just an explosion of interest and financial reward.”
Sophie Chen, the senior business development manager of life sciences at Invest Ottawa, says it’s a matter of showing would-be investors the huge potential in the research underway in Ottawa.
“We have a big pool of technologies and the patents to be picked up by investors – it’s a gold mine,” she says.
“If they could identify that, then it could generate a resurgence of the whole sector.”
Bill Dickie, president and CEO of Atreus Pharmaceuticals.