ABOUT THE YOUNG CEO HAVE NOO IDEA ,WHAT IS COMPANY'S NEXT STEP
When BELLUS Health announced in early May 2014 that it had engaged U.S. biotechnology merger and acquisition firm Lazard as financial advisors to explore the sale of the company’s lead product and program, KIACTA™, many on the capital markets side wondered if BELLUS was on the brink of a big exit.
The question inevitably came up at the recent Bloom Burton Conference, with the investor audience wondering if the timing was right to hitch their wagons to this upstart company.
That’s what happens when a company reaches this stage in the game. It’s not just that the aforementioned KIACTA™ – currently in a confirmatory Phase 3 trial – is promising as a treatment for AA Amyloidosis, but the fact that it is an orphan drug, a very hot commodity in the biotech space. Once the forgotten cousins of the pharmaceutical industry, orphan drugs are now its fastest growing category and very much in high demand.
As appealing to potential investors and buyers is the name behind the company. As CEO and president of BELLUS Health, Roberto Bellini is a rarity in Canadian biotech; a second generation biotech CEO. His father, Francesco Bellini, accomplished what most scientists and entrepreneurs in the space can only dream of. BioChem Pharma, the company he founded and ran, developed the HIV-AIDS medication 3TC, a billion dollar blockbuster before being sold to Shire Pharmaceuticals in one of the biggest cash deals in Canadian biotech history.
In the case of younger Bellini, the apple doesn’t fall far from the tree. Like his father, Roberto was raised a scientist and received his Bachelor’s degree in biochemistry at McGill University. Likewise, the leap from science to business for Roberto happened at a very young age, launching Picchio Pharma with his father, a family company that was created to invest in the biotech space.
“It was just good timing with my father having sold BioChem, we decided together to start a family business and run it very much like a venture capital firm. Our strategy wasto invest in a small number of companies and to take a high ownership position in these companies,” explains Roberto on how he transitioned into the business world. From the start, Roberto was heavily involved, at the very beginning as an analyst, then more senior roles and then eventually working directly in the investee companies.
Neurochem, the ancestor to BELLUS Health was one of the companies in the family’s investment portfolio. “They were a spin-out from Queen’s University with a focus in two main areas, Alzheimer’s disease and AA amyloidosis. I worked directly in project management and drug development, really the nitty gritty of operations and clinical trial management. It was great on-the- job training.”
By 2009, he was appointed vice president, Business Development and then president and CEO of the company in 2010. Following the high profile failure of its Alzheimer’s disease program, he was charged with the task of turning its business fortunes around.
“The plan was to focus on the company’s second project, KIACTA™, which we believed the market was undervaluing,” explains Bellini.
Five years later, the company is financially sustainable and on the cusp of potentially great things starting with the crown jewel of its pipeline.
According to Bellini, KIACTA™ is a drug that is designed to bind to amyloid proteins preventing them from creating toxic fibrils and plaques. These fibrils and plaques in time clog the kidneys and cause the manifestation of AA amyloidosis, a rare disease that affects 10,000 to 15,000 patients in the U.S., Europe and Japan.
“Amyloids represent a whole family of proteins in the body, roughly 25 of them, and each is linked to a different disease when they start misfolding and binding together. In the case of AA amyloidosis, usually within seven to eight years of diagnosis patients are either dead or on dialysis, and the latter places a financial burden on the healthcare system of about $100,000 per year per patient in the U.S. So, if you can develop a drug that can delay dialysis for the patient, which we think we have with KIACTA™, you could save the healthcare system a lot of money,” he explains.
The KIACTA™ program has already gone through one Phase 2/3 study, which according to Bellini, was strongly supported by the medical community. The results of this trial concluded that KIACTA™ slowed the decline of kidney function caused by AA amyloidosis. On the recommendation of the FDA, the company is following up with a confirmatory study of 230 patients that Bellini says is to the favour of
KIACTA™ with refinement of endpoints and patient-subject selection criteria.
“Essentially, we need to produce similar results to the Phase 2/3 study to approval. The confirmatory study concludes when 120 out of the 230 patients reach an even of kidney dysfunction, and there are already over 60 of these events recorded in our trial and we expect to reach 120 within the next two years.”
Moreover, the company has more than enough money to complete the trial.
“We have a fully funded business plan, we don’t require any financings, we have cash on hand (reported $13.1 million as of Q2/2014) to carry us through and beyond an exit. It also helps that we’re not big spenders, we have a lean operational structure with a low a burn rate.”
This wasn’t always the case. When Roberto stepped into the role of president and CEO, the company was burning through cash at an unsustainable rate. Making the company financially viable involved several steps. For starters, in addition to shifting the focus of the company from its Alzheimer’s drug to its AA amyloidosis drug, Bellini also restructured the company into a semi-virtual model.
“We decided to focus on what we were best at: clinical development. This meant focusing in- house on clinical trial design and business development, and using contract research organizations to do the actual work.”
Bellini remodeled the BELLUS team from over 50 employees to nine. He focused on building a culture based on high expertise, multi disciplinary skills and information transparency.
“The company would not be in the position it is today without the contribution of our employees,” he adds.
A second part of refocusing the company was putting in place partnerships to help BELLUS finance its clinical trials. BELLUS turned to a U.S. fund called Auven Therapeutics to back its trial. In all, Auven has contributed more than $70 million in the development of the current Phase 3 program, and these funds are a big reason why BELLUS is in an enviable cash position today. In exchange, the resulting revenues from a sale of the product will be split based on a pre-agreed formula which he expects should result in an even split of the overall proceeds
between the two parties.
There’s also a second project involving KIACTA™ that Auven is involved in financially. This project came about when Mount Sinai Hospital in New York approached BELLUS to test KIACTA™ in a second rare disease indication called Sarcoidosis. The disease is caused by granulomas, or balls of proteins that form in the lungs and it affects more than 100,000 patients in the U.S.
“A researcher at the hospital had a bit of a ‘Eureka’ moment proposing that if amyloid plays a role in the formation of those granulomas, why not see if the drug can inhibit this formation. The research showed activity in some preclinical models, so an agreement was signed to proceed with a human proof-of- concept study at Mount Sinai next year,” says Bellini.
Again, the focus of the company is on treating a rare disease and relying on a partner to fund the trials. The shift to focus on orphan and rare disease therapeutics isn’t accidental.
“The figures around rare diseases are truly amazing. For example, there are more than 250 million people in the world that suffer from over 7,000 different rare diseases and there are only about 300 approved therapies for those diseases in the U.S.”
As Bellini likes to say, rare diseases aren’t so rare.
“It’s a largely untapped market as only five per cent of rare disease patients have a specific therapy to treat their disease. More importantly, they represent a significant unmet medical need, most affect children and 80-to-90 per cent of rare diseases are serious or life threatening. Moreover, there’s also a more supportive regulatory and commercial pathway than with traditional therapeutics when it comes to orphan drugs. In fact, three of the biggest pharmaceutical markets (U.S., Europe, and Japan) all have regulations in place to provide benefits for the development of rare disease drugs, including easier access and communication with regulatory agencies, as well as the benefit of protection from competition from generics for up to 10 years,” he says.
There are other reasons for focusing on orphan diseases say Bellini, including the fact that a company can apply for approval based on clinical studies of hundreds of patients instead of the thousands or tens of thousands that are usually required.
“From a commercial perspective, many of the best drug launches of the last five years have been rare disease drugs, including poster child successes like Alexion Pharmaceuticals’ Soliris, a drug used to treat the rare disorder, atypical hemolytic uremic syndrome (aHUS), and Vertex Pharmaceuticals’ drug Kalydeco for cystic fibrosis. There’s also the incentive of premium pricing.”
According to Bellini, most rare disease drugs launched today are priced and reimbursed anywhere between a $100,000-to-$300,000 per patient per year. The industry as a whole has taken note of these trends, and there has been an increase across the board of rare disease drugs in development over the last 10 years, with 33 per cent of FDA approvals in the last five years being drugs for rare diseases.
“You realize very quickly that the economics really make sense.”
It’s all reason enough for BELLUS to continue to build its rare disease portfolio. Among the new additions is Shigamab, a monoclonal antibody therapy being evaluated for the treatment of Shiga toxin-producing E.coli (STEC) bacterial infections. BELLUS acquired the asset when it purchased Thallion in 2013; it is also a product that falls in the kidney disease area. STEC infections can lead to hemolytic uremic syndrome (HUS), a condition principally affecting the kidney and that also often leads to dialysis.
“Shigamab works very simply; it binds and neutralizes the toxin produced by e. coli,” Bellini says. “We are currently conducting animal proof-of-concepts studies with the drug and we intend to move the test drug into a Phase 2 study next year.”
The company is also involved in a joint collaboration with Montreal-based VC Amorchem to discover a new drug for another rare amyloid disease, AL amyloidosis. Once again, the partnership that was struck sees BELLUS’ partner taking on the financial burden developing the projects with the caveat that if the results are positive, BELLUS can buy back the rights to the program.
“It’s putting people with the right expertise in place to do the research work and allowing us to stay focused on clinical development.”
It’s all part of a plan he says for when the company eventually sells its KIACTA asset. One might ask, with all this going for it, why the need for an exit strategy? Bellini says it’s about having a culture that’s focused on creating value for company shareholders. In fact every aspect of the company’s business plan is tied to this strategy.
While the company has hired Lazard, Bellini considers the base case for a KIACTA exit to be after the confirmatory trial is complete in 2016.
“But considering the high market demand, this was a good time to test the market. It’s never a question if we’re going to exit, but rather when we’re going to exit,” he adds.
That said, he also believes that even if there is an exit, he won’t be leaving the sector any time soon. If anything he feels like he’s just getting started.
“It’s funny, people always say that I’m a bit young to be a CEO, and I tell them I was very young when I learned about this business. When you grow up with an immigrant entrepreneur father, the things we talked about at the dinner table, or when we went fishing, or on family vacations was the business.”
Like his father, the business of biotech is in his blood.