BOSTON CAPITAL - A big gun in tough spot
By Steven Syre, Globe Columnist, 2/13/2003
The odds of earning a buck investing in any young biotech company are horse-track long. Any chief
executive who can make that proposition work profitably over and over is doing something special.
Mark Skaletsky is my candidate for the most successful serial CEO of Massachusetts biotech
start-ups. It's been 23 years since Skaletsky resigned a job at Bristol-Myers to work above a
Cambridge restaurant as the third American employee at an obscure new company, Biogen Inc. He
left years later, by then the public Biogen's president, to run another new, local venture that was
later sold profitably as it prepared to go public. Still later, Skaletsky hit it big with yet another
start-up, Geltex Pharmaceuticals Inc., which eventually sold for more than $1 billion.
This kind of record might make you feel warm and fuzzy about Skaletsky's current start-up project,
Essential Therapeutics Inc. in Waltham. Recent news would make you feel queasy.
Essential Therapeutics stock would have been delisted from the Nasdaq market this week, if not
for a last-ditch and presumably futile appeal. Company shares that were already under pressure
now trade around 13 cents. Meanwhile, two directors quit on Monday over the failure of
shareholder proxy proposals to deal with capital accounting problems. All this preceded a decision
last month to drop the company's leading product after disappointing phase 1 trial results.
Can Skaletsky make it work one more time, in what seems to be his most difficult circumstances
yet? He knows how it looks. ''I'm an optimist,'' he says.
Two particular characteristics have shaped Skaletsky's biotech management record. He has been
adept at shaping organizations around other people's technical ideas, and has been willing to sell at
a point that best suits the business, though not necessarily his own financial interests.
Skaletsky hasn't had to work with just anyone's bright idea. The companies he took over in years
past were created to commercialize technologies developed by big-name academic scientists like
Robert Langer at MIT and George Whitesides at Harvard.
Skaletsky sold the first company he ran, Enzytech Inc., to Alkermes Inc. shortly before it planned
to go public, a process that ultimately could have offered greater personal financial rewards. He
sold Geltex to Genzyme Corp. after it became clear its lead product would succeed but well before
it was commercialized. The idea: The business would benefit from greater financial resources as it
headed into a capital-intensive phase, sooner rather than later.
''There are few CEOs willing to do that because the main thing they're doing is dealing themselves
out of the deck,'' says venture capitalist Chris Gabrieli, who was the chairman of Enzytech.
Months after the Geltex sale closed, Skaletsky joined a start-up called Althexis Co., a privately
held firm that was soon merged into Microcide Pharmaceuticals Inc., a small public company with
seemingly complementary business interests. Three big venture capital partners agreed to pump $60
million into the newly combined company, now renamed Essential Therapeutics, in the form of
preferred stock.
The company later ran into problems with Nasdaq listing rules because its capital had to exceed the
value of the preferred stock. The venture partners agreed to swap their preferred for common
stock, but Essential couldn't gather a majority of common shares to vote for the arrangement.
Now the company finds itself in an odd position. It has cash, enough to last two years at this rate,
but shares worth barely a dime apiece, and prospects that seem longer term than they did a just a
few months ago.
Skaletsky's biggest problem is that he runs an early-stage business in the form of a public company,
bankrolled mostly by venture capitalists. Essential Therapeutics should be a private company
nurtured by venture partners.
It may work, maybe not. ''There are no guarantees,'' Skaletsky agrees. Don't count him out yet.
Steven Syre is a Globe columnist. He can be reached at syre@globe.com. |
