Good evening Ian,just wondering if in your opinion Procyon should be taken seriously yet?
I will post a link to an interview Hans did this week and would appreciate your opinion,thanks.
twst.com Click on Procyon Biopharma
THE WALL STREET TRANSCRIPT
Questioning Market Leaders For Long Term Investors
HANS J. MÄDER - PROCYON BIOPHARMA - (PBP.TO)
CEO Interview - published 01/22/01
DOCUMENT # LAP605
HANS J. MÄDER, President and CEO of Procyon BioPharma Inc., has had extensive experience with
leading firms in the pharmaceutical industry in Canada, the U.S.A and Europe. Prior to joining the
company, Mr. Mäder was the Head of Global Marketing Services at the Head Office of Novartis Pharma
in Switzerland since 1998. Prior to this appointment, he directed the merger of Ciba-Geigy and Sandoz
in Canada and served as CEO of Sandoz and then as President and CEO of the resulting company,
Novartis Pharmaceuticals Inc., Canada, with $300 million a year in annual revenues and approximately
1,000 employees. While at Novartis, Mr. Mäder succeeded in attracting major research projects and
investments to Canada. At Sandoz, Mr. Mäder also held senior marketing positions and successfully
launched several new products as well as innovative marketing campaigns. Mr. Mäder is a former
member of the Board of Canada’s Research-Based Pharmaceutical Companies (formerly the
Pharmaceutical Manufacturers’ Association of Canada) and as such, has often spoken on the
importance of global competition for the Canadian biotechnology and pharmaceutical industries.
Sector: Biotechnology
TWST: Could we start out with a little history and a quick overview of the company?
Mr. Mäder: Procyon BioPharma is basically an oncology biotechnology company. We have four
products; three of these four products are in the area of cancer and one in dermatology. The company
has been in existence for about 10 years as a small biotech company. The company started out in
London, Ontario, and was founded by a scientist and a banker. The initial activities of the company were
in the reagents business, subsequently branching off into biotechnology, particularly in the field of
cancer. The company was taken public in July 1998 by Yorkton Securities on the Calgary Stock
Exchange, at an IPO price of $1. In late 1999 Procyon moved its head offices and research facilities to
Montreal, Quebec, and is also now listed on the Toronto Stock Exchange since August 1st of last year.
TWST: What are the products that you’re working on today?
Mr. Mäder: As I said earlier, there are four product/technologies: two are technology platforms. The first
is in the area of prostate cancer, based on PSP, which stands for prostate secretory protein. PSP is a
naturally occurring human protein that is involved in the regulatory mechanism of prostate cell growth.
The company has purified this molecule and is using it to reduce tumors in prostate cancer, especially in
end of the line patients who have so-called hormone resistant tumors. PSP works in these tumors by
inducing apoptosis, which is programmed cell death. The PSP-based therapeutic under development is
planned to start human clinical trials in the second half of 2001. This technology also has diagnostic
applicability and we’re developing a test for both the diagnosis and prognosis of prostate cancer. The
latter is important because the currently used diagnostic test, the PSA test, has limited prognostic
application, as opposed to the potential PSP test.
TWST: How does it do that?
Mr. Mäder: The levels of PSP in prostate cancer tissues have an inverse correlation to the Gleason grade
of prostate cancer, which is used to measure the severity of cancer. So the higher the grade, the lower
the PSP levels in prostate tissue biopsies, the more aggressive the cancer.
TWST: What do you have to do to get this product into the marketplace as a diagnostic?
Mr. Mäder: For a diagnostic, Procyon is currently working on an ELISA test. So once the test is
validated and developed, by I would say next summer, we will build collaborations with leading
researchers and clinicians, probably here at McGill University, and start using it. Subsequently we plan
to license it out to a company that is already in a testing environment by the end of next year.
TWST: Why license it?
Mr. Mäder: Procyon’s business plan, or mission is — we are basically a research and development
organization. We develop products, which are at the preclinical stage and obtain proof-of-concept in
animals. Then we try to confirm the data we have produced from animal studies in man as quickly as
possible, meaning Phase I and Phase II. Once we have proved that it works and the toxicity is okay, we
license it out to pharmaceutical companies to finalize the Phase III and to market and sell it. Our revenue
stream is derived from upfront, milestone payments and royalties from eventual sales of the products by
the pharmaceutical companies. That’s how we function.
TWST: Can you get this product into the diagnostic market prior to having it go through the clinical
trials?
Mr. Mäder: I would say so but essentially you do both together because once the PSP therapeutic goes
into clinical trials, it will be very, very handy to have an ELISA test to measure PSP levels as well.
TWST: How big is this market potentially?
Mr. Mäder: We believe that this market, we are talking about the hormone refractory market, could
potentially be about $0.5 billion in sales annually world-wide.
TWST: What does it compete with?
Mr. Mäder: There really is not very much out there as regards competition. Currently, chemotherapy for
hormone refractory patients is largely ineffective. These patients, therefore, do not have much of a choice
and will eventually succumb to the disease in a relatively short frame of time. So this is the point of entry
we are using for commercializing PSP. The potential for PSP in such patients is based upon the fact
that in animal tests done so far, we show over 50% reduction in tumor growth using human hormone
resistant prostate cancer cell lines. So the first indication would be hormone refractory cancers where
nothing else works. We expect that once the product is established on the market, physicians will not
wait until somebody becomes hormone refractory. So you may end up having a combination therapy with
hormone therapy eventually. That is the general idea.
TWST: What else are you working on?
Mr. Mäder: We have another technology that’s called the ANA and it stands for antinuclear
autoantibodies, which are a non-pathogenic subset of antinuclear autoantibodies in the body, that attach
to so-called nucleosomes which are shed when cancer cells die. These surround the other cancer cells
to which the antibodies can then attach and kill them by immune mediated mechanisms — a very, very
exciting technology. The technology was initially developed in the US, we licensed it from scientists at
Harvard University. The therapeutic antibodies used for human trials are being co-developed with a
company specializing in antibody engineering, BioVation of UK. This will allow us to go into clinical trials
toward the end of this year. The ANA technology seems to be applicable to diverse cancers, irrespective
of the type of cancer. That is the interesting thing about ANA and we have data showing effects on
lymphoma, which is a blood tumor, as well as in melanoma and colon cancer. So it seems to be a sort
of a pan-cancer monoclonal antibody therapy — very exciting.
TWST: Is there anything else like it around?
Mr. Mäder: No, not really! We have the patents on it and it is a very unique mechanism.
TWST: Where does this product stand at this point?
Mr. Mäder: Right now we are developing the therapeutic monoclonal antibody in a form suitable for going
into human clinical trials. We plan to start these trials in the second half of 2001. We have obviously a
scientific advisory board and one of our members is Dr. Estrov from the MD Anderson Cancer Center in
Texas. That’s where we plan to do the initial trials for this technology.
TWST: Assuming all goes well, when might the product come to market?
Mr. Mäder: The first indication we are going to target is leukemia, CML, chronic mylogenous leukemia
that is rare but a very severe type of cancer, for which the treatment options are currently limited. So
again we hope for some sort of a fast track from the FDA on that. I don’t anticipate that this product will
be on the market before 2004, probably 2005.
TWST: I guess there is no way of assessing what the market is since it seems to work out in a lot of
different forms of cancer.
Mr. Mäder: There are so many different types of cancers. There’s nothing out there that is so-called pan
cancer. Therefore, you normally need different approaches for different types of cancers. Again, our
approach using monoclonal antibody therapy for treating a wide variety of cancers is quite unique. We
also have the worldwide patents on our technology.
TWST: It sounds like these are two potentially big products. What else is going on?
Mr. Mäder: We also have two other products, which are more late stage and already in clinical trials.
One of them is called COLOPATH™ and is not a drug but a diagnostic test to screen and monitor
patients who have colon cancer. It is also a very exciting technology. It is a test; I call it a so-called
painless, non-invasive test, which can be used, by any primary care physician or GP in his office. It
requires rectal mucous as opposed to stool for conducting the test. So a rectal finger examination by a
physician is enough for obtaining a sample. The test measures an analyte, which is secreted into the
mucous of the gut when there is colon pathology. This also occurs at the polyp stage. Therefore, the test
will also pick up polyps which are larger than one centimeter. The test has a high sensitivity, over 92%,
without being invasive. There is a dichotomy today because you know, if you can catch colon cancer
early enough, you can actually cure it. The problem is that the tests that are out there that are
non-invasive are not sensitive enough and the ones that are more sensitive are very invasive, like
colonoscopy. The latter is also expensive, including usually half a day stay in the hospital. In addition,
you have to be sedated. It costs at least $500 or $600 per procedure and it’s very invasive. That’s why
people delay getting this test done because nobody likes it and then sometimes it’s too late and the
disease is more advanced. This is why it would be nice to have a test that is as sensitive as
colonoscopy but less invasive and also less expensive. So once you’re COLOPATH negative, you go
home. But if you’re COLOPATH positive, then you have an incentive to go for a colonoscopy. The test is
already approved in Canada as a Class II, which implies a monitoring application. It can be put onto the
market as we speak, and we’re actually talking to some companies to license it out now for the
Canadian market as a monitoring device. For the US and the rest of world, we are working with a CRO in
the US now to put a protocol together for a potential screening test, and do some trials on the general
population, towards getting approval as a general screen. As you know the American Cancer Society
recommends that people aged 55 and over should have their colon tested regularly and today they use
colonoscopy.
TWST: So it’s on the market today in Canada?
Mr. Mäder: No, not on the market yet but we have Class II approval. We expect it to be licensed and
marketed towards the end of 2001.
TWST: We should get some reading sometime next year as to what the response is?
Mr. Mäder: That’s correct; the trials we have done so far gave excellent results. As I said, you’ve got to
put it into perspective. If you have something that patients are willing to do and take; you can have a
great deal of confidence in the results. This is what is needed in this type of cancer.
TWST: What’s been the physicians’ response?
Mr. Mäder: Very well, so far! We had some presentations at some scientific meetings and these were
very well received. A test such as COLOPATH™, which could be used before colonoscopy, I believe
would be of high value and readily acceptable to the general population.
TWST: How big is the market for this product?
Mr. Mäder: We estimate the market potential of the test to be around $350 million per year, considering
that there are about 70 million people in the US aged 50 and over, of which about 20% who get screened
currently. The market in general for diagnostics is more modest; however, the risk in product
development can also be lesser than in therapeutics.
TWST: Is that it or is there more in the pipeline?
Mr. Mäder: We have one other product, FIBROSTAT™, which is not actually in oncology. FIBROSTAT™
is a product, which is used to reduce excessive scarring which can result from burns or from surgery.
Between 15% to 30% of the Caucasian population does not heal well after surgery. They get red,
elevated, itchy and painful scars, which can ultimately lead to hypertrophic scars. Our product
FIBROSTAT™ is designed to reduce the incidence of such scarring and in clinical studies has shown to
have an efficacy of as much as 50%. The product has a physiological mode of action, and the
mechanism has been characterized. One can assume that if the product works as we think it does,
anybody who is going to go into cosmetic or plastic surgery will try FIBROSTAT. Why take a chance,
you know? So this is an early revenue generator for us. We already have a licensing deal for this product
with a company called Biovail for the Canadian marketing rights. Negotiations are also ongoing with
several parties for the US and European rights. So this is the most advanced product we have.
TWST: Will this be on the market?
Mr. Mäder: Sometime in late 2003 or early 2004, but the revenues have started for us because of upfront
and milestone payments.
TWST: Potentially how big is the market for this product?
Mr. Mäder: Our business model calls for peak sales of about $500 million worldwide. Peak sales are
defined as sales three years post-launch by a pharmaceutical company. In addition we estimate sales of
about $100 million in burns even though we have not done much work in scars resulting from burns as
yet.
TWST: That’s going to be not that far down the road then, in terms of generating revenue?
Mr. Mäder: Yes. We’re actually just finalizing the product development for FIBROSTAT™. We’ve just
filed the IND for the final dose finding study in Canada, which has been harmonized for the FDA in the
US as well. Subsequently, we are planning to go into the final phase III trials by mid 2001 in Canada and
US.
TWST: For investors keeping an eye on the company, what benchmarks or milestones should they use
over the next year or two to judge you?
Mr. Mäder: I would say beginning human clinical trials for the two platform technologies we have, PSP for
prostate cancer and ANA for leukemia. We want to bring these into the clinic in the second half of 2001.
Those are major milestones. The initiation of Phase III trials for FIBROSTAT™ by the third quarter of
2001 and a licensing -JV of COLOPATH™ by the middle of 2001 are our other main short term
milestones. We are also currently talking with another company for an eventual acquisition of a new
technology.
TWST: You’re not standing still?
Mr. Mäder: No, not at all, we’re constantly renewing ourselves. So I would suggest that by mid-year
2001, we should have completed an acquisition of a new, exciting technology in oncology that will be
complementary to what we have already.
TWST: Do you have the staff to handle all this effectively?
Mr. Mäder: We do. We do have two laboratories here in Montreal. We have a battery of scientists, but
then we also have many collaborative agreements with the inventors of our technologies through their
respective universities. We also have strong project management with most of the clinical work being
done by clinical research organizations, CROs. So yes, we’re very well organized I think.
TWST: How about from a financial point of view? Do you have the funding to support all this?
Mr. Mäder: Yes. The company raised in the last year close to $25 million through a private placement
and a special warrants issue. Also there is about $12 million outstanding in warrants over the next two
years. We therefore, have enough funds to develop what we have right now, especially since the bulk of
the funding goes really to the ANA technology and to PSP, our internal pipeline. Our other product
opportunities, FIBROSTAT and COLOPATH, we are in the process of licensing them out and therefore
the companies we work with will pay for further development. That is the model we have used for
FIBROSTAT in Canada, for example, and we are obviously going to negotiate the US rights in the same
way. So yes, we’re very much okay for the next 24 months.
TWST: What is your current cash position?
Mr. Mäder: We have about $16 million. We’re currently burning around $300,000 to $400,000 a month.
TWST: How do you feel about the value the market is currently putting on your company?
Mr. Mäder: I think the company is undervalued, and there are several reasons for this. You’ve got to
understand the investment mix we have we grew very fast in the first half of 2000 and toward the latter
part of 1999. In late 1999 we made a private placement at $0.25 for a total of $3 million. These shares
are now freely tradable and investors are cashing in. You can’t blame somebody for cashing in when
they make 500%, 600% profit. That coupled with the fact that we’re not well known yet and that we only
really have one large brokerage firm, Research Capital Corporation, supporting us and following us with
analyst support, all that means that our trading volume is a bit low. So you put those two things together
and the fact that the market is in a downswing, and you’re going to end up with a company that’s
undervalued.
TWST: Is part of it a reaction to what you did and part of it just lack of familiarity?
Mr. Mäder: It is largely a lack of familiarity; we absolutely need to have a greater following by brokerage
houses. We have not gone into the US as yet; we haven’t done anything there. We need to do some
investor relations in the US. We’re going to have to get at least two or three more analyst reports from
major brokerage houses in Canada and the US so we get better known. I think that the profit-taking from
the earlier placement is going to end within the next month or two and will relieve the pressure on the
stock. We are going to have to increase our coverage outside Canada in the US and work on our
milestones. We have reached most of our milestones so far.
TWST: If you were sitting down with some potential longer-term investors today, what two or three
reasons would you give them to go out and buy your stock?
Mr. Mäder: I think we’re well prepared to deliver because the people who are part of Procyon today are
not only scientists, but people who have business acumen as well. They are people who come from the
pharmaceutical industry. Our major customer is the pharmaceutical industry. So it is not just research
but a combination of research and business know-how in one company together, which has the potential
of building shareholder value. The products we have are exciting, they’re novel. They’re in an area where
there is always high need, which is cancer and we are not a one-product company.
TWST: Thank you. (TM)
HANS J. MÄDER
President & CEO
Procyon BioPharma Inc.
1650 Trans-Canada
Suite 200
Dorval, Quebec H9P 1H7
C A N A D A
(514) 685-9283
(514) 685-5138 - FAX
www.procyon biopharma.com
e-mail: info@procyon biopharma.com
Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include an
Investors Brief or other highlight material to be provided and sponsored by and for the company. This
Interview with Hans J. Mäder, President & CEO, Procyon BioPharma Inc., is accompanied by an
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