Balancing Act

Complementary talents allow co-founders Donald McCaffrey and Dr. Norman Wong to walk the tight rope of transitioning Resverlogix into a new company

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By Amber Lepage-Monette

Sometime within the next two years, Resverlogix Corp. (Calgary, AB) may not be the same company it is today.

That’s because the firm is actively seeking to partner its cardiovascular program, which will likely spark an acquisition.

But don’t be shocked — that’s been the plan all along.

“We assume it’ll be an acquisition because our technology is so broad-based and the IP so strong, that it would be very difficult for any pharma to just license and leave us to furnish competitors with additional technologies,” says co-founder, president and CEO Donald McCaffrey.

Resverlogix currently has a mirrored sub-company to which it has licensed its fibrotic and oncology programs. It is through this new entity that McCaffrey and co-founder Dr. Norman Wong will continue their involvement, and through which Resverlogix will live on — though admittedly it will be a bit different from the company that was started in 2001.

Back to the Beginning

Resverlogix’s origins trace back to a meeting of like minds regarding technology, and an ideal pairing of talents.

Wong was a clinician working at the University of Calgary (U of C) (Calgary, AB) assaying apolipoprotein A1 (ApoA1) compounds, and McCaffrey was a businessman looking to establish himself in a new industry.

McCaffrey, whose background is in marketing, has started many companies over the years, mostly through conferences. His first was the Canadian International Petroleum Conference, which still exists today.

It was out of personal interest that McCaffrey started looking into the biotech industry, wanting to make a change.

“I was getting rather bored with some of the other conferences — they weren’t that intriguing as compared to biotech,” he says. “So I moved into the biotech area, and I’m very pleased I did.”

Wong was a presenter at a biotech conference McCaffrey organized, and caught McCaffrey’s attention with his research ideas. They met through a shared personal friend, and quickly began discussing the idea of starting a company.

“(Wong) was very convincing to me that there would be a paradigm shift from the treatment of atherosclerotic plaque from reduction of LDL cholesterol to expression of HDL cholesterol,” McCaffrey says. “So we decided to get started on it early and see how much IP we could tie up before that paradigm shift. So we had about a two to three year head start on pretty much everybody else working in the field.”

Technologies on the Move

This approach has left Resverlogix positioned with two lead programs, TGF-Beta Shield™ and Nexvas™.

The company is developing a method to antagonize transforming growth factor-beta (TGF-beta) — a protein exuded by cancer cells that masks itself from the immune system — to treat cancer and fibrotic diseases. The company’s TGF-Beta Shield oncology program is currently being prepared to enter preclinical trials.

With the firm’s Nexvas program, researchers are looking to increase ApoAI — the building block for HDL cholesterol, also known as “good” cholesterol.

The Nexvas program is about to enter IND work, McCaffrey says, and is expected to enter Phase I clinical trials next year.

But with the company’s recent request for proposals, Resverlogix expects the Nexvas technology to be sold off at that time.

“That has been our business model from the beginning,” McCaffrey says. “To license or sell the technology at a very early stage and being in a large market as we are, $30-billion-a-year cholesterol market, it’s very advantageous.”

In seeking a partner for its technology acquisition, Resverlogix decided to take a unique approach.

“We put out a request for different pharmaceutical companies to come forward and participate in our request for proposals, so it was basically a bid situation for a right of first refusal, instead of working with seven or eight pharmaceutical companies going forward, constantly sharing information, when all but one of them are going to be competitors,” McCaffrey explains.

Taking this approach carried additional benefits as well. “It’s given us the ability to really understand the corporate cultures of who we would be working with and the individuals and find out what add-ons they could add to the program,” he says.

But this isn’t the only thing Resverlogix has done in a unique way. The company went public and managed to get listed on the stock exchange without doing an IPO.

In the spring of 2003, Resverlogix acquired Apsley Management Group in a reverse takeover, and at that point joined the TSX Venture Exchange.

Taking this approach to going public was much more effective than by traditional means, McCaffrey says.

“A lot of the time with the venture capitalists and/or the institution financing early, there’s a lot of dilution, and we avoided that,” he says, explaining that Resverlogix financed the takeover itself.

Several months ago, Resverlogix graduated from the venture exchange to the Toronto Stock Exchange, which McCaffrey says has been beneficial for the company.

“A lot more awareness — U.S. buyers can relate a lot easier to the Toronto exchange,” he says. “(A) lot of institution-owned securities firms, like the bank-owned securities firms, really don’t invest into the venture exchange. So it was a nice upgrade for us.”

Biotech is a Different Business

With a background in business, McCaffrey had in the past gained experience starting companies. Creating a new venture in the area of biotech, however, posed some unique challenges.

“Many biotechs are virtual companies — ours is an actual hands-on lab with R&D going on every day,” he says. “Calgary is not exactly a hotbed for a lot of biotechs at this point in time. There are some emerging, some very good ones emerging, but even finding lab space and setting it up and organizing that was a challenge.”

Though McCaffrey says the company has now managed to hire some of the top researchers in the field, recruiting personnel was also a challenge when Resverlogix was first starting out.

“If you’re in Montreal or Vancouver or San Diego, or cities like that, you have a huge pool of people to draw from. Here, we did not,” he says.

With the level of research carried on by Wong and senior vice-president of Clinical Affairs Dr. Jan Johansson, PhD, McCaffrey says the company has now managed to attract employees and researchers from around the world.

“(Wong and Johansson are) quite well known in their field, so the fact they’re working together on a major project certainly piques the interest of the level of person that we want to attract,” he says.

“We’ve been adding to the brain gain I guess, because we’ve been bringing them in from the States, California, and Denmark and Sweden, Japan. So, we’ve had quite an influx,” McCaffrey notes.

Two Heads are Better Than One

Though McCaffrey and Wong have very different backgrounds, this wasn’t a hindrance to starting their company. If anything, it may have proven beneficial to this pair of entrepreneurs — an excellent balancing of each other’s strengths and weaknesses.

“Norman really did not want to get involved in the business side, and wanted to stay on the science side. And I was not science oriented, so it was good,” McCaffrey says. “We had a little joke amongst ourselves that he’d stay out of the boardroom if I’d stay out of the lab.”

McCaffrey says he goes out of his way to learn the non-business ropes.

“I stay actively involved in all science meetings,” he says. “So (learning) just through osmosis and asking what at the time may be dumb questions. But I do learn quite a bit from it.”

For his part, Wong holds several positions at U of C, including professor in the departments of medicine and biochemistry, associate dean of research, and member of the diabetes and endocrinology research group.

In terms of splitting his time, Wong is pretty even about it, spending about half of his days with Resverlogix in R&D and directing lab technicians, McCaffrey says.

Having two co-founders with different strengths not only allows for the dividing of responsibility, but has also created a ripe learning environment for both.

“We talk every day and update what’s going on, on either side,” McCaffrey says. “So he has learned an immense amount about business — even though he shyly says he doesn’t. And I’ve learned quite a bit about science, because I’ve had some very good teachers around me.”