Ingenious Devices

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By Patricia Nicholson

Angiotech Pharmaceuticals Inc. (Vancouver, BC) is making big waves. The company’s lead product, a drug-coated stent, is expected to complete the FDA approval process and launch in the U.S. in the fourth quarter of 2003. It has licensing deals with major medical device companies such as Boston Scientific Corp. (Natick, MA) and Cook Group Inc. (Bloomington, IN). And in February, Angiotech acquired Palo Alto, Calif.-based Cohesion Technologies Inc.

But Angiotech’s roots probably sound familiar to a lot of Canadian start-ups: a good idea, strong science, and not much in the way of money or business experience. So the question that many junior biotechs might have for Angiotech’s founder and CEO Dr. William Hunter is this: How do you get there from here?

Hunter has been a guiding force in the growth of Angiotech and the development of its lead product: a coronary stent coated with the anticancer drug paclitaxel. With traditional stents used in balloon angioplasty to treat heart and vascular disease, the body often recognizes the device as foreign. Scar tissue then grows over the stent, and blocks the artery. Angiotech coats its stent with paclitaxel, which is designed to inhibit tissue growth, thus preventing scars from growing over the stent.

But Hunter did not set out to run a biotechnology company. He arrived at this career path “100 per cent by accident,” he says. “It was a sequence of events that unfolded — and I’m grateful they did — but I didn’t wake up one morning and go running home to my parents and say I wanted to be a biotech executive.”

As a medical student at the University of British Columbia, Hunter met one of his Angiotech co-founders when he was required to give a lecture to the Vascular Department. Before he began med school, Hunter had done his M.Sc. in cell biology, and some of his earlier interests coloured the lecture he gave.

“The focus of my talk was that there were some drugs out there, some biological responses out there, that actually were very important and could be very effective if you could use them in really small doses in really tiny places,” Hunter says. “Cancer drugs do an awful lot more than treat cancer. They have an awful lot of biology. They do very profound things to cells. And if you could use them in tiny little areas of disease instead of having to subject the whole human being to their effects, they could be pretty neat drugs for things other than malignancy.”

The germ of Angiotech’s big idea might have gone no further had it not been for some audience feedback.

“The entire department was asleep by the end of my dissertation, except there was one guy at the back of the room,” Hunter says. The holdout was Dr. Lindsay Machan, an interventional radiologist. “I hate to admit it, but I didn’t even really know what an interventional radiologist was, and he explained that what he did was he put small catheters in tiny places — and balloons and stents and all these weird things that were site-directed therapies — and if you could combine that with some of these drugs, maybe we’d have something interesting.”

Hunter was just about to embark on a two-month elective course, during which he returned to some of his old research interests with his former graduate supervisor, Larry Arsenault, PhD. When Hunter returned, he had a surprise for Machan.

“I think he never thought he’d see me again,” Hunter says. “(I) came back and presented him with the stuff to put on his stent, and he was just shocked. And a company was born.”

There was, of course, a little more to it than that. Angiotech was officially founded in 1992 by Hunter, Machan and Arsenault.

“We had no business expertise whatsoever. We believed we would be able to commercialize this stent for $250,000, that it would take us about a year,” Hunter laughs. “That was 10 years and many, many millions ago. We had no idea what we were getting into. I actually did my internship and ended up practicing medicine for 10 years while this thing was getting started. And then one day the company just became big enough that it consumed my medical career. I haven’t seen a patient now in probably close to six years.”

For Hunter, that early naiveté may have been a blessing.

“I think the best asset that you can have during the startup phase is complete and total ignorance. If you go into this whole process with too much knowledge, I think you’re dead,” he says. “If I were to sit down now knowing that I’ve got to get partners, knowing I’ve got to deal with the FDA, knowing I’ve got to raise a hundred million dollars and knowing I’ve got to bring in 50 people and knowing I’ve got to do three rounds of trials, et cetera, et cetera, et cetera — you’d just give up before you started.

“The best thing you can have going for you is a complete and utter lack of what lies in front of you. Just go in there head first, be enthralled by the science, be excited by the opportunity, be excited by the potential, and learn each step as it comes to you rather than trying to be an expert all at once.”

Honing his business skills on the job, Hunter has guided Angiotech through major licensing deals, taken the company public and acquired Cohesion.

“I wish I had something insightful to say,” Hunter laughs when asked about the learning curve that took him from having no business knowledge to running one of Canada’s most successful biotechs. “It’s a little bit like MBA by fire. I certainly made more than my share of mistakes early on, and the only thing I hope is that I make less of them now.”

During the company’s first few years, Hunter was Angiotech’s chief scientific officer. His strong technical background was a big asset.

“That really helped because a lot of the early decisions in the business are really technically based. If you make the wrong scientific decisions and your science doesn’t work out, it doesn’t matter how skilled a manager you are, the company is not going to be successful. And similarly, if you happen to be like us and be blessed with really good science and your stent works, you can make a lot of mistakes and still come out smelling like roses,” he says.

It also helps to seek out people who know more than you do. “Right from day one I’ve really surrounded myself with industry veterans. I’ve always had a management team that was more experienced than myself and came from big pharma or big biotech backgrounds. And they really helped guide me along the way.”

When the time came to take Angiotech public, the decision was made based on the stage of development the company had achieved. Unlike many Canadian biotech startups that go public at an early stage because they need the funding, Angiotech had the financial security to wait until it was ready.

The company had enjoyed strong venture capital backing from Canadian sources such as the Working Opportunities Fund (now Vancouver, B.C.-based GrowthWorks) and Ventures West Inc. (Vancouver, BC), as well as some U.S.-based support.

“We had access to patient institutional money at a really early stage of development, and they participated in more than one round, so that gave us a fair bit of stability. And we also had a different business model,” Hunter explains. Unlike companies that are developing new drugs from scratch, Angiotech’s development process begins at a different level: with an approved drug and an approved device.

“That meant that we got into human trials in three to four years instead of 10 years, so we didn’t have to survive quite as long in that preclinical phase as other companies did. So it was a combination of patient money and the fact that our commercialization timeline was a little more favourable than for some other companies that allowed us to get to where we did for less money in less time.”

Angiotech went public in December 1997 on the Toronto Stock Exchange (TSE). It was listed on NASDAQ in March 2000.

“It was the right time for us in terms of our evolution as an organization,” Hunter says of Angiotech’s initial public offering. “We had already signed a pretty innovative deal with Boston Scientific and Cook, where we had two stent partners. We already had one program going that was in clinical trials, and in the year following our IPO we took three programs into clinic. So we were at the right point in time, the company was mature enough. We were beyond animal data, we were into human data, we had multiple human trials going on in several different disease states. So we had enough news flow, we had enough critical mass that we were viable as a public story.”

As one of only a handful of Canadian biotechs that have made it to NASDAQ, Hunter has some interesting insights.

“I think going public in Toronto was one of the smartest things we ever did. It gave us basically two and a half years to practice being a public company. I don’t mean that in a denigrating way to the TSE. I just mean that being on the board in New York, or NASDAQ — it’s a lot of work. The investor relations requirements — like everything else when you go from Canada to the U.S. — are about 10-fold higher,” Hunter says. “Having a chance to go public on a smaller market, a more easily defined market — the Canadian market — allowed us to kind of learn our art and figure out what we did well from what we didn’t do so well before we got dumped on the U.S. market.”

Since entering that bigger market, Angiotech has witnessed the serious ups and downs of the past couple of years first-hand. Listing on NASDAQ just before the bottom fell out the markets, Hunter describes the spring of 2000 as “an interesting time.”

“We saw our stock go from $30 to $130. And we saw our stock go from $130 to $30. So I’ve experienced a $100 run-up and I’ve experienced a $100 decline in my career. Everything was just kind of crazy then,” he says. “We were fortunate enough that we raised $150 million Canadian that spring, which basically set the business up for many years. So we haven’t ever raised money again. And we’ve been able to do acquisitions and other things without having to raise capital.”

He adds, though, that the step up to NASDAQ is a bigger jump than many people believe, even for veterans of the TSE.

“The number of companies competing for investors goes up exponentially,” he says of leaping into the vast American market. “So to differentiate yourself is much, much more difficult.”

Again, Hunter says he is glad to be listed in Toronto as well. He says the crash might have gone differently for Angiotech had it not been on the TSE as well as NASDAQ.

“I think our Canadian investors were far more patient and less trigger-happy than the American investors were. I think actually the TSE cushioned our fall, and as I said, we ended up hanging in there really pretty well since 2000, relative to what happened to a lot of other people,” he says. “Toronto, and the Canadian content, was actually a real asset to us during the last couple of years of the bear market.”

Hunter has obviously picked up quite a bit of business acumen along the way. But he says the most valuable thing a biotech executive can learn is to be aware of what he doesn’t know.

“Nobody, no matter how smart they think they are, could ever be an expert in all the facets of this business. There’s just way too much to it. And the sooner you realize that you don’t know everything, and the sooner you realize the difference between the stuff you know really well and the stuff you don’t know at all but you like to pretend you do, the better off you’re going to be.

“It takes a lot of people to bring something through to the finish line and you need to give up power and give up ego and give up credit, and bring in people who know what the hell they’re doing to do the job,” he says. “So you’ve got to know what you don’t know.”

He remains active in the science side of the company, but has come to love the business side as well.

“I still write a fair number of patents, and R&D still reports to me. They don’t let me put on a lab coat in case I break something, but I still have a fair bit of a say as to which fields we go into or what things we develop or what experiments or things we undertake,” he says. Hunter would miss the scientific side if he had to give it up completely, but has embraced the broad spectrum of his business role.

“I like the diversity of it all, to tell you the truth,” he says, citing Angiotech’s partnership agreements as an example. “I really enjoy that interaction. I enjoy the combining of corporate visions into products. Combining our strengths with other companies’ strengths to be able to do things faster.” Hunter laughs and adds, “I love going to work.”

And there’s plenty to do. Angiotech’s plans include drug-loading the devices that it acquired when it bought Cohesion, which include CoStasis®, a sprayable liquid hemostat to control bleeding in surgical procedures, and the surgical sealant CoSeal®.

“We think we’re going to be able to make a surgical implant to prevent bypass failure, for example, which we think is really innovative and is almost ready to go into clinic,” Hunter says. “We think that we’re going to be able to make a sprayable barrier that can prevent scarring and stop bowel obstruction and infertility in women. Both those programs are either in the clinic now or will be by the end of this year. I think those will be important products for us.”

Hunter says Angiotech’s potential product pipeline is much broader than the drug-coated stent that is most associated with the company name.

“We tend to be known as the stent guys. Obviously we’re very proud of that program, but I think that the premise is a lot more significant than just the stent,” Hunter says. He estimates that 280 million pieces of medical hardware are implanted in the human body every year. “Any time you put a foreign body into a human being, sometimes it can elicit a response that you don’t want that makes that device malfunction,” he says. “So we think that same premise of using therapeutics on devices has an enormous number of opportunities, and obviously there are 279 million implants that aren’t stents, and we think there are a lot of them that we can expand into.”

That’s a big vision for Angiotech, but it’s one that Hunter believes the company is capable of fulfilling.

“We’d like to be something important. I really don’t want us to be a footnote,” Hunter says. “We actually believe we can build a business here. We actually think that there’s a need for merging drugs and devices. We actually think that we are at the front of a wave of convergence in medicine, and that we are the company that will lead that charge.”