ImClone’s Waksal Back in Biotech With Plans for SpinoutsMeg Tirrell
Sam Waksal is back. Five years after the cancer drug company he founded was sold to Eli Lilly & Co. for $6.5 billion, and four years after he served jail time in an insider trading scandal that ensnared Martha Stewart, Waksal is again making moves in the biotechnology industry.
The 65-year-old scientist and entrepreneur founded ImClone Systems Inc. almost 30 years ago, developing one of the first targeted cancer therapies. Waksal now plans to spin out two units of his new venture, Kadmon Corp., into publicly traded companies, and start a Kadmon China that may list on the Hong Kong Stock Exchange.
Waksal sees new opportunities in an industry enjoying a moment in the sun. The Nasdaq Biotechnology Index hit an all-time high of 2,097.90 on Aug. 2, and gained 44 percent in the past 12 months at the close on Aug. 30. Companies with initial public offerings this year, including Epizyme Inc. and Bluebird Bio Inc., have returned more than 45 percent for investors.
“We haven’t seen a biotech market like this since 2000,” Waksal said in an interview at his New York offices. “You get these windows, you get companies funded, you get shareholders that are interested in an approach, a strategy, a technology, a management team, and often, you really get big winners.”
Waksal founded Kadmon in 2010 as the successor to ImClone, the company that developed the cancer drug Erbitux and was acquired by Indianapolis-based Lilly in 2008. His new company is also working on cancer medicines, and drugs for hepatitis C, inflammatory disorders and genetic diseases. It’s in the same building, along Manhattan’s East River, as ImClone.
“Everybody is aware of the news around Sam, but Wall Street has a history of second chances,” Les Funtleyder, a health-care strategist with New York-based investment firm Poliwogg, said in a telephone interview. “Despite the well-known travails, ImClone was able to bring a very successful drug to market and then get itself acquired. By Wall Street standards, that’s a success.”
The divisions Kadmon may spin out are focused on gene therapy and metabolomics. Both ventures will aim to list on a U.S. exchange, while Kadmon China will focus on diseases central to that region, such as cancer, Waksal said.
He pointed to Cambridge, Massachusetts-based Bluebird and Agios Pharmaceuticals Inc. as examples of companies working in those areas; they’ve returned 46 percent and 31 percent, respectively, since their IPOs this year.
Neither Bluebird nor Agios yet has therapies on the market. Kadmon sells the hepatitis C drug ribavirin, and its most-advanced experimental medicine is in the third and final stage of clinical trials generally required for U.S. marketing approval, with more compounds in earlier stages. Spinouts could raise funds for later-stage, larger studies.
“What’s very interesting about the company is that our platform technologies that are really feeding our pipeline are in some novel areas,” Waksal said. “One of them is gene therapy, and it doesn’t really get to unlock its value” as part of the larger company, he said.
Kadmon is in the process of choosing bankers and the new companies may list by the end of this year or early next, Waksal said, noting the plan has humorously taken on the name “Operation Dreidel.”
His company may retain part ownership of the spinouts, or just forge partnerships with them on certain medicines. Olivier Danos, former director of the Gene Therapy Consortium at University College of London and now a senior vice president at Kadmon, will be chief scientific officer of the gene therapy company, Waksal said. He didn’t provide more details on the executive teams.
As part of his 2003 settlement with the U.S. Securities and Exchange Commission over insider trading charges, Waksal accepted a lifetime ban on leading a publicly traded company. He served five years in prison after admitting to telling his daughter to sell her ImClone shares a day before U.S. regulators rejected the company’s application for approval of Erbitux.
Stewart, founder of Martha Stewart Living Omnimedia and a friend of Waksal’s, served five months in federal prison and time on house arrest for conspiring to obstruct justice by lying to investigators about why she sold shares of ImClone stock.
Erbitux was approved in 2004 for colorectal cancer, and since has been cleared for additional uses in head and neck cancer. The drug generated more than $1.8 billion in revenue last year, according to annual reports of Lilly’s partners Bristol-Myers Squibb Co. and Merck KGaA.
It took 20 years from the time Waksal founded ImClone to the drug’s approval, a path not atypical for biotech companies whose road to market can include spurts of funding from venture capital firms, long and rocky development efforts and multiple direction shifts.
Regeneron Pharmaceuticals Inc., maker of the macular degeneration medicine Eylea, was incorporated 24 years before it turned its first profit from a major drug. Ariad Pharmaceuticals Inc., whose cancer drug Iclusig was approved last year, was founded in 1991.
Waksal founded Kadmon with a different idea: rejecting the venture capital model of starting a company based on one drug or technology platform, and instead seeking a faster and more efficient way to profitability.
He has raised almost $500 million in equity, debt and strategic partnerships from investors including Steven A. Cohen, founder of the hedge fund SAC Capital Advisors LP. Kadmon bought Three Rivers Pharmaceuticals in 2010 to gain medicines for hepatitis C. The company sells a higher-dose version of the drug ribavirin than others on the market, enabling patients to take fewer pills. Kadmon has signed an agreement with a large pharmaceutical firm on the drug, Waksal said, declining to name the partner.
Waksal anticipates the growing hepatitis C market, fueled by new medicines with fewer side effects and better efficacy from companies such as Gilead Sciences Inc. and Johnson & Johnson, will drive Kadmon’s sales and help fund its research and development.
“Next year is going to be an unbelievable year for us,” Waksal said. “We’re going to have significant earnings and, after some of the next-generation antivirals get on the market for HCV, we think that in 2015 we will have earnings significantly north of $150 million.”
Earnings before interest, taxes, depreciation and amortization were about $25 million in 2012, and may grow to $40 million to $60 million next year, Waksal said. The company is working to advance therapies such as its KD019 through the clinic for areas including lung, breast and prostate cancers.
“We have, as part of our business, a pipeline which we’re terribly excited about,” Waksal said. “That was one of the things we built at ImClone that was really great. But our pipeline is even more exciting than ImClone’s.”