Little Pharma, Big Drugs

Little Pharma, Big Drugs

Entrepreneurs by Jean Gruss | Editor/Lee-Collier

A group of former Eli Lilly executives hopes to build a blockbuster pharmaceutical company in Southwest Florida.

Edmundo Muniz scheduled seven weeks in September 2005 to raise $10 million for a small pharmaceutical firm he established a month earlier in Bonita Springs near Fort Myers.

Muniz, who formerly was vice president in charge of drug giant Eli Lilly's global oncology research, had helped found Tigris Pharmaceuticals with the backing of a New York-based venture capital firm called Two River Group Holdings.

Little did they know that they would raise $11.6 million from institutional and wealthy individual investors on the very first day. "We had to say 'Stop'," Muniz says, adding that Tigris turned down another $3 million to $4 million.

Investors will get another chance. Tigris is now working on a plan to raise another $15 million to $20 million in a second round sometime during the next few months. Besides venture capitalists and experts in oncology, the board of directors also includes former U.S. Secretary of State Alexander Haig Jr.

With big pharmaceutical companies such as Eli Lilly struggling with patent expirations and exorbitant research costs, a new generation of small pharmaceutical companies such as Tigris is emerging to outmaneuver the drug giants.

Tigris plans to do that by hiring drug-development experts from large companies such as Lilly who will take promising compounds through clinical development and commercialization and do it with the agility and speed of a small organization.

Under Muniz's watch, Lilly's oncology division gained the approval of nine drugs. These included Gemzar, a breast-cancer drug with $1 billion in sales, and Alimta, a drug to treat lung cancer from asbestos with $500 million in sales.

Despite his successful career at Lilly, Muniz says he caught the entrepreneurial bug. While he acknowledges taking a lower salary to start Tigris, he says his undisclosed ownership stake in the small company could end up being more valuable if Tigris' drugs succeed.

"The business model of the pharmaceutical industry is undergoing a transformation," Muniz explains. For one thing, research and development is not limited to the laboratories of pharmaceutical companies anymore but is now scattered among various educational institutions and specialized medical centers around the country.

There has also been a shift in resources from spending on big blockbuster drugs to more customized treatment of specific diseases. Large pharmaceutical companies can't afford to focus on these kinds of drugs because they can't justify the billions they're spending on research and development. That's where companies like Tigris can steal business away from big pharma.

Already, Tigris has four promising cancer drugs in the pipeline at various stages of development. The first drug is a gel to treat cervical lesions that risk becoming cancerous. A welcome alternative to surgery, the drug could be approved as early as late 2007, at which time Tigris will hire a sales force to sell it.

"We want to build Tigris into a full-fledged pharmaceutical company," Muniz says, adding that the plan is for Tigris to sell shares to the public sometime in the next two years. Depending on the outcome of drug trials, Muniz estimates the company will generate revenues of as much as $50 million by 2008, though he can't yet estimate a timetable for profitability.

Winning the war for talent

To take promising compounds through clinical trials and regulatory approval, Muniz hired top Lilly colleagues. Among them is Anne White, Lilly's chief operating officer for global oncology, Binh Nguyen, Lilly's executive director of oncology, Leslie Carter, the director of global operations in Lilly's global regulatory affairs department, and Geraldo Alvarez, Lilly's head of oncology in Mexico.

Muniz likes to recall how he and Nguyen recruited Carter this past winter. When she arrived at the interview in Bonita Springs from Lilly headquarters in snowy Indianapolis, Muniz and Nguyen greeted her dressed in shorts and flowered shirts. They drove a few minutes away to a marina and the three of them climbed aboard Nguyen's 30-foot sailboat for a two-hour sail where the "interview" took place.

It wasn't a hard sell. Besides the sunny climate, Muniz offered Carter an ownership stake in the venture. What's more, Tigris offers a culture where their entrepreneurial spirits can thrive.

"Great talents do enjoy financial rewards and status, but that is not the main source of motivation," Muniz says. "They want to be trusted, they want freedom to achieve goals without being stifled by bureaucracy, and they crave scientific and human achievement more than anything else."

Still, Bonita Springs is not known as a pharmaceutical hotbed. San Francisco, Boston and Northern New Jersey are better known for that.

But Muniz believes that Florida and the region are poised for growth in that area. He points to the H. Lee Moffitt Cancer Institute & Research Center in Tampa and Scripps Research Institute near West Palm Beach as evidence of Florida's growing biomedical industry. He says he knows many pharmaceutical-industry executives and wealthy investors who back new ventures who own homes in Southwest Florida.

"We intend to capitalize on this movement," Muniz says.

And, yes, they love the weather. "That is a very important factor," says Muniz, whose decision to located Tigris' headquarters in Bonita Springs was based in part because he owned a home there.

Tigris' strategy

Named after one of the two life-sustaining rivers in ancient Mesopotamia, Tigris takes promising molecules through clinical trials and regulatory approvals.

Muniz and his colleagues scour the country for compounds they think have the potential to be developed into drugs for humans. "This is a high-risk, high-reward business," Muniz says.

Muniz estimates that about 5,000 individuals or teams or scientists are working to discover molecules that might one day become human drugs. "We've evaluated dozens and dozens of molecules," he says.

Typically, scientists or non-profit research organizations will sell the molecules they've discovered to companies such as Tigris because they don't have the financial resources to carry it through testing and regulatory approval. A drug could take seven to 10 years and $800 million from preclinical trial phase to approval, Muniz estimates.

For example, in July Tigris entered into an exclusive deal with Moffitt, University of South Florida Research Foundation and Yale University to develop commercially several small molecules that appear promising in treating a range of cancers, including lung, prostate, renal, pancreatic and breast. Terms were not disclosed.

In another deal in July, Tigris won the rights from the National Cancer Institute to develop a drug that shows promise in treating renal and breast cancer. The company bid against others and won, though Muniz declined to reveal the exact terms of the deal.

Although Muniz won't say how much his company paid for any of the four molecules it purchased, he says a promising molecule in pre-trial stage might cost $500,000 to $1 million. Then it makes additional payments as each trial phase is completed successfully, plus it pays royalties of 2% to 10% of gross sales when it hits the market.

Tigris outsources the clinical trials to medical institutions in the United States and Mexico. In fact, Mexico has the highest rate of cervical cancer in the world, and clinical trials there cost a tenth of what they do in the United States, making it an ideal research area for the gel that will treat cervical lesions.

While big pharmaceutical companies have annual research-and-development budgets of $1 billion or more, Muniz says he's proud that his team has identified and secured the rights to four promising compounds for less than half of the $11.6 million the company raised in the fall.

Although the company only has 15 employees today, Muniz estimates that the company would have to hire 100 to 200 salespeople to sell one drug globally.

Why not sell an approved drug to an established company with a sales force? "We will never leave an offer on the table, but that's not our goal," he says. "We need to be prepared to launch."

HOW TO MANAGE A STARTUP

As a top executive with drug giant Eli Lilly, Edmundo Muniz learned many management lessons. He's putting those to use now in building Tigris Pharmaceuticals, a Bonita Springs-based startup company that specializes in taking cancer drugs through clinical trials and regulatory approval. Here are some of lessons he's learned:

• Know the basics of your business really well and be obsessive-compulsive and relentless in implementing your plans.

• Measure your progress by using clear and simple metrics and make sure your organization knows and champions them. Own the results and don't give excuses.

• Under-promise and over-deliver, always. This is the greatest source of credibility in business.

• Integrity and trust are the cornerstones of leadership.

• Leading is about empowering people to perform exponentially. You will not be able to achieve that if you do not commit to your people personally.

• People are clever; they know when you are using them.

• Respect and love your people genuinely, but be relentless in demanding performance.

• Cultivate loyalty at all levels.

• Fight bureaucracy hard.

• Do not gossip.

• Build deep and long-lasting relationships with customers.

• Management is a race of endurance, not a sprint.

• Learn when you need a break.

• There are always two sides to the same story.

• Create an environment where people can speak without fear.

• Be humble and cultivate self-awareness.

• Face the facts.

• Pick your battles wisely.

• Tell the truth.

• Always try to have fun.