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Genzyme -> The Clinuvel Pathway

Henri Termeer was the founding president of Genzyme, the biotech pioneer which commercialised one of the first orphan drugs and was built into a $21B fortune 500 business. Termeer contravened his expert panel advice in 1985 to pursue the high risk development of Ceredase to treat Gaucher disease which had only 5,000 patients worldwide and the first enzyme replacement therapy. We believe this is a strongly correlated playbook for Clinuvel Pharmaceuticals business model with the worlds first FDA approved photoprotective drug also for treatment of an orphan disease.


- The insights from this blog have been predominately drawn from the book Conscience and Courage by John Hawkins.


Baxter Boy - "Stretching the rubber band"

Henri Termeer was a Harvard MBA graduate who took a role at Don Baxter Intravenous Products Inc. (Baxter International), Baxter was founded in 1931 by Dr Ralph Falk who pioneered the first intravenous solutions. In 1953 William Graham a patent lawyer took over as CEO for the next 27 years, this was important as Mr Graham created the breeding ground for what became known as the 'Baxter Boys' - the diaspora of Baxter leaders. More than 1 in 5 of the 299 biotech's that went public between 1979 and 1996 had a Baxter Boy CEO. Henri Termeer was a Baxter Boy and learnt the Baxter fractionation business "you took apart plasma and sold factor VIII, Factor IX, Immunoglobulins and Albumin". Termeer learnt how to make diagnostic and therapeutic products, how to market them and how to run the business - he wasn't a specialist but learnt as much as he could. It was during this time that Termeer learnt about building a business in a small market through the launch of Autoplex-T, to treat Factor VIII Inhibitor Haemophilia A patients.

Treatment Portfolio

After being appointed as the CEO of Genzyme Termeer put together a panel of experts from MIT and Harvard to advise Genzyme to evaluate technology, he gave this panel a 10% stake in Genzyme. This panel advised Termeer not to pursue Ceredase for the treatment of Gaucher disease because "its ridiculous no one will ever pay $250k p.a for treatment", insufficient supply of placentas, risk of safety from human derived tissue and huge investment for small market size.

Gaucher disease had only 5,000 patients worldwide with no available treatment to save patients from premature death. One rare sub type of the disease typically results in death by 2yrs of age.

Genzyme completed an IPO in 1986, it received the first FDA approval for Ceredase in 1991, after this it proceeded to launch Cerezyme (1994), Fabrazyme (2003), Aldurazyme (2003) and Myozyme (2006), revenue grew from $270M to $3.2B from 1994 to 2006. During this 28yrs there were 30 acquisitions made in a wide range of fields.

Genzyme Timeline

Henri's Dozen

The colleagues recognised 'Henri Dozen':

  1. Patients always come first. "we work in this space by permission of the regulators, patients and physicians and we do it with humility"

  2. Exalt Innovation, Especially if it saves lives. "The development of Ceredase will be remembered as one of the gutsiest decisions in biotech history".

  3. Be Accountable, operate with integrity. Genzyme is bigger than any of us individually.

  4. Take risks with people; challenge them; let them run but do not let them fail.

  5. Be mindful of your time. "every second that passes never comes back".

  6. Strategic thinking, not strategy planning. He refused forecasts beyond 18months. reliance on long term planning is paralysing.

  7. Disdain bureaucracy; Tolerate ambiguity. Avoid structure that that would hinder crisp decision making.

  8. Celebrate heroes, especially those who take action to improve patients lives.

  9. Do not give up your first born. This is the foundation technology and identity of the business.

  10. Pay as you Go. diminish dependence on capital markets. Be frugal.

  11. Engage in the moment. manage by walking around.

  12. Anything is possible. Stretch the Rubber band.

Beware of short term-ism

Sadly Genzyme was taken over in 2011 by Sanofi for $23B including earn outs, this was at a time when Genzyme was facing the companies biggest crisis (an FDA imposed shut down of the flagship Allston facility) and an activist attack from Carl Icahn demanding a "change of the guard" with a 62pg presentation attack to shareholders. Genzyme was left vulnerable to this due to their sole reliance on a singular Cerezyme and Fabrazyme facility. This facility had a virus outbreak which resulted in the shut down of production, destruction of inventory and rationing of supply to patients. This lead to a FDA sanctioned $175M fine. The perennial delayed gratification of the biotechnology industry leaves this type of business particularly exposed to short term vultures that can easily justify short term decisions for instant gratification.

Clinuvel Pharmaceuticals

We believe there are many similarities to Clinuvel (CUV.ASX) in the determined focus to treat a small patient population. The long term prospects of this initial molecule (Afamelanotide) to treat expanding indications is evidenced by the recent treatment for XP in addition to EPP initial trials of which were launched within the year post FDA approval.

Philippe Wolgen CEO ticks all of the Henry Dozen, see some of his quotes from that last 10yrs of annual reports and newsletters we have studied:

  1. Patients always come first. "..the patients voice is paramount in Clinuvels decision making process, at the end of the day it is the patients and the expert physicians that hold the fate of a drug in their hands.." Source: 2016 AR - pg.4

  2. Exalt Innovation, Especially if it saves lives. EPP is a treatment population of 5,000-10,000. Source: CUV Website "We aim to be innovative in our approach to find solutions for unique, complex and neglected healthcare solutions" FY18 AR Pg 5.

  3. Be Accountable, operate with integrity. "...Maintain a just culture where objectives are clear but where we encourage openness rather than attribute blame.." Source: FY15 AGM Slides pg 12.

  4. Take risks with people; challenge them; let them run but do not let them fail. Has a very evident high performing culture, recruit from within. "We select people on attitude, aptitude and mindfulness...we put together teams which share an eagerness to learn and explore" - Source: Website. "We aspire to create an environment where professionals are able to develop and grow." Source FY18 AR Pg 5

  5. Be mindful of your time. "We are vigilant not to become complacent and recognise that success can only come from identification and mastering of obstacles" AR FY18 pg 5

  6. Strategic thinking, not strategy planning. "We admit errors, recognise shortfalls, evaluate, analyse and learn to implement new findings" Source: FY18 AR Pg 5.

  7. Disdain bureaucracy; Tolerate ambiguity. "Our environment is one where open discussion and open communication is encouraged...we embrace individuals who are positive and see opportunities when others would turn away" Source: CUV Website.

  8. Celebrate heroes, especially those who take action to improve patients lives. "People conceptualise ideas and products and at Clinuvel the integrity and quality of people - in that order - leads to meaningful outcomes, successes and eventually products to serve patients and a wider audience of users." Source: CUV Website

  9. Do not give up your first born. CUV has chosen to directly sell Afamelanotide through Prorphyria specialist centres not license to big pharma.

  10. Pay as you Go. "Equally we empower our management to seek optimal funding solutions at minimum cost and dilution" Source AR pg 4.

  11. Engage in the moment. "Analysts, Journalists and broader stakeholders most often agree that a great company irrespective of its activities is the sum of the people it employs from top to bottom" - Source CUV Website.

  12. Anything is possible. "We aim to grow our know how ... Collaboratively we seek to excel in a multifaceted field to arrive at scientific breakthroughs" Source AR FY18 Pg 5.

We believe CUV will be an outstanding quality compounder for decades to come, the opportunity for further disease treatment with foundation technology is a well trodden path for the worlds most successful biotechnology companies.

Please contact us to discuss if interested.


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