Roberto Bellini grew up idolizing his father, Francesco, an Italian immigrant who built BioChem Pharma Inc. into one of Canada’s most successful biotechnology ventures. “He was a very important role model for me,” says Bellini. “He would come home at night and tell us all about his work. He made it look interesting and made it look like the things they were doing were important.”
They were. BioChem developed the 3TC molecule, a vital ingredient in the drug cocktail that transformed the fight against HIV/AIDS in the 1990s. (It’s included on the World Health Organization’s list of essential medicines.) It also made “Dr. B,” as his son calls him, wealthy; the Laval, Que., company sold out to Shire Pharmaceuticals Group PLC for $5.9 billion in 2001.
Now Bellini is trying to finish what his father started. For 18 years, the pair have tried to repeat the success of BioChem with their publicly traded biotechnology developer, originally named Neurochem Inc. and now called Bellus Health Inc. The Laval company’s attempts to create a wonder drug for Alzheimer’s disease and a treatment for a serious kidney condition both flopped, crashing the share price each time.
Fortunately, in biotech, failure is not only part of the game—it’s the norm. Entrepreneurs face incredibly long odds, as their drugs must pass a series of trials with animals and then humans before earning regulatory approval. If success proves elusive, there are options: do more trials, find another promising molecule or quit the game.
The Bellinis are not quitters. And they could finally be on the verge of that long-sought repeat success. Bellus’s latest drug candidate isn’t targeted at a life-or-death disease but a nagging ailment that impacts the lives of millions of people: chronic coughing. The Canadian firm is in a race with Big Pharma heavyweights to be the first to get to market with its treatment. Regulators haven’t green-lit a drug for cough therapy since dextromethorphan—a staple in over-the-counter cold medications—in 1958. Analysts believe the market for the new class of drugs will be worth billions of dollars annually and that Bellus’s version could be the best one. Some of the most sophisticated investors in biotech have piled in, and the company is sitting on US$100 million in cash.
There’s just one thing: Bellini, now Bellus’s CEO, still has to prove that his molecule, BLU-5937, actually works. The company is running trials involving 65 of the most acute chronic coughers in the U.S. and U.K., and will publish its findings mid-year. If the results are strong—and BLU-5937 emerges as the best-in-class treatment—Bellus’s stock could more than triple, giving it a US$1.5-billion valuation, says David Martin, an analyst with Toronto boutique life sciences investment bank Bloom Burton & Co. If it fails outright, the stock is headed toward zero again.
“We have a high conviction that the upcoming [trial results for] BLU-5937 will be positive,” says Sam Slutsky, senior research analyst with LifeSci Capital in New York. “If this is the case, there is a lot of upside potential.”
Bellus is not the only Canadian biotech developer riding a renewed wave of hope. In fact, the industry in this country is coming off its best year in a generation. In 2019, several Canadian biotechs—including Bellus—listed on the Nasdaq, the premier exchange for drug developers. Two with Canadian operations, Clementia Pharmaceuticals Inc. and Blue-Rock Therapeutics, sold for US$1-billion valuations; two more, Zymeworks Inc. and Aurinia Pharmaceuticals Inc., surpassed that level as their stocks soared. Venture capital investing in the Canadian sector hit a record $921 million last year, according to Refinitiv, a financial data firm, while several Canadian biotechs raised over $100 million to further their development, the kind of big-league funding needed in order to be taken seriously. Memories of the dismal 2000s, when VC investing dried up and R&D spending in Canada by Big Pharma dropped off, are starting to fade. “I’m the most bullish I’ve been on the Canadian sector,” says Peter van der Velden, managing general partner of Lumira Ventures, an early backer of Aurinia and Zymeworks. “People are building really, really exciting companies.”
But two things are missing from the scene: Canadian money and Canadian pharma giants. Most of our big institutional investors outside Quebec have remained absent from the country’s sector, missing out as global trends in drug discovery, including precision medicine to target genetic defects and the use of artificial intelligence in preclinical research, have delivered promising new treatments.
Meanwhile, 99 years since the discovery of insulin at the University of Toronto, this country has yet to produce a global developer of patented medicines. (The exception, Bausch Health Cos. Inc.—formerly known as Valeant Pharmaceuticals—is headquartered here for tax reasons and dismissed by industry watchers as a not-really-Canadian pharma company.) The country doesn’t lack the ingenuity to create groundbreaking drugs. It’s just missing the ability to build large, sustainable, Canadian-anchored companies around them.
But with all the activity and recent success in Canada’s biotech sector, there’s hope we can produce a “Gilead of the North”—a firm like the Silicon Valley giant that grows from the petri dish all the way to the Fortune 500. That’s a mission for Roberto Bellini.
Can the son deliver a winning drug, match his legendary father’s legacy and create Canada’s first Big Pharma? Or if he can get the world to stop coughing, will the temptation be too overwhelming to sell?
Francesco Bellini wasn’t quite ready to retire from the entrepreneurial life when he sold BioChem in 2001. It had been a wild ride. The company’s great discovery prevented the HIV retrovirus from mutating. But the founders (including fellow researchers Gervais Dionne and the late Bernard Belleau) realized 3TC worked best in combination with the existing HIV treatment AZT to control the virus. It meant those with HIV could live to full life expectancy, a dramatic improvement over earlier treatments. BioChem sold worldwide rights to pharma giant GlaxoSmithKline to get 3TC to market for both HIV and hepatitis B patients. By 2000, 3TC-based drugs generated £948 million in annual sales for Glaxo, translating into $196 million in royalties for BioChem.
But success had its side effects. Atlanta’s Emory University claimed it invented 3TC and even obtained a U.S. patent in 1996, sparking a messy legal fight that was later settled. BioChem was also targeted by short sellers; one even set off bombs at the company’s facilities in November 1997 in an attempt to hurt the share price.
Facing an underperforming stock and questions about potential revenue growth, Dr. B decided to sell to Shire. He had properties in the Laurentians, Florida and Italy; an art collection; a vintage wine cellar; a hunting lodge; and his name on McGill University’s life sciences complex, courtesy of a $10-million donation. His legacy as a Canadian biotech legend was secure.
But Dr. B wasn’t content. In retrospect, he wished BioChem had had the wherewithal to keep going. “Everybody thinks I did a great thing at BioChem,” he said in 2003. “And I did. I built a $6-billion company. But inside me, I failed… I did not succeed to build a Canadian multinational at BioChem.”
In the early 2000s, he struck a partnership with Power Corp. of Canada to begin investing in other life sciences startups. He soon found one he believed had the potential to surpass BioChem. Neurochem had grown out of Queen’s University in the 1990s and was looking to develop two treatments: one to slow the onset of Alzheimer’s and another to treat sufferers of a rare and often fatal kidney condition. He and Power Corp. bought a 24% stake in mid-2002. Dr. B became chair but wanted to get back in the game; by year’s end, he was CEO.
Dr. B declared he’d hit “the big home run.” He thought the Alzheimer’s drug, called Alzhemed, could reach US$4.5 billion in sales. Investors bought in.
But then, key human trial results published in April 2005 showed the kidney drug wasn’t as effective as expected, sending the stock down by 30%. The big blow came in August 2007, when the U.S. Food and Drug Administration determined results from Neurochem’s late-stage Alzhemed human trials were “inconclusive.” The stock fell 44%, and analysts slashed their targets, one to 50 US cents.
Dr. B wouldn’t give up. He swore by the effectiveness of Alzhemed, declaring he had a “moral responsibility” to take it to market. The company would do so, but only by producing it as an off-the-shelf, unregulated “nutraceutical,” sold alongside natural products like omega-3 and ginkgo biloba. The medical researcher sounded like an old-style pitchman as he predicted the renamed Vivimind would surpass US$1 billion in sales by targeting not Alzheimer’s patients but healthy people afraid of losing their memories. Vivimind revenue was less than a thousandth of that sales target when Bellus sold the business in 2013—to another entity Dr. B controlled. Though he no longer owns it, he still believes in Vivimind and “takes it to this day,” his son says.
It was time to admit the elder Bellini didn’t have another BioChem in him, at least as CEO. In 2008 he signalled the company was abandoning Neurochem’s Alzheimer’s ambitions by convincing shareholders to change the firm’s name to Bellus. He slashed staff and decided to step back. “I didn’t have any more energy,” say Dr. B, now 73. “I’d fought too many things. My son was there, ready to take my place.”
Roberto Bellini is a good-natured and disarmingly cheerful individual, taller and thinner than his diminutive, roly-poly dad. He speaks in a scratchy, high-pitched voice and laughs easily. “If you don’t have good humour in this business, you’re in a lot of trouble,” he says.
Bellini started out as a middle-class kid, a self-described “nerd-jock” who loved to read but also excelled at sports, captaining school teams. The family’s lifestyle changed as BioChem took off during his teens and they moved out of their Town of Mount Royal, Que., bungalow to a bigger home.
Bellini spent summers during high school working in BioChem’s labs, where he determined he wasn’t cut out for a career in a white coat. Instead, he was keen to be involved in the business end and went straight from completing his biochemistry studies at McGill University to joining the family office in 2002, first as an analyst and then as assistant to the CEO of one of its portfolio companies.
If Bellini ever had ambitions to match his father’s accomplishments, he says they were gone by the time he took over as CEO of Bellus, just shy of his 30th birthday (Dr. B remains chair). Bellini was driven to succeed—but not to match BioChem’s success. “Trying to achieve that same level wouldn’t be healthy. I realized I wasn’t my dad. I had to be myself.”
Both men agree the father is a calls-the-shots leader, while the son is collaborative. “My dad knows what he wants to do, and he does it,” says Bellini. “We created a different culture of making decisions that was more based around getting the best ideas from the full team, debating those ideas openly and then finally [finding] the right path to take.”
Dr. B says both Roberto and his brother, Carlo, who runs another biotech startup backed by family money, lead differently than he did. “For me, a lot was by instinct. [For them], it’s much more logical. I was a real entrepreneur. They are more managers. If they are going to be successful, I don’t know, because you need to be an entrepreneur. You have to see what other people don’t see… Roberto, he has a logic to follow. Which is fine too. But by being like that, you will not outsmart the crowd. He will develop. It will take more and more courage of making moves that are not the clear moves.”
Their differing working styles mean the pair often disagree. “He’s extremely difficult to work with—extremely demanding, never happy,” Bellini says. “Sometimes people say, ‘Oh, you work with your dad—that must be easy.’ No, it’s extremely hard. But the reason it works so well is he can push me so hard, but I can push back. I won’t crack.”
“Dr. B is old school in his approach to managing the board, which I really appreciate,” says Clarissa Desjardins, a Bellus director. “He’s very efficient and focused on making decisions. Roberto absolutely holds his own. He’s a very different character from his father. If you say Dr. B is old school, Roberto is really a Renaissance man. I think they make a great team in terms of respecting each other’s roles.”
Bellini’s focus after becoming CEO on Jan. 1, 2010, was to find new investors and clean up the company’s financial structure, which he did two years later. He also wanted to complete a second set of human trials on the kidney drug, called Kiacta, that the FDA had said were necessary to earn regulatory approval. He found a partner, Auven Therapeutics, that agreed to bankroll the study of 261 patients with a kidney condition called AA amyloidosis and split revenues. The study hinged on waiting for 120 of them to experience an “event”—a deterioration of their kidney function—to see if those who took Kiacta would recover. It was a difficult trial, spread out across more than 25 countries.
There was renewed market anticipation as the stock tripled in value. But when the results came back, Bellini was shocked. Kiacta “did not meet the primary efficacy endpoint in slowing renal function,” Bellus announced on June 20, 2016. Translation: The drug was no more effective than a placebo in stopping kidney malfunction. The stock fell 85% that day and by a further 37% the following month. Analysts dropped coverage, and Auven terminated the program.
After nearly two decades, Bellus had spent more than $300 million of investor money, including $60 million of the family’s fortune. It had no meaningful prospects, nine employees, $8 million in cash and a market capitalization hovering around $15 million. Bellini, then six years into the CEO job, questioned whether he’d made the right choice in life to follow in his father’s footsteps.
“That was the moment when I had a real reflection. It was, Oh my God, what am I doing here? How did I get here?” he says. “It was a difficult time for me.”
A month after the Kiacta failure, Bellini told the board he’d try to find a buyer for Bellus or a new project to develop. “We had to find a story that was easily digestible,” he says. “Something that couldn’t be too highly technical. It needed to be in a disease area that was understandable for investors.”
One of his calls went to the Neomed Institute, a not-for-profit research centre housed in a Montreal facility vacated by AstraZeneca in 2012, one of many global pharma giants that uprooted their R&D operations from Canada around the turn of the decade. Along with the property, the departing company had also bequeathed to Neomed some cash and three pain-killing molecules it had been developing. Bellini wasn’t so interested in pain medications, but the researchers at Neomed had discovered one of their molecules could stop a sensory receptor in the upper airway, known as P2X3, from messaging the brain to trigger a cough.
Turning off the impulse to cough had huge potential. Chronic cough—lasting eight weeks or more—affects 10% of people globally. Between 10% to 20% of those, or more than 2.5 million people in the U.S., cough constantly for months, even years, for unknown reasons. That creates physical complications (headaches, vomiting, sleep deprivation and even rib fractures), not to mention social and psychological problems. There’s no known cure or approved treatment, though doctors have tried narcotics and speech therapy.
Roberto immediately got excited. Pharma giant Merck & Co. had just bought Afferent Pharmaceuticals, which was also targeting the P2X3 receptor, for US$500 million, plus another US$750 million if it hit its milestones. But the Merck drug, Gefapixant, had a weird side effect: It turned off not only P2X3 but also another receptor that led to a loss of taste. Neomed’s drug was much more selective, sticking mostly to the receptor it was supposed to target. If Merck had just committed a significant sum to a drug with an off-putting side effect, what could Bellus do with a similar treatment devoid of that problem?
In February 2017, eight months after the Kiacta failure, Bellus licensed global rights to the Neomed molecule and sold a few small assets to raise about $5 million for preclinical trials on animals. That year, the company ran two trials. In one, it showed its molecule, BLU-5937, suppressed coughing in guinea pigs. (How do you make a guinea pig cough, you ask? By putting it in a chamber infused with a fine mist of citric acid and histamine.) It also devised an experiment that gave rats a choice between drinking from a bottle of water or quinine. Rats fed BLU-5937 avoided the bitter quinine at the same rate as those in the control group. By contrast, rats that took Merck’s Gefapixant were equally likely to drink the quinine. It was a strong indication that Bellus’s drug didn’t mess with taste impulses like Merck’s did.
Those preclinical results, published in September 2017, turned heads. That December, the company raised $20 million in a stock offering on the Toronto Stock Exchange. Next up was a study to see how the drug affected healthy humans.
In November 2018, Bellus showed the drug was not only safe in a trial of 60 healthy adults but that fewer than 5% experienced any taste alteration at expected doses, compared to 59% in Merck’s latest trials. It was good news. The company immediately raised $35 million, led by U.S. biotech venture firm OrbiMed Advisors LLC.
The stock rose, and analysts picked up coverage. Then, on June 20—three years to the day of the Kiacta meltdown—Bellus soared by 44.5%. The reason? Merck, during an investor day presentation, highlighted Gefapixant, not just for chronic cough but also as a potential treatment for sleep apnea and endometriosis. Michael Nally, Merck’s chief medical officer, called it a “huge commercial opportunity.”
“I was ecstatic,” Bellini says with a wide grin. “All of a sudden, they’re talking up the fact that this is a platform. We had good data and had positioned it well.” Now Bellus could push the story that it had a better offering than one of mighty Merck’s hottest prospects. Two months later, Bellus went public on the Nasdaq—10 years after dropping its listing—raising US$70 million in an oversubscribed offering.
Dr. B was worried the IPO would excessively dilute existing shareholders, but Bellini argues having a well-financed company benefits all shareholders. “If my dad was in my shoes, he’d do the same thing,” he says.
Now comes the potential payoff. The company is currently enrolling 65 chronic cough sufferers in a study. Half will be treated for 20 days with escalating doses of BLU-5937 and the others with a placebo. Subsequent trials will likely follow with upwards of 500 patients. Bellus is also looking to start human trials this year to see if the molecule curbs an itchy skin condition after it showed successful results in mice.
But if this year’s chronic cough trial results are as good as expected, will Bellus sell out? Those few Canadian biotechnology companies that show enough promise typically get acquired, enriching their mostly American or European funders. “If BLU-5937 succeeds, there will probably be a lot of interest from Big Pharma in buying the company,” says Bloom Burton’s Martin.
Gaining scale in pharma is an uphill battle for any startup, let alone a Canadian one. “If you want to build something big here, you’ve got to fight the forces, and the forces are the mentality that it’s just not the Canadian way,” says Zymeworks CEO Ali Tehrani, an Iranian immigrant who’s trying to do just that.
For decades, Canada has lacked the capital, infrastructure and wherewithal to build domestic pharma giants (we’ve done better with copycat generic-drug makers, notably Apotex Inc.) as the short-term interests of shareholders and patients favoured partnering with or selling out to Big Pharma. It goes back to insulin: The diabetes treatment has long been championed as Canada’s greatest medical discovery, our “gift to the world.” It was actually a gift to the economies of the United States and Denmark, where pharma giants Eli Lilly and Company and Novo Nordisk A/S built their respective businesses on the strength of making and selling insulin, while the U of T’s Connaught Labs lacked the capacity to produce it in sufficient quantities.
The Canadian build-and-sell cycle doesn’t have to continue forever. California’s Gilead Sciences Inc. grew from a startup to a Big Pharma giant. There’s no reason that can’t happen here, says Richard Glickman, an Aurinia cofounder. “It will take the vision of a CEO who will fight the battle—because it is a battle.”
Bellini is coy about Bellus’s future. “We’re preparing to continue developing this asset on our own. At the same time, we’ll be looking at our options to do partnership deals, licensing deals or even potentially mergers and acquisitions, and we’ll look at what the best option is for our shareholders.”
Dr. B is more certain. “The biggest problem in Canada is that there is money for startups but not [domestic sources for later-stage financing] to bring products to market. That is why companies that have interesting technology have to sell themselves. And that’s probably what will happen even with Bellus. They’ll add value to a molecule, but they will be bought… If we find a good merger that will be good for our employees and for our shareholders, we should do it.”