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Q&A: Steering a biotech pioneer through upheaval

Michael Berendt is tasked with managing Bioniche Life Sciences Inc. through a period of major change.

LARS HAGBERG/The Globe and Mail

Canadian biotech pioneer Bioniche Life Sciences Inc. has gone through a period of turmoil recently, after an investor launched a proxy battle that culminated with the election of new directors and the departure of CEO (and founder) Graeme McRae. There will be more upheaval, as the Belleville, Ont.-based company plans to sell its division that makes medicines for animals. It is also looking for a partner to continue development of a human bladder-cancer treatment, and it must decide what to do with its high-profile division that makes a vaccine to prevent cattle from spreading the dangerous E. coli bacterium.

Experienced pharma and biotech executive Michael Berendt was brought in earlier this month to manage the company through this period of uncertainty.

Did the proxy fight leave a bad taste in the company?

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It was put behind us very quickly. It was settled reasonably. We basically have a new board of directors. We have a new CEO, and I am going to add some additional senior management as we move forward. The real focus is on change.

Did the proxy fight actually make it easier to change the company?

I think it probably did result in people stepping back and saying, "Is there an alternative way of approaching these businesses?"

What will Mr. McRae's role be in the revamped organization?

He is chairman emeritus, and he is going to have a consulting relationship.

How tough is it to take over from a CEO who was the firm's founder?

Change is always a little difficult at the beginning, but there was a good foundation set here. It is a question of refocusing and identifying new objectives. There are challenges associated with that, but if you are a very clear communicator, it is usually a pretty smooth transition.

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What are your priorities in your new job?

We need to basically review all the existing business units and understand how to continue momentum. I am also looking to reduce debt in a meaningful way, and to contain our costs, so that our dollars last longer and go farther. There is a lot on the table right now.

How do you maintain morale in an organization that is in such a state of flux?

You have to] set reasonable schedules, timelines and performance objectives. …This is a big change and I don't want to discount that, but clearly there are paths forward.

Is it hard to hold on to people and skills when they know that a big chunk of the company is about to be sold?

I have been pleasantly surprised by the skill set that has remained here. I think it is due to the fact that every step of the way, what has been going on in the process has been communicated.

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Also, in terms of the sale of the animal health division, we have been talking to companies that have an interest, not only in the products, but also in the people. Until we know exactly who is going to purchase that division, and how many people will be going with that transaction, there is insecurity. But I think people are dealing with it. The turnover has been fairly low.

You plan to hang on to the human health division, but it doesn't it generate any revenue yet. What is the plan?

The prospects are very good. The product, called Urocidin, addresses a significant unmet medical need [for treatment of] bladder cancer. The challenge is getting regulatory approval in Canada and United States. There are still significant clinical development trials that have to be conducted, and they are expensive. To derive revenue [in the meantime], we are looking for a strategic partner such as a major pharmaceutical company, who would pay up front for access to this asset.

Will there be other products from that division?

Currently the whole focus is on the regulatory path forward for the [bladder-cancer treatment]. But we will be opportunistic and look for other cancer therapeutic agents that could be brought into the pipeline.

What will happen to the vaccine that prevents cattle from shedding the E. coli bacterium?

We would certainly entertain offers [for that business and] the vaccine manufacturing centre associated with it. We would only hang on to it if we were able to generate some revenue, [which will happen if] governments give regulatory approval for the sale of the product, or if a major company comes in and subsidizes the effort in exchange for rights. [In that case] we would receive milestone payments and maybe royalties.

How healthy is the Canadian biotechnology sector right now?

The Canadian science and technology that feeds the biotech industry – especially as it relates to human health – is as strong and as productive as anywhere in the world.

One of the problems that existed in the past in Canada, and in the United States, is that there was a limited amount of money and it was spread very thinly in many, many companies. There was not enough to get the early-stage products into clinical-stage development. Now there are specialized funds that have been set up to get these projects out of academia and out of early stage startup companies… and to move them along.

Why are there so many cutbacks among global pharmaceutical firms these days?

There is an interesting transition going on. Large pharma companies are very focused on reducing infrastructure costs, internal costs, and even some of their internal research programs. They are looking to outsource things, but they are also very aggressively looking to partner and bring in new projects. That trend began a couple of years ago and it is continuing today.

You will see a lot of licensing and partnering initiatives, and there has been an aggressive move on the part of the large pharma companies and biotech companies to acquire smaller companies.

Essentially there will be far more connections between companies?

Big pharma has realized you can't build walls and silos. There is a lot of innovative science and technology going on in smaller companies, and they have to find ways to access it. [Working alone] has not proven to be the key to success.

Editor's note: An earlier online version of this article incorrectly referred to E. coli as a virus. This has been corrected.

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