The BioBalance Corporation (BBAL.PK)
Interview with:
Dennis O’Donnell, President and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
PROBACTRIX®; a non-pathogenic biotherapeutic agent that restores normal GI (gastrointestinal) function by reestablishing a healthy balance of gastrointestinal microflora.


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Restructuring as a pure pharma play, BioBalance aims its lead product at the vast markets for GI therapies

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Specialty Pharmaceuticals

The BioBalance Corporation

A wholly owned subsidiary of
New York Health Care Inc.

363 7th Avenue
New York, NY 10001

Phone: 212-679-7778

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Dennis O’Donnell
President and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
Mat 5, 2005

Dennis O'Donnell has been a director of the Company since January 2004, Chief Operating Officer of the Company's BioBalance subsidiary since May 2003, President of BioBalance since November 2003 and BioBalance CEO since July 2004. Mr. O'Donnell has more than 20 years of general management, marketing and business development experience in the pharmaceutical, consumer healthcare and nutritional industries, principally with Wyeth (formerly American Home Products) from 1983 to 2002, including as Vice President of Wyeth's Respiratory and GI/Topical Business Units from 1994 to 1996; Senior Vice President of Global Business Development & Strategic Planning for Wyeth's OTC Drug Division from 1996 to 1998 (where he identified drugs, devices and nutraceuticals for potential licensing or acquisition); and Executive Vice President & General Manager of Wyeth's Solgar division, a leading manufacturer of premium dietary supplements, probiotics and specialty nutritional products. From February 2002 to April 2003, he was a consultant to the pharmaceutical and consumer healthcare industries. Mr. O'Donnell is a registered pharmacist, with a B.S. in Pharmacy from St. John's University and an MBA in Marketing & Finance from New York University's Stern School of Business.

Company Profile:
The BioBalance Corporation is a specialty pharmaceutical company focused on the development of novel treatments for various gastrointestinal (GI) disorders that are poorly addressed by current therapies via accelerated regulatory pathways. 

BioBalance’s first product, PROBACTRIX®, is a non-pathogenic biotherapeutic agent that restores normal GI function by reestablishing a healthy balance of gastrointestinal microflora. It has been clinically proven effective in the prevention and/or treatment of various gastrointestinal disorders including pouchitis, Irritable Bowel Syndrome (IBS), Crohn’s disease, ulcerative colitis and diarrhea caused by antibiotics, chemotherapy or AIDS.

Acquired by New York Health Care in January 2003 in a reverse merger, BioBalance operates as a wholly owned subsidiary. The combined entity trades its common stock under the symbol BBAL.PK. The Company has announced plans to divest the home healthcare business to focus exclusively on BioBalance and recently signed a definitive agreement to divest certain New Jersey home healthcare assets for $3 million. The Company is also finalizing the negotiation for the sale of the remaining home healthcare business that will require shareholder approval. Pending shareholder approval, the corporate name will become BioBalance Holdings Inc.

CEOCFOinterviews: Mr. O’Donnell, what attracted you to BioBalance?
Mr. O’Donnell: “What attracted me most to BioBalance was the technology.  In PROBACTRIX®, the company owns the worldwide rights to a breakthrough product that addresses a potential root cause of many GI disorders.  PROBACTRIX  is a healthy strain of E.coli bacteria that has been extensively studied in both the Soviet Union and Israel and has been clinically proven effective in treating GI conditions ranging from Irritable Bowel Syndrome (IBS) to Crohn’s disease and colitis. This was very interesting to me because chronic GI disorders affect millions of people who spend billions of dollars on OTC and prescription products that provide only symptomatic relief. For example, in IBS treatments, there are currently only two prescription drugs approved with limited efficacy, yet have potentially harmful side effects as well. PROBACTRIX may represent a major paradigm shift in the treatment of GI disorders with no known side effects, and I think that’s extremely exciting.”

CEOCFOinterviews: You became President last year and CEO a few months back; what has changed since you joined the Company?
Mr. O’Donnell: “The Company is undergoing a substantial restructuring, which I believe will make it much stronger and more profitable in the future. Let me give you some background. Early in 2003, shortly after BioBalance merged with New York Health Care, the Company ran into unexpected trouble when New York Health Care’s president and a consultant were indicted on securities fraud, which ultimately led to the Company’s delisting from NASDAQ. In addition, the hybrid business model, pairing a probiotic business with a home healthcare business, proved to have few business synergies and was viewed negatively by potential investors. Today, we are refocusing the business exclusively on the business of BioBalance and the development of innovative treatments for gastro-intestinal disorders that are poorly served by current therapies on the market. We are in the process of divesting the home healthcare business to become a pure pharma play focused on BioBalance’s exciting new biotechnology. Investors see the potential: in February, we completed a private placement of about $4.9 million. In April, we announced the sale of our NJ home healthcare assets for $3 million, and we are finalizing the negotiations to divest the remaining legacy business. I think this turn-around represents an exciting story, in that this company has taken some lumps but is now focused on a very bright future.”

CEOCFOinterviews: How can E.coli be good?
Mr. O’Donnell: “A good analogy would be good and bad cholesterol. Ten years ago, cholesterol was only bad, but now science has emerged to show that there are good and bad forms of cholesterol. I believe science will also evolve along a similar pathway for E.coli. There are hundreds of different strains of E.coli, and most of them are neither good nor bad. There are a few strains that are highly pathogenic, such as the ones in tainted hamburger meat that you read about in the headlines.. Our product, PROBACTRIX®, is actually one of the few E.coli strains that are extremely beneficial to the body. PROBACTRIX is an all-natural product, isolated from a healthy human volunteer that works with the body’s immune system. Both in laboratory and clinical testing, it has been shown to have positive effects on a number of GI conditions.”

CEOCFOinterviews: Does this go under the same category as drugs?
Mr. O’Donnell: “Its regulatory pathway is as a biological agent. There are two groups in the FDA; one is a drug group and one is a biologics group. We are filing for prescription drug approval as a biological agent, which is the same group that handles vaccines and other biological agents. PROBACTRIX®   has already received GRAS status – which means Generally Recognized As Safe – which would allow us to sell the product as a medical food or dietary supplement. However, we believe this product has much greater investment potential as a prescription drug, so we are pursuing accelerated approval for its use  as a prescription drug.   This may take longer, but we are confident that, if we succeed, it will mean much greater return on investment for our shareholders.”

CEOCFOinterviews: Will you tell us about the timeline?
Mr. O’Donnell: “In November 2004, we initiated a clinical trial for IBS, or Irritable Bowel Syndrome, which is the chronic GI disorder that affects 40 million Americans, making their lives miserable and, in fact, causing more workplace absenteeism than anything but the common cold. This clinical trial is a randomized, double blind, placebo controlled trial taking place at four medical centers including New York-Presbyterian Hospital/Weil Cornell in New York. It is led by Dr. Mark Pochapin, the director of the Jay Monahan Center for GI Health and Chief of GI Endoscopy there. Two major hospitals in Israel and one in Canada are also involved.

“In Q3 of 2004, we also conducted a high-dose safety trial to verify the  excellent safety results found in prior studies and to support Phase I status for our prescription drug effort. We did some extensive safety testing in Israel about a year ago on 125 human volunteers, at ten times the normal dose, with no reported side effects whatsoever.

“Our strategy is to pursue accelerated prescription drug approval via “orphan drug” designation for pouchitis, a frequent long-term complication following colon removal for which no drugs are currently approved. At the end of 2004, as a first step in this process, we filed an Investigational New Drug (IND) application with the FDA. Because of all the research already done, we anticipate that we can move to a Phase II study for pouchitis in the third quarter of 2005. We anticipate a Phase III study will begin in 2007 and approval will be achieved by the end of 2009 if the tests are successful.”

CEOCFOinterviews: Is there any particular reason why the testing was in Israel?
Mr. O’Donnell: “The predecessor company was based in Israel, and we still have a clinical team there, which allows us to do studies like that on a quicker and cost-efficient basis. However, we will be conducting the IND clinical trials here in the United States as we move forward as a prescription drug.

CEOCFOinterviews: You recently signed a manufacturing agreement; will you tell us about that?
Mr. O’Donnell: “That is correct; it is with Benchmark Biolabs Inc. and this relates to the issue of FDA development. Benchmark has a state-of the art facility in Lincoln, Nebraska, where it will manufacture PROBACTRIX® for our clinical trials once we receive FDA clearance to begin. We had been manufacturing PROBACTRIX in another site when we were considering launching the product as a medical food. However, in order to achieve FDA approval as a prescription drug, we must ultimately manufacture it in a U.S. facility certified under Good Manufacturing Procedures, or “GMP.” Benchmark expects to receive GMP certification in the near future."

CEOCFOinterviews: Will you tell us about funding for the development?
Mr. O’Donnell: “We recently put together a financial consortium led by Sterling Financial Investment Group, and we raised $4.9 million in a private placement offering. These funds will allow us to proceed with clinical development of PROBACTRIX® as a prescription drug. Prior to this, we raised $6.1 million. In addition, BioBalance received the proceeds from the $3 million sale of the NJ home healthcare assets.”

CEOCFOinterviews: How far will that get you?
Mr. O’Donnell: “The recent funds will take us out in excess of twelve months. With the anticipated conversion of warrants for the private placement offering and potential cash from the pending sale of the remainder of the home healthcare business, we expect to have funding in place for almost two years.”

CEOCFOinterviews: Will you tell us about the market opportunity?
Mr. O’Donnell: “The total market opportunity for GI disorders is huge. Irritable Bowel Syndrome (IBS) alone affects at least 40 million Americans and constitutes a $3 billion market, according to a Red Chip Research forecast. Information Resources, Inc. (IRI) estimates that about $2 billion a year is spent on over-the-counter products that provide very limited relief. There are only two major prescription products – Lotronex and Zelnorm – both of which are limited in application and have potentially harmful and sometimes fatal side effects. PROBACTRIX® addresses IBS symptoms with no reported side effects. However, to speed time to market, we are planning to go after a prescription drug approval for an indication called pouchitis, for which no treatments are currently approved.”

CEOCFOinterviews: What is pouchitis?
Mr. O’Donnell: “Pouchitis is a severe inflammatory condition that results following bowel resection, commonly due to ulcerative colitis. Pouchitis affects about 200,000 patients in the United States. It is very painful and very difficult to treat.”

CEOCFOinterviews: Is there any treatment now for pouchitis?
Mr. O’Donnell: “There is nothing approved on the market at this time, and the relatively small population affected makes the condition appropriate for “orphan drug” designation. The FDA has a separate Office of Orphan Drug Product Development designed to facilitate rapid approval of applications for drugs that uniquely address critical conditions in small populations. Once approved, orphan drugs are given seven-year exclusivity in the U.S. and ten years of exclusivity in Europe. It is interesting to note that according to MedAdNews, orphan drug sales exceeded $28 billion in 2003 and are projected to reach $44 billion in 2008.

“I should also mention that, while a company can’t promote a product for “off-label” usage, once a product is on the market for one indication, physicians are allowed to prescribe it for other indications as well, which provides a pathway for prescribing PROBACTRIX® to the large numbers of sufferers of various other GI illnesses, including IBS.”

CEOCFOinterviews: How do you decide what order to go after the various conditions you can address?
Mr. O’Donnell: “We have an outstanding team of senior medical and regulatory advisors on whom we rely for advice in this area. We felt that pouchitis was the most efficient and cost-effective path to market. Simultaneously, we are doing an additional study as a medical food for treatment of Irritable Bowel Syndrome. This is taking place here in New York at Cornell Medical Center, as I discussed earlier.”

CEOCFOinterviews: You have a lot of market potential in many areas of gastrointestinal disorders!
Mr. O’Donnell: “Yes, and there are a number of additional indications that we will be considering down the road. Obviously, given limited funding, we are not going to go after all of them at once, but we will be looking at doing some pilot studies and ultimately filing INDs for each additional indication to broaden the product’s market potential.”

CEOCFOinterviews: What sets BioBalance apart?
Mr. O’Donnell: “While there are a number of probiotic products on the market, they are sold as dietary supplements with very little oversight by FDA and with little or no proof of effectiveness. We will be the first to pursue prescription drug development of a natural biotherapeutic agent for GI disorders. Our product is proprietary, and we hold patents in a number of areas for stability and taste as well as the delivery system itself. The product is well protected by 32 patents in the United States and abroad.”

CEOCFOinterviews: Is there much research in the gastrointestinal area and why is your product going to be the winner?
Mr. O’Donnell: “There is a lot of emerging science about GI disorders. One breakthrough study was independently conducted in California about two years ago that linked the symptoms of IBS to the overgrowth of pathogenic bacteria in the GI track. The study was done by Dr. Mark Pimentel from Cedars-Sinai Medical Center in California. While we didn’t sponsor that study, it does support the science behind PROBACTRIX®. It clinically proved that if you can kill off the overgrowth of pathogenic bacteria and prevent re-colonization, you can restore the microbial balance in the GI tract and relieve the symptoms of IBS. Antibiotics were found to kill off both pathogenic and healthy bacteria, and that’s why their effect is so limited. This new knowledge about restoring microbial balance points to a new paradigm in GI therapy, and PROBACTRIX is clearly a first mover in this market. Moreover, no harmful side effects have ever been detected in any of the studies on PROBACTIX.”

CEOCFOinterviews: After testing, when might the first product be available?
Mr. O’Donnell: “We are looking to file our Biological Licensing Application (BLA), which is similar to a New Drug Application (NDA), sometime around late 2008 or early 2009, assuming that testing continues to go well.”

CEOCFOinterviews: Why is this the right time for investors to consider BioBalance?
Mr. O’Donnell: “I think that if you look at what is going on in the entire pharmaceutical industry right now, you’ll see that most of the big pharma companies are having serious problems with their pipelines going dry. Most of the innovation is coming from smaller biotech companies. As I mentioned before, there are only two prescription products for IBS, which is a huge market. Both these products – Zelnorm and Lotronex – have made money but both carry major safety risks of harmful side effects.  BioBalance will play an important role in supplementing the pipelines of large pharmaceutical companies with prescription products bearing no known side effects and addressing large markets. Right now it costs a little over $800 million dollars to get a drug approved and onto the marketplace. That gives you an idea of how much a pharmaceutical company would value a prescription product going into late-stage development.”

CEOCFOinterviews: In closing, what should investors know about BioBalance that may not be readily apparent?
Mr. O’Donnell: “I think it’s important to understand that the company is completing a transition to a pure pharmaceutical play with a breakthrough product entering Phase II development. We are moving forward to obtain listing on a broader national exchange. We are S&P qualified, so we are “blue-skied” for secondary trading in more than 37 states. We are in the process of hiring a very knowledgeable CFO who will assist me in continuing the restructuring of the Company to maximize shareholder value and help assure we remain in full compliance with the Sarbanes-Oxley requirements. In closing, I would say that BioBalance is a company on the move with tremendous upside potential.”


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“This new knowledge about restoring microbial balance points to a new paradigm in GI therapy, and PROBACTRIX is clearly a first mover in this market. Moreover, no harmful side effects have ever been detected in any of the studies on PROBACTIX.” - Dennis O’Donnell


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