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SemBioSys’ technology platform allows them to produce
proteins in plants and to extract and purify those proteins inexpensively for use in
treating cardiovascular and metabolic diseases, such as atherosclerosis and diabetes
Healthcare
Biotechnology
(SBS-TSX)
SemBioSys Genetics Inc.
Suite 110, 2985-23rd Avenue N.E.
Calgary AB Canada T1Y 7L3
Phone: 403-250-5424
Andrew Baum
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
September 14, 2006
BIO:
Andrew Baum, Director, President & Chief Executive Officer
Andrew Baum has been the President and Chief Executive Officer of SemBioSys Genetics
Inc. since August 1998. Prior to joining SemBioSys, Baum spent 16 years at Calgene,
Inc., an agricultural biotechnology firm where he started as Calgene’s first employee
and rose to the position of President of Calgene’s Oils Division. Baum developed and
implemented all aspects of Calgene’s genetically engineered oils business, one of the
first to focus on using genetic engineering to develop output traits. In 1997, Calgene was
acquired for US$240 million by Monsanto Company, a world leader in agricultural
biotechnology, food ingredients and pharmaceuticals. Baum thereafter served as the
Director of Business Development for the Sustainable Development Sector of Monsanto. In
this capacity, Baum was responsible for identifying and addressing new business
opportunities as well as ensuring a smooth transition of Calgene’s plant oils
business into Monsanto. Baum received his B.Sc. in Industrial Engineering and Operations
Research from the University of California at Berkeley.
Baum serves on the Executive
Committee of the Board of Washington-based Biotechnology Industry Organization (BIO) which
is the trade organization representing the U.S. biotechnology industry. In addition, Baum
is Vice Chairman of BIO’s Food and Agriculture Governing Body, chairs the working
group of BIO on plant-made pharmaceuticals and is a member of the Council for
Biotechnology Information. Baum is also the Chairman Emeritus of BioAlberta and a member
of the Board of BIOTECanada.
Company Profile:
SemBioSys Genetics Inc. is a biotechnology company (TSX:SBS) focused on the development,
commercialization and production of biopharmaceuticals and non-pharmaceutical products
based on its plant genetic engineering skills and proprietary oilbody-oleosin technology
platform - the Stratosome™ Biologics System. Its two lead pharmaceutical product
candidates are insulin and a developmental cardiovascular drug called Apo AI. It also has
a series of non-pharmaceutical products addressing animal and aquaculture health,
nutritional oils and human topical markets. SemBioSys currently has funded partnership
agreements with Martek Biosciences Corporation, Lonza Inc. and Arcadia Biosciences, Inc.
CEOCFO: Mr. Baum, what was your vision when you joined the
company, and how has that transpired?
Mr. Baum: “Our vision when I came to the company in 1998
was somewhat vague in that we didn’t really understand what our technology platform
would allow us to do, but it was basically saying that we had the ability to transform the
way the pharmaceutical proteins and other proteins were being produced. We have evolved
into a strategy where we actually have a bi-partide strategy, focused on the
commercialization of non-pharmaceutical products that provide income in the immediate
term, complimented by a portfolio of pharmaceutical products where our manufacturing
technology really does transform the economics and therefore the availability and
opportunities of certain types of drugs. We think that these two elements will allow us to
develop a portfolio of products that generate income in the short, intermediate and
long-term.”
CEOCFO: Will you tell us
a bit about each side of the company?
Mr. Baum: “The non-pharmaceutical portion of the
business consists of three elements; one is our topical ingredients. Our first product is
the DermaSphereŽ Ingredient System, which is a multi-functional ingredient carrier and
delivery system all in one. It was actually commercialized by Lonza Inc., in 2004; which
was unique in that our core platform was already generating products that would generate
revenue in the short term. The second element is our animal health products; our lead
product there is ImmunoSphere™ Feed Additive, which has the ability to transform the
$7.5 billion shrimp industry. The final element is the nutritional oils; we have
agreements with Arcadia Biosciences, Inc. and Martek Biosciences Corporation, to develop
oils with enhanced chemical compensations, which will improve their utility as
nutraceuticals.
The pharmaceutical portion of the business is focused
on those proteins where we believe manufacturing is a major issue. In that context,
insulin, which is facing short-term and long-term supply issues and the protein called Apo
AI, which has the potential to offer a new way of treating atherolosclerosis are our lead
products.”
CEOCFO: You recently had a major milestone, will you tell us
about that?
Mr. Baum: “We were happy to announce recently, that we
have achieved commercial levels of insulin expression in safflower. What that means is
that we now have safflower plants, which we use to produce our proteins, that are
producing enough insulin to make our process extremely cost-effective, the ability to
reduce cost of goods about 40% or more, capital costs about 70% or more and offering an
unparallel degree of flexibility. It is important to note that this was a major de-risking
element for the insulin program in that the biggest concern that we had was biological;
could the plants accumulate enough insulin to make our process economical. Other people
have tried and failed, we succeeded. The balance of our development process is mainly
execution, it is within our control, and we are very good at execution in this company.
Our next milestone is getting insulin into the clinic in 2007; we believe that using an
abbreviated 505 (b) (2) clinical trial, we could be in the market as early as late 2009 or
2010.”
CEOCFO: Will you address
the market for insulin?
Mr. Baum: “The thing about insulin is that the product,
transgenic insulin has been on the market for over 20 years. We expect the demand to go up
dramatically from 5,000 kilos per year to maybe 16,000 kilos per year in the next few
years, driven by two factors. First, alternate delivery that is exemplified by Exubera
which is Pfizer’s (Pfizer Inc. – NYSE: PFE) product has the potential to
transform the way insulin is delivered because it is inhaled rather than injected.
Therefore, it has the ability to improve patient compliance and it is great for patients
because it provides an alternative to injection. The challenge is that you need ten times
more material in order to get the same effect. In addition, diabetes is exploding into the
developing world as a result of increased wealth and “better diets”. If you put
those two factors together and you have a major increase and demand for the material, then
we believe we are uniquely positioned to fill part of that gap.”
CEOCFO: What knowledge
do you have that allows you to extract this from the plants?
Mr. Baum: “We are able to do two things. First, we are
able to produce proteins in plants, particularly in seeds, at very high levels; transgenic
proteins like insulin. In addition, we are able to extract and purify those proteins using
our technology process, and we are able to do that very inexpensively. One of the
challenges people using plants have is that although they can make proteins, they cannot
extract and purify them. We can do that. The ability to extract and purify is important,
because it represents as much as 70% of the cost of extraction or purification.”
CEOCFO: What is your
competition like, and how do you benefit most from this?
Mr. Baum: “We have a tremendous degree of intellectual
property protection around this technology platform. If you look at the patents, it will
be clear how strong that protection is. If you look at some of the people we have
partnered with, such as Arcadia Biosciences, these are companies that would have the
ability from a technical prospective to deploy this technology if they thought they could.
However, they have chosen to work with us instead of doing that because they realize our
patents are so strong.”
CEOCFO: Will you tell us
about some of the other applications?
Mr. Baum: “Beyond insulin, atherosclerosis is a
hardening of the arteries and one of the leading causes of death in the US and around the
world. Up to this point, people have focused on treating that disease by preventing a
deposition of plaque in the arteries by using products like statins, which are a $20
billion dollar product category. There are a new set of products, which focus on reversing
plaque deposition; these products are the Rotor Rooters of the cardio vascular system. We
are working on a project called Apo AI, which in limited clinical studies has actually
shown the ability to reverse plaque deposition in arteries. It cleans out the arteries and
reduces the possibilities of heart attack or stroke. That is a protein that is difficult
to make using traditional systems, because it is required in very large volumes and as a
result, we are looking for our technology to enable the commercialization of this protein
moving forward.”
CEOCFO: Will you tell us
about the financial picture of the company?
Mr. Baum: “We are a publicly traded company on the
Toronto Stock Exchange (TSX: SBS). We went public in December of 2004, selling 4 million
units at $5.00 a unit. The units were a share and a half warrant. We did a private
placement in December of last year and as a result, we are reasonably well funded. We have
roughly two years worth of cash and are in a position to raise money when we want to raise
money and not when we have to.”
CEOCFO: Is the
investment community aware of SemBioSys?
Mr. Baum: “I think they are becoming aware, and I think
the insulin announcement made us very visible certainly in Canada and hopefully in the US.
I am an American originally, so I spend a lot of time in the United States, speaking to U.S.
investors as well as the obvious emphasis on the Canadian investors. I think we are
becoming more visible and hopefully, we will become increasingly visible as we continue to
execute against the milestones.”
CEOCFO: What are the
challenges going forward other than just the time to do all the procedures?
Mr. Baum: “Obviously, in a business like ours it is all
about execution. What we say at SemBioSys is that bad execution beats good science every
time. You have to deliver on the promise, not make the promise to create value. So, there
are execution challenges. The other issue that SemBioSys and every other company has to
face, especially in Canada, is that the biotech markets are not as strong as we would
like. Fund-raising is always a challenge for biotech companies until they get to
profitability. I think in the current environment, it is a bit more problematic than it
has been in other times in the history of the industry. However, our belief is that if you
create value, valuation will follow and valuation will be recognized.”
CEOCFO: Why should
potential investors be interested, and is there anything that does not jump off the page
of which people should be aware?
Mr. Baum: “The reason people should invest with us is
that we are a company that has the ability to transform a portion of a $50 billion dollar
industry to proprietary technology that is proven. In addition, we have a series of short
to intermediate term products that uniquely create the opportunity to realize value in the
short and intermediate term. You don’t have to wait for five to seven years for
pharmaceutical product to be approved, we are able to demonstrate increasing value through
our non-pharmaceutical products, as our pharmaceutical products move into the clinical
trial process. It is a unique value proposition that has been implemented by a management
team that is delivering what it said it would do, both before and after it went public.”
CEOCFO: Any final
thoughts?
Mr. Baum: “If you are looking for companies that have
the potential to represent the next wave of biotechnology in the nation, we are a great
place to invest.”
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