Corrections or additions?
This article "The Energizer VC" by Barbara Figge Fox was prepared
for the July 17, 2002
edition of U.S. 1 Newspaper and corrections were made on July 22. All
Bob Johnston: Long-Haul Venture Capitalist
Bob Johnston is the perfect example of a man who is
not ready to retire. At 65 this venture capitalist is engrossed in
three new companies — Targent, Carta Proteomics, and Vela
— and shows no signs of slowing down.
From his office on Cherry Valley Road he has started more than a dozen
companies in 34 years. While some of today’s most successful biotech
venture capitalists were medical professionals who made their first
million as pharmaceutical executives, Johnston did it the
way, by finding and nurturing one good idea and plowing the earnings
into another good idea.
"Bob is incredibly enthusiastic and motivated," says Patrick
("Pat") Maguire, CEO of Targent and Johnston’s latest hire.
"Bob is very good at taking a novel concept, sorting out how much
traction the idea has, then incubating and moving it forward. He seems
to have a good recipe for that."
That Johnston’s companies operate close to home is no accident. He
incubates them in his office on Cherry Valley Road, then sets them
up in Princeton, which is near many of their potential pharmaceutical
partners. "I am very provincial," says Johnston. "And
I say, if I am putting up my money the company is going to be
The state of New Jersey should be glad about my provinciality."
Johnston Associates Inc. (JAI) operates with just a two-person staff,
and most of the time Johnston himself is doing double duty. "For
any of these companies, I am the president and CEO until we find Mr.
Wonderful," he says. "The key to success is finding the right
CEO in the first place. He should know the science, know finance,
know how to raise money, and keep all the constituencies happy,
the board of directors and the investors."
"If you are an investor, you want someone who is driven, someone
for whom it is not just a job, it is a mission. If I were extremely
successful at finding the right CEOs all the time, life would be a
lot easier," says Johnston.
Mr. Wonderful, for Targent, is Maguire, an MD and veteran
executive who has just arrived from La Jolla, California. The company
will buy partly developed cancer therapies and bring them to market,
and it is operating from Johnston’s de facto incubator on Cherry
For Carta Proteomics, the CEO has not yet been found. But meanwhile
David Houck, the chief operations officer, is hiring staff in
space at Princeton Corporate Plaza on Deer Park Drive. Carta will
be a toolkit and drug discovery company. By using mass spectrometry
to analyze protein-protein and protein-small molecule interactions
it will help to discover new drugs for many different diseases.
Kevin Keim is the CEO of Vela Pharmaceuticals, which was founded in
1998 and opened its office on Princeton Pike last year. Focusing on
therapeutic compounds for psychopharmacological use, such as
eating disorders, sleep disorders, and anxiety, it will take a second
look at drugs that did not do well in clinical trials. Using an
compliance team, Vela hopes it can groom some of these drugs for
Johnston looks for signs of entrepreneurship in the CEOs he hires,
and he likes it when a candidate’s parent has had his or her own
Johnston’s own father had owned the Cadillac dealership in Trenton,
and he had worked there during vacations from Lawrenceville School.
The close-up view of the car sales business helped him learn how to
weather all kinds of crises. "I learned by osmosis to have less
worry or concern about risk," he says. "Most people who go
into business for themselves aren’t worried about failure. They have
seen an enterprise survive."
Johnston also learned about the value of a good
from his father, who did not succumb to the postwar temptation of
accepting bribes for early auto delivery. He is careful to hire only
those whom he believes will make impeccably ethical decisions. "In
the scientific community, there is a lot of pressure from corporate
partners to get results, but if you are not representing your results
correctly, it will come back to haunt you," says Johnston. "It
is a little like getting married. Who wants to be in bed with someone
who is not being honest with you?"
Though he enrolled as an engineering major at Princeton University,
Class of 1958, he switched his major to economics, managing to take
a good number of liberal arts courses and lay the groundwork for a
lifelong appreciation of contemporary art. After a stint in the Air
Force National Guard, he earned his MBA from New York University, then
worked in Manhattan for investment banking firms. When he was
just 30 he opened his own firm, JAI, to do investment banking in
Six years later he married Lynn Dixon, a Wellesley graduate who was
an investment banking analyst with Donaldson, Lufkin & Jenrette. She
had also worked on Capitol Hill during the Kennedy administration.
It was the first marriage for both, and 30 years and three children
later, he still refers to her as "my bride." She is an
fundraiser and is currently on the boards of New Jersey Network and
Lawrenceville School and an emeritus board member of the Art Museum
of Princeton University and McCarter Theater. Her husband fondly notes
that they have a good division of responsibility. "I am supposed
to make the money and she is supposed to give it away."
Johnston used to say he lost sleep "only when we need more money
and am not sure if I can get it," but now he is more likely to
toss and turn about the safety of his adventurous children.
Their eldest son majored in microbiology at Princeton, studied
at the University of Pennsylvania, and worked at SEQ. Then he enlisted
in the U.S. Army, took Ranger training, and returned safely from
in Kosovo with the 82nd Airborne.
The second son, is in medical school at the University of Pittsburgh,
but his most recent outdoor adventure was climbing Mt. Rainier during
a snow storm.
His third child and only daughter went to Smith and spent some time
in New Zealand and Australia. After a summer stint teaching at
Princeton Day School she will leave for India to be an administrator
Johnston ascribes his investing success to his consistent involvement
with companies that were at the forefront of their technologies:
the land of the blind, the one-eyed man is king," he says.
you get in early, it’s easy to be smarter. We were in the computer
industry in the 1960s, and in one of the first three biotech companies
in 1977." (Genex Corporation, founded that year, successfully
merged with Enzon four years later). "Then again, they say that
the pioneer is the guy with the arrows in his back. If you’re too
early, you might not make it."
Among his wins:
but is still working with 45 people on College Road East to develop
monoclonal antibody products for targeted delivery of diagnostic and
genetics and genetic engineering for biological pesticides.
Drive, was founded in 1983 to make biosensor devices for real time
microbes to degrade toxic and hazardous waste.
Inc. in Massachusetts,
York, both founded in 1984. Also
of Stamford, Connecticut, founded in 1987 with Dr. Lewis Thomas and
Rodman Rockefeller and now called Pharmastem;
Valley, Pennsylvania; and
experiences with SEQ Ltd., which was a pioneer in sequencing genes.
Founded in 1992, it incubated on Cherry Valley Road and then in rented
space at Sarnoff. When it encountered technology and market problems,
Johnston repositioned the firm as Praelux and sold it to Amersham
Pharmacia as a high throughput service company.
That’s when Johnston started over with what could be considered his
"second dozen" companies — Vela, Carta, and now Targent.
"If your skill is starting companies," he said in a 1994
"why not go back and do what you do best? You may get a better
rate of return, and fewer people are putting companies together and
getting them launched. Whereas later on, a lot of people are willing
to spend time with a self-sufficient company" (U.S. 1, August
Targent hopes to rescue old cancer compounds," says Johnston. It
will be a specialty pharmaceutical
company, not a large drug company, and it will focus on oral compounds
for the cancer market. If oral compounds are as potent as intravenous
therapy, which must be administered in the hospital, they will
be more convenient for the patient and less expensive.
The track record of some similar specialty medical companies has been
excellent. Alza Pharmaceuticals, for instance, sold quite profitably
to Johnson & Johnson. Others are Dura Pharmaceuticals (sold to Elan),
First Horizon, Pharmion, King Pharmaceuticals, and Shire. "They
are much older companies. but they all started out with the specialty
pharma moniker and business model," says Pat Maguire, CEO.
Though the company operated virtually at first, Maguire hopes to reach
a critical mass of a dozen people within 18 months.
Specialty pharmas don’t generally start from scratch. "We are
not doing breakthrough fundamental research, but in this financial
climate, it is difficult to get funds for that," says Johnston.
To in-license and develop a product is one likely strategy. Another
is for Targent to buy late stage compounds at the right price and
spend money on clinical trials to prove their worth. Unless the
has the potential to generate almost $500 million, it would not appeal
to a big pharma but would be profitable for a smaller, leaner company
Another potential business model is to buy compounds already on the
market and promote them with a focused sales and marketing effort.
"One of the compounds we are buying came from a company in
and it has never been marketed," says Johnston. "Another was
dropped by a big pharma as being too small, and a third had been
in Europe but not here."
Maguire had worked under Philip Schein MD at Georgetown, who is now
a member of Targent’s board. It was Schein (who went on to be CEO
of US Bioscience) who suggested that his former student be named CEO
Also on the board is Seth Lederman MD, founder of Vela Pharmaceutical
and a teacher at Columbia. The scientific advisory board has Stephen
Carter MD (former senior vice president at Bristol-Myers Squibb),
Daniel Haller MD (chief of oncology at the University of
and Jerome Birnbaum MD, former executive vice president of research
at Bristol-Myers Squibb, now senior vice president of research of
Achillion Pharmaceutical in New Haven, Connecticut.
When Johnston interviewed Maguire for the job, he asked, "When
you look at yourself, what is it about you that adds value
to this business equation."
Maguire’s answer: "If you are an MD with a business focus, and
can clearly articulate a message, and have respect in the medical
and business communities, you have a leg up on the world. Also, I
have had a fair amount of exposure in the private equity world. I
participated in all the road shows with the CEO of VitaGen and we
raised $15 million in a private placement series round."
A Connecticut native, Maguire’s parents worked in Manhattan, his
in sales and his mother as director of accounting in a publishing
house. Maguire is a good talker and an only child. He remember his
mother, who had an unusually important job for a woman of that time,
urging her son to work hard. As he says, "every Irishman can spin
tales, and I am Irish on both sides. But she made sure that I walked
the talk. Her axiom was, `They will know you by your deeds.’"
After prep school at St. Bernard’s he majored in biology at Wesleyan
University (Class of 1965). Like Johnston, he took advantage of the
opportunities at a liberal arts college and developed an appreciation
for French literature. He earned an MD and PhD from Georgetown, doing
his internship at Brigham & Women’s at Harvard and his residency at
Stanford under Norman Shumway, known as a heart transplant pioneer.
Breast and colon cancer had cropped up in Maguire’s family, and this
affected his choice of research. He did his PhD thesis with Schein
on new ways to diagnosis breast cancer, looking at how scar tissue
forms. Then he trained to be a general and thoracic surgeon who would
treat many thoracic malignancies.
Maguire practiced surgery for nearly 10 years, and even when his work
merely served to buy time for a patient, he says he did not consider
it a burden to work with terminal cases. "I chose to look at it
as a privilege. You are with someone at their most difficult and their
most intimate times. Not many people get to experience that. While
it is tough, you are exposed to great joys. I tried to look at it
as a slice a life that not many people have a chance to observe."
"But I got fascinated by the business side," he says,
why he went for his MBA at Pepperdine, and did a thesis on contract
manufacturing as a competitive financial strategy for biotechnology
firms. "I enjoy interacting with the medical entrepreneurial
In La Jolla Maguire joined a pre IPO, pre-market company, VitaGen,
which has a human cell-based bio-artificial liver system, called ELADr
(Extracorporeal Liver Assist Device), that works with dialysis
to help the liver regenerate and recover. It buys time for those
a transplant and is in Phase 2 clinical trials. "We had a very
special niche, the first real attempt at cellular therapies. We were
among the pioneers in this area," he says. "Clearly it was
new ground for the regulatory agencies."
He cites the successes. "In May, 1999, there were no clinical
trials and no patients, and 2 1/2 years later we had finished a
significant Phase 1 trial, had enlisted 12 of the major liver
centers at universities, and, when I left, were well on the way to
completing our phase 2 trial." If the trials continue to be
VitaGen will be in a good position to attract financing and expand.
A bachelor, Maguire is glad to be back east to be closer to his
and he had been fending off at least one headhunter a week at his
previous job. He chose Target, he says, because it represented "an
opportunity to get right on the ground floor in a start-up
pharmaceutical. And I was very impressed with Bob Johnston, and the
board and scientific advisory board, all of whom brought critical
mass to the venture."
Cooking classes now mitigate his need for manual challenges that
no longer provides, and his favorite dish (because he gets to
his dissection skills) is boneless Cornish game hens with mushroom
It’s a big move from vice president to CEO. "But," he says,
"I still get up and brush my teeth in the morning, and I am
forward to building an A-1 team.
Patrick Maguire, CEO. 609-683-9322; fax, 609-683-7524.
Carta Proteomics will take proteins that have been
as potentially important, classify their structure, and determine
how they interact with proteins, DNA, and small molecules — all
to search for potential drugs. "We can help tell the researchers
how the drug molecule is binding to the protein target, how it is
influencing the protein in a structural way, and how they can make
the next generation of drug," says David Houck, Carta’s chief
Until the last four or five months Carta was a virtual company, but
when Johnston contributed $2 million of the $3.5 million that Carta
has to work with, he moved it to Princeton. Houck came from
Phytera. "I was recruited to make it real, to get the lab up and
running and get the technology implemented," says Houck. "It’s
a blast." Patrick R. Griffin has just been hired as chief
Patents have been filed by Virgil Woods at the University of
at San Diego and Vernon Anderson at Case Western Reserve, and three
have been issued. Carta’s current platform uses mass spectrometry
to delineate the protein structures. "What puts us out in
says Houck, "is that we able to look at protein structure and
interaction in high throughput mode — to assist in discovery of
better pharmaceutical agents in a shorter period of time."
"Drug discovery is an iterative process. You start with a small
molecule, essentially an idea, and ask `Will it influence my target?’
But there are many other aspects of the molecule that you can improve.
We will help chemists get from the first concept of a drug to a real
drug, faster," says Houck.
In addition to the mass spectrometry, Houck plans to add other drug
discovery capabilities, such as molecular and in vitro biology,
chemistry (design and construction of small molecules), and lead
(finding a better version of an initial compound). "Pharmaceutical
partners will hand us proteins and ask us to answer questions
protein structure and how that structure is changed when small
bind to it. This information will help them design better binders
and then better drugs."
"Eventually we plan to evolve to a fully integrated drug discovery
company," says Houck. "Our ultimate goal is to push compounds
through Phase I clinical trials. At that point they will have a huge
value for pharmaceutical partners."
Carta’s mass spectrometry is different from the mass spectroscopy
used by GeneProt, the Swiss-based firm that recently postponed its
plans to expand at the Technology Center of New Jersey in North
Anxious to stake out a different space, Houck explains that Carta
Proteomics is a protein structure company, not a protein
company. "They are target discovery, we are target
If you were flying a plane over a neighborhood, GeneProt would be
interested in what types of houses it saw (colonial or ranch style)
and what is inside them. We are interested in the actual structure
of the house."
Six very active companies are working on protein structure and
Houck says, but by and large they are using NMR and X-ray
In contrast, Carta can analyze the structure of proteins that do not
Any big pharma is also a competitor, because protein structure is
a hot topic right now. "As we try to footprint the structure of
a protein we are integrating many proprietary techniques.
Squibb and Merck may have in-house capabilities, but they are not
doing it the way we are," says Houck.
A native of Michigan, where his father was an engineer, Houck went
to Alma College in Michigan, Class of 1978, then earned his PhD from
Ohio State. The first startup that he worked in was North Carolina’s
Paradigm Genetics, where he was the 20th employee, and it went up
to 200 in a year and half. He has also worked at a potential
to Carta, OSI Pharmaceuticals on Long Island.
In his most recent job as senior director of molecular profiling
and basic chemistry analytical support at Merck, Griffin directed
40 scientists involved in mass spectrometry technology. He graduated
from Syracuse University in 1984, has a PhD from the University of
Virginia, and did postdoctoral research at California Institute of
As president and CEO of Carta, Johnston spends 60 percent of his time
on Carta business, but headhunter Steve Israel at Korn Ferry is hard
at work to find a replacement — Carta’s Mr. Wonderful.
Junction 08852. David Houck, COO. 732-438-6500; fax, 732-438-1919.
Home page: www.cartaproteomics.com
Of Bob Johnston’s three latest companies, Vela
is the oldest. Johnston began it shortly after he sold Praelux to
Novartis. Pretty soon a dozen people were working in the seven-room
farmhouse that serves as his office, and one of them actually had
to put his desk in the fireplace by the front door.
Focusing on diseases of the central nervous system, Vela
looks for compounds that, for one reason or another — maybe the
market was not big enough or the findings not exciting enough —
had been sidetracked.
With $45 million from such prestigious investors as JP Morgan Partners
and Venrock, Vela has bought a compound for depression and is working
on therapies for fibromyalgia. "Vela’s strategy is to look at
compounds dropped in clinical trials, and in its area, a lot get
in Phase 3," says Johnston. Many patients with depression get
better even when they are taking the placebo, not the real drug. Or
they just quit taking the drug. Obviously, this nullifies the results.
"Patient selection is very critical," says Johnston. "The
team has a great deal of experience in running those trials, where
compliance is one of the biggest problems. Vela has a unique
The president and CEO, Kevin L. Keim, went to Delaware Valley College
of Science, Class of 1968, and has a master’s degree from Fairleigh
Dickinson and a PhD in neurophysiology from New York University. After
17 years at Hoffman-LaRoche he moved to the Princeton area to join
the Ayerst Group, soon to be Wyeth-Ayerst. Then as president of
CNS Therapeutics he expanded sales from $5 million to $75 million
in nine years.
After its drugs are approved, Vela will probably sidestep the
process and, instead, seek to license them to pharmaceutical
Exceptions could be niche drugs — those that help a relatively
small universe of patients.
In addition to Johnston, other founders are Mark Fisher, president
of MBF Capital Corporation; Seth Lederman, director of the laboratory
of molecular immunology of the department of medicine of Columbia
University; Donald W. Landry, chief of the division of experimental
therapeutics of the department of medicine of Columbia University;
and S. Leslie Misrock, senior partner, Pennie & Edmonds, the law firm
that helped find the technology. On the board are Anthony Evnin,
general partner of Venrock Associates; Charles Newhall of New
Associates; Philip M. Satow, past president of Forest Pharmaceuticals;
and Ernest Mario.
Formerly with Bristol-Myers Squibb, Mario is the veteran CEO who grew
and sold Alza Pharmaceuticals to Johnson & Johnson and then used some
of those profits to endow Rutgers’ pharmacy school with $5 million.
His latest company, California-based Intrabiotics, has just finished
Phase III trials for a treatment for mouth sores resulting from
Mario has known Johnston since the 1970s and says that he is like
most successful venture capitalists who start small companies in that
he is very perceptive, not just from a technology standpoint but from
a personnel standpoint. "Generally the successful ones have the
ability to find the real winners, who can take not just the technology
forward, but can also build businesses."
But Johnston is different from most in one way, because he spurns
the quick hit. "He is somebody who sticks with it," says
"In fact, his stick-to-it-iveness often cost him money."
for instance, had some very rough times that forced a radical change
in its business plan. "When Cytogen was rocking along, Bob could
have taken money off the table and reduced his exposure, but he
that would be perceived as lack of confidence. And he does this time
and time again," says Mario. "He is a loyal-to-the concept
guy, and that is what makes people want to work with him — they
know they will not get thrown off the raft."
— Barbara Figge Fox
Building 4, Suite 216, Lawrenceville 08648. Kevin L. Keim, president
and CEO. 609-895-8352; fax, 609-895-8353. Home page:
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