Targent: New Specialty Pharma

Carta Proteomics Toolkit for Discovery

Vela: Triage for Depression Pills

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

rights reserved.

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

Pharmaceuticals

— 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

old-fashioned

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

here.

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,

including

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

pharmaceutical

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

Valley

Road.

For Carta Proteomics, the CEO has not yet been found. But meanwhile

David Houck, the chief operations officer, is hiring staff in

laboratory

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

depression,

eating disorders, sleep disorders, and anxiety, it will take a second

look at drugs that did not do well in clinical trials. Using an

experienced

compliance team, Vela hopes it can groom some of these drugs for

success.

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

business.

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

reputation

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

technology

intensive industries.

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

efficient

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

bioengineering

at the University of Pennsylvania, and worked at SEQ. Then he enlisted

in the U.S. Army, took Ranger training, and returned safely from

serving

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

with an

exchange program.

Johnston ascribes his investing success to his consistent involvement

with companies that were at the forefront of their technologies:

"In

the land of the blind, the one-eyed man is king," he says.

"When

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:

Cytogen Corporation, founded in 1981, has had its

struggles

but is still working with 45 people on College Road East to develop

monoclonal antibody products for targeted delivery of diagnostic and

therapeutic substances.

Ecogen Inc. of Langhorne, was founded in 1983 to use

microbial

genetics and genetic engineering for biological pesticides.

i-STAT Corporation, now with 150 people at Windsor Center

Drive, was founded in 1983 to make biosensor devices for real time

blood analysis.

Envirogen Inc., founded in 1988 to use genetically

engineered

microbes to degrade toxic and hazardous waste.

Johnston also contributed to such out-of-town companies as

Sepracor

Inc. in Massachusetts, Sonomed Inc. of Lake Success, New

York, both founded in 1984. Also Biocyte Corporation,

of Stamford, Connecticut, founded in 1987 with Dr. Lewis Thomas and

Rodman Rockefeller and now called Pharmastem; Spex Group (an

instrument company), Immunicon Corporation, of Huntington

Valley, Pennsylvania; and

A-Company Orthodontics in San Diego.

Johnston experienced some of the "arrow in the back"

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

interview,

"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

3, 1994).

Top Of Page
Targent: New Specialty Pharma

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

certainly

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

product

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

like Targent.

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

bankruptcy,

and it has never been marketed," says Johnston. "Another was

dropped by a big pharma as being too small, and a third had been

approved

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

of Targent.

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

Pennsylvania),

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

father

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,

explaining

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

community."

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

machines

to help the liver regenerate and recover. It buys time for those

awaiting

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

statistically

significant Phase 1 trial, had enlisted 12 of the major liver

treatment

centers at universities, and, when I left, were well on the way to

completing our phase 2 trial." If the trials continue to be

successful,

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

family,

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

surgery

no longer provides, and his favorite dish (because he gets to

demonstrate

his dissection skills) is boneless Cornish game hens with mushroom

dressing.

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

looking

forward to building an A-1 team.

Targent, 181 Cherry Valley Road, Princeton 08540.

Patrick Maguire, CEO. 609-683-9322; fax, 609-683-7524.

Www.targent.com

Top Of Page
Carta Proteomics Toolkit for Discovery

Carta Proteomics will take proteins that have been

identified

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

operations officer.

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

Massachusetts-based

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

scientific

officer.

Patents have been filed by Virgil Woods at the University of

California

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

front,"

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,

synthetic

chemistry (design and construction of small molecules), and lead

optimization

(finding a better version of an initial compound). "Pharmaceutical

partners will hand us proteins and ask us to answer questions

concerning

protein structure and how that structure is changed when small

molecules

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

Brunswick.

Anxious to stake out a different space, Houck explains that Carta

Proteomics is a protein structure company, not a protein

identification

company. "They are target discovery, we are target

characterization.

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

function,

Houck says, but by and large they are using NMR and X-ray

crystallography.

In contrast, Carta can analyze the structure of proteins that do not

crystallize.

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.

Bristol-Myers

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

competitor

to Carta, OSI Pharmaceuticals on Long Island.

In his most recent job as senior director of molecular profiling

proteomics

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

Technology.

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.

Carta, 11 Deer Park Drive, Suite 103, Monmouth

Junction 08852. David Houck, COO. 732-438-6500; fax, 732-438-1919.

Home page: www.cartaproteomics.com

Top Of Page
Vela: Triage for Depression Pills

Of Bob Johnston’s three latest companies, Vela

Pharmaceuticals

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

Pharmaceuticals

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

dropped

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

niche."

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

Quintiles

CNS Therapeutics he expanded sales from $5 million to $75 million

in nine years.

After its drugs are approved, Vela will probably sidestep the

marketing

process and, instead, seek to license them to pharmaceutical

companies.

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,

managing

general partner of Venrock Associates; Charles Newhall of New

Enterprise

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

chemotherapy.

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

Mario.

"In fact, his stick-to-it-iveness often cost him money."

Cytogen,

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

thought

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

Vela Pharmaceuticals Inc., 3131 Princeton Pike,

Building 4, Suite 216, Lawrenceville 08648. Kevin L. Keim, president

and CEO. 609-895-8352; fax, 609-895-8353. Home page:

www.velapharm.com


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