Biopharmaceutical executives, especially those who have founded their own companies, never cease to amaze me. Why? Well for starters, the process of starting with nothing but an idea and then pulling together all the necessary resources to build a company capable of developing and delivering a product to patients is an amazing logistical challenge. It requires someone capable of big-picture thinking. Someone confident in being able to recruit top talent to join them on their journey. Getting investors requires a delicate balance. For example, founders need to be able to communicate the idea with sufficient enthusiasm and share complex scientific principles in a way that those lacking a scientific background can not only understand but get behind.
Over the years, I’ve had numerous opportunities to speak with founders of successful biopharmaceutical companies. And while many are scientists, others hail from biopharmaceutical manufacturing, and still others bring a distinct business background, such as Brad Margus, who founded not one, but three biopharmaceutical companies, plus a 501c3 nonprofit to boot. We sat down with Brad Margus, CEO and cofounder of Cerevance, a company working to discover new treatment for brain diseases, to not only gain a better understanding of what makes this serial entrepreneur tick, but to learn what drew him away from the food industry to biopharma.
A Serial Entrepreneur’s Formative Years
Margus began college as a political science major at George Washington University (GW) but later switched his major. “I decided that if I really wanted to ‘change the world,’ I’d be better off doing so through business,” he recalls. In 1984 he enrolled as a full-time student in Harvard’s MBA program, which turned out to be a formative experience that helped prepare him for his serial entrepreneur journey. There, he was surrounded by classmates who wouldn’t let their passion for building businesses be hampered by any traditional constraints. One of his classmates started Starwood Hotels & Resorts by buying up hotel chains around the age of 32. Another started Gilead Sciences right out of business school. “These people were somehow able to see a dream as being achievable by breaking the problem down into small pieces,” Margus says. “And if you didn’t know how to do something, they advocated finding someone who did.”
He also attributes an entrepreneurial finance class taught by Professor William Sahlman as being a foundational experience that would influence his business career for years to come. “It was much more than a traditional finance class. It involved first looking at an opportunity, such as a new invention, and then figuring out how to finance the resulting business. The class taught us to think about what we could do if there were no rules.”
From Student Of Business To Student Of Shrimp
It should be noted that Margus was not devoid of business experience up to this point. After earning his undergraduate degree, he had worked for two years in supply chain sourcing of raw materials at a big Texas conglomerate that owned about 10 companies in the food industry. Through that experience he learned about Kitchens of the Oceans, a shrimp-processing company in Florida.
During his second year at Harvard he worked on a plan to do a startup, which he ultimately transitioned to doing a buyout and takeover of Kitchens of the Ocean. “I learned a lot about leveraged buyouts in the mid-1980s,” he explains. This was all the rage at the time. You don’t have to use your own money, and you can leverage to the point of having a negative tangible net worth, which is where you borrow more money than the company is worth. We paid down debt pretty quickly, made money from day one, had factories overseas in Ecuador and Thailand in order to be closer to raw material sources, and marketed our products to hotel chains, airlines, cruise lines, supermarket chains, and all kinds of different sectors.”
Though not as fulfilling as he’d eventually find the biopharmaceutical industry, Margus says the experience extremely instructive. “When you run a leveraged company that has borrowed a lot of money, you really have to keep track of your pennies and make sure everything’s under control and that you’re operating with a lot of discipline,” he contends.
From Shrimp To Biopharma — Not Your Typical Career Path
Economically, the shrimp business was good, and Margus was soon married and raising a family in Florida. In the mid-1990s, two of his three young sons were diagnosed with a terrible genetic and ultra-rare disease called ataxia telangiectasia (A-T). “Children with A-T run around and look pretty normal when they are two, but part of their brain is dying, so they gradually lose muscle control, and by the age of eight or nine they are usually in wheelchairs,” he informs. Worse, about 40 percent get cancer, and about 80 percent develop immune system problems. The Margus’s decided to start a nonprofit organization called the A-T Children's Project. And while the organization began conducting fundraisers, Margus sought out scientists to tutor him in the science relevant to the disease. The A-T Children’s Project set up cell tissue banks, organized conferences, and even established a clinical center with a multidisciplinary team of physicians at Johns Hopkins to facilitate a greater understanding of the disease.
In the late 1990s, Margus says there was a “genomics bubble,” which resulted from the first draft of the human genome sequence. Apparently, a lot of academics held the opinion that the technologies now existed to take genomic research forward. Further, VCs had money they were ready to invest. However, there seemed to be a shortage of seasoned executives with genetics experience. His background with the A-T Children’s Project not only gave him a deep background on the science, but it had positioned him as a national advocate for people affected by rare genetic diseases, giving him a solid grasp of the inner workings on Capitol Hill. And with that, his biopharma serial entrepreneur journey began.
In the early 2000, Margus experienced an interesting confluence of events. First, a competitor in the food industry reached out seeking to merge their two companies where one CEO could leave. Second, Margus was receiving offers to join genomic startups. “When I was a shrimp guy, yet highly involved with the A-T Children’s Project, here’s how my day might go,” he says. “I might get a call from the president of TGI Friday's about a shrimp item for next year’s menus. The next call might be from someone about to win the Nobel Prize in molecular biology that I’m trying to convince to give me some advice on my kid’s disease. Then the next call might be from a father whose kid had died or recently been diagnosed with A-T.” Of those three phone calls, which do you think Margus had the least passion for anymore? That’s why he went to California to start Perlegen Sciences, seeking help from Stanford professor David Cox, M.D., Ph.D., and Stephen Foder, Ph.D., chairman and CEO of Affymetrix, a nearby microarray company. “Building a company is a lot like building a skyscraper,” he analogizes. “Even if you don’t know anything about architecture or construction, that doesn’t have to stop you from building a building. You just have to find people who know what they are doing.” Margus says he had a bit of a knack for finding such biopharma builders to give him guidance. And if he implemented whatever they had suggested, he found they often were willing to help with the next steps.
When asked if there are any valuable lessons learned from his first biopharma build Margus responds, “There are two parts to the risk of any biotech startup. One is execution risk. Can you get done what you promised investors you'd do? Do you reach milestones? Do you get your whole team rowing in the right direction and achieving each thing you want to achieve? When you hit a technical obstacle, do you find your way to work around it or solve it?” The other risk involves the science, and that’s something you can’t really do anything about, as you have to wait and see what the experiment reveals. “You may have $1 billion to get to a Phase 3 only to find out that what you have doesn’t work in humans, so you have to be comfortable with such uncertainty and risk,” he states.
Perlegen was a spinoff from Affymetrix, which had given the company access to its microarray technology. “We had a very cool approach and were able to publish lots of high-profile papers, but we could never really quite get the value from those findings to sustain a great business.” For example, the company in-licensed a Phase 3-ready drug, and the FDA wanted the company to use its genetics technology to screen out half of the people likely to experience side effects. “Had we been successful it would have probably been a first-line blockbuster, but we could only find about 22 percent of the variance, and we ended up winding down operations in 2009.” Margus considers Perlegen a great learning experience, and since then, he seeks to hire people with a similar experience of working through a challenging time.
We are going to pause here, and when we pick back up it will be with Brad Margus’s next entrepreneurial venture, Envoy Therapeutics.