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EXCLUSIVE LIFE SCIENCE FEATURE leaders LIFESCIENCELEADER.COM JUNE 2014 34 but they lacked the structure, infrastruc- ture, and capital necessary to truly exe- cute on it — and we were seeing them stall out," Achar says. "They would start in product development, but by the time they got to clinical, they just didn't have the bandwidth or the funds to execute on it." Achar thought a new company, eventu- ally Genzum, could serve as the "incuba- tor" for those companies and products, providing not only funds but also clini- cal expertise combined with the busi- ness acumen needed to out-license and commercialize the product. After going back to school and returning with a fresh MBA in hand, he went to work on bringing his idea into reality. "If we could provide capital and infrastructure for those opportunities, we believed it would produce a great, long-term value, especially if we could help out-license the product to distribution companies that would not otherwise have such products in their own pipeline." So Genzum did just that. "Our very first product, an ophthalmic suspension, was an incubated product out of the CRO, and we were fortunate enough that a Big Pharma distributor found it inter- esting and in-licensed it from us, and what that did was establish our business model. We then went out and executed, and before we knew it, we established a track record." CONCEIVING THE MODEL Compared to tablets, capsules, and some solubles, topical medicines tend to be highly unstable, complex formulations where the emulsi- fiers and other constituents play essen- tial roles alongside the active drugs' effectiveness and safety. Thus, the FDA will accept ANDAs (abbreviated new drug application) for most topicals only with accompanying Phase 3 data com- paring the generic head-to-head with the original drug. That means the generics producer must "reverse-engineer" the original product to create a precise duplicate. No wonder few companies have the capa- bility or inclination to compete in the space. But the rare combination of finan- cial strength and special skills at Achar's disposal gave him a leg up on others. Genzum's model would grow to include not only incubator partners but the big- gest players in generics. "Today, the big five generic compa- nies are coming to us with their topical- product wish list, what they ultimately want to see coming down our pipe- line, because semi-solid drug forms — creams, gels, ointments — are very tough to reverse-engineer and usually have a very complex and expensive clinical requirement," says Achar. "Traditionally, the big players would develop all of their product pipeline in-house. So why would they go outside? Cost and risk — the costs are too high, and the risks are too high. They turn to a company that is specialized in the area and can create value in a partnership." Besides the value Genzum offers as a specialized topicals developer, the com- pany also matches the investment of its commercial partner in a development project. "The risk plays right into our strengths," Achar says. "And we also address the cost aspect because in all of our partnerships, we have invested dollar-for-dollar with our commercial partners in the total cost of developing the drug, executing the clinical trials, and submitting to the FDA. It's something we take a great deal of pride in, being able to say we are truly an equal partner." Another key aspect of Genzum's model is that it does not aim to improve on the original product; instead, it aims to repro- duce it precisely. "We're coming on as the generic, joint-existing brand, so we have to be bang-on equivalent. We reengineer to meet and match the same safety and efficacy as the brand. So as the patent nears expiration, we will begin our work with the commercial partner to evaluate, identify, and then develop the product. And we put it in a head-to-head compari- son clinical trial." Reproducing the active drug ingredient is the simple part, according to Achar. "If you don't formulate exactly, then you will probably fail in the clinic. Yes, the ingredients are on the label, but the label doesn't tell you the order, proportions, and other characteristics of the ingredi- ents. That's the actual innovation, figur- ing that out. It takes about six months in R&D; to reverse-engineer such a drug. And of course, once we come out on the market, it's more affordable because we're coming out at a discounted price." The drawn-out reengineering of topi- cals makes keeping them confidential while in development especially critical, he says. "You don't really want to tell the market you're doing a new product in advance. And before the product goes to market, for both sides, you don't want to say who the partners are. Once it is FDA- approved, then everyone says who they worked with to develop it." Just as with its products in develop- ment, the company's financials also remain hidden while it courts and forms more partnerships around new product opportunities. But Genzum's business model seems to have a built-in positive forecast, in Achar's view. "The nice thing about our business is we're product- revenue driven, so once we develop the product and share in the cost, we also share in the rewards. The money the product generates comes back to us and to the commercial partner." Another tantalizing hint: In September 2013, the company achieved a successful Series B round of unannounced size, which Achar says doubled the company's valuation. It now has north of a half-dozen products in the pipeline. BUILDING RELATIONSHIPS Many companies in special- ized areas of the life sciences have scientist founders. Achar, by refresh- ing contrast, is a businessman who has founded what is, before and after all, a business. When he started Genzum, he already had a map in his mind of how the company should develop and deliver on the promise of its model. Being a quick learner is another key business skill, and Achar obviously soaked up every bit of knowledge he could from his years at the CRO, "learning the mechanisms of the industry and the dynamics of drug development," as he puts it. Teaming that knowledge with his business sense, he went forth in search of partners. "What I really understood quickly, and A POST-GENESIS STORY – GENZUM PLIES THE ART & SCIENCE OF SCALING UP By W. Koberstein 0 6 1 4 _ F e a t u r e _ G e n z u m . i n d d 3 0614_Feature_Genzum.indd 3 5 / 2 1 / 2 0 1 4 1 : 1 9 : 4 0 P M 5/21/2014 1:19:40 PM