Published in UT San Diego, October 6, 2014
Do you know the difference between a jean and a gene?
Well, biotechnology is one of San Diego’s key industries, and its practitioners not only know the difference, they are the leaders in the successful commercialization of research conducted at UC San Diego, Salk Institute for Biological Studies, The Scripps Research Institute, Sanford-Burnham Medical Research Institute and many other local institutes. It is this “technology transfer” that fuels the future of the industry.
One of those leaders is Richard Heyman, who started as a researcher at Salk and went on to become a successful, serial biotech entrepreneur. The first thing we love about Heyman, 57, is that his financial success did not come when he was in his 20s. He spent decades as a researcher and entrepreneur before achieving a big payoff. In July, he sold Seragon Pharmaceuticals to Genentech for $1.7 billion, and the year before, he sold its predecessor, Aragon Pharmaceuticals, to Johnson & Johnson for $1 billion.
When Heyman received his Ph.D. in pharmacology in 1986 from the University of Minnesota Twin Cities, he planned to pursue a career in academia, and he took a postdoctoral research position at the Salk Institute, where he had the good fortune to work in a lab headed by Ronald Evans, an authority on hormones.
“When I was a student, my professors saw only one path forward — academics — so I had zero exposure to starting a company or interacting with big pharma or biotech,” said Heyman.
Lesson 1: Expose young scientists to entrepreneurs. The era of research for its own sake has given way to the need and the desire to commercialize.
A few years later, Evans started Ligand and asked Heyman to help in transferring the technology and to serve initially as a consultant. Eventually, Heyman became a full-time Ligand employee.
Lesson 2: Make the transition from the bench to the boardroom easier to understand. “As a young scientist I had the opportunity to get involved in many aspects of the business. I presented to pharmaceutical companies, venture capitalists and the Ligand board of directors. I got to see how the different pieces of the business fit together,” he said.
Lesson 3: Expose young scientists to the whole business. Encourage cross-pollination of disparate disciplines.
After Ligand, Heyman worked with Evans to establish X-Ceptor Therapeutics, where he served as chief scientific officer. He learned more about raising venture capital and the fundamentals of starting a company. “It’s a little bit like trial by fire. Venture capitalists like Jim Blair and Kevin Kinsella helped me network and introduced me to human resource, finance consultants, and lawyers,” he said.
Lesson 4: It takes a team. The company raised $35 million, and he said that it was sold in 2004 for about the same amount to Exelixis, a San Francisco genomics-based drug discovery company. In 2009, Heyman was approached by a group starting Aragon Pharmaceuticals that planned to focus on why men with prostate cancer were failing the first generation of drugs that targeted what is called the lock and key mechanism. This was his first time as the CEO — 19 years after he left the Salk Institute.
Lesson 5: You probably won’t be the CEO at your first company.
By 2012, Aragon had strong clinical data and needed to raise $200 million to $250 million to get through clinical trials since building a successful biotech company is a very expensive venture. Heyman considered the following options:
• Take the company public.
• Find corporate partners who would receive royalty payments and equity in exchange for their cash.
• Sell the company.
• Find a company that would buy the prostate cancer research and would let Heyman spin out the research focused on breast cancer.
He picked No. 4, and in August 2013, the transaction with Johnson & Johnson closed on a Friday. On a Monday, Seragon Pharmaceuticals (the new name) opened with most of the same team of scientists. A year later, Seragon was sold to Genentech for $1.7 billion.
Heyman was ultimately rational. He knew what he knew and more to the point, he knew what he didn’t know.
Rule No. 373
If the road were straight, you would not need guard rails.