The biotech boom builders.

CMAs stimulate growth and success in an expanding biotech and pharmaceutical market

Growth, expansion, acquisitions, new products: all are part of the growing field of biotechnology. As the science of developing effective solutions to disease becomes more refined, Canadian firms are finding a ready and waiting world market for their products. And the CMAs who help direct the future of those companies are finding their jobs exciting, innovative and fulfilling.

When Klaus Kepper, CMA, joined MethylGene Inc. in October 2000, he brought 15 years of experience in the pharmaceutical and health care industry with him.

That experience has helped the vice-president, finance and CFO to assist in positioning the company for a competitive future. The Montreal-based company began operations in 1997; it has a variety of R&D programs that develop new drug products to battle cancer and infectious diseases. Sixty of MethylGene's 77 employees are focused solely on R&D; since its inception it has raised in excess of $90 million from equity financing, corporate partnerships and government, including $4.8 million through Technology Partnerships Canada.

"This company has established a strong product pipeline, which is very important," says Kepper. "In addition to one program in clinical trials and another program where we expect to file an Investigational New Drug in 2003, the company has several research programs that are progressing very nicely."

Kepper's role includes human resources, information technology and laboratory operations at MethylGene's leading-edge, 30,000-square-foot facility in the Montreal Technoparc.

Kepper's role is well defined: to help ensure that the company's future course is crystal clear. "Although accounting is part of the job, the key financial aspects to the job are largely about getting the financial projections right, looking three to five years out and staying on top of the direction of the company. We do an annual budget and strategic plan and because we're private and looking to raise money, we also prepare business plans as well.

"Forecasting is such an important part of the job and that's the strength of the CMA skills--you really focus on the management part of the business," says Kepper, who also holds an MBA. He adds that "these two designations really complement each other."

A graduate of Concordia University with a Bachelor of Commerce degree (1976), Kepper earned his CMA in 1977 and MBA in 1982. He has held progressively responsible jobs at Mallinkrodt, Sommerville Belkin and most recently with Smith & Nephew where he also served as vice-president, finance of that firm's central and East Europe operations.

"In today's biotech industry, cash king," says Kepper, adding that the key is to develop your products and position them for a market that may be years down the road; still, the payout will come if investors are patient.

"The market is extremely poor right now and that has a direct effect on the industry. As there is no IPO window at the moment, companies are using their cash reserves. You have to convince the shareholders that running out of cash is much worse than dilution."

It's also an industry typified by consolidation. "That's here to stay and the companies that successfully consolidate should be the big winners of tomorrow. We can expect the market to pick up in late 2003 to 2004. For CMAs, this is a good time to come in and raise money for companies and see what the industry is all about. As a CMA in biotech, raising the money is what you live for."

It's also important to have a multiple set of programs, adds Kepper. "In R&D, it's only one in every hundred concepts that will get out there. But the more programs you have, the more you limit the risk and the better possibility you have for being successful. MethylGene is well positioned for the future and will be ready for an IPO when the next IPO window opens up for biotech."

John Howes, CMA, corporate controller for Bioniche Life Sciences Inc. in Belleville, says there couldn't be a more exciting time in the biotechnology field.

Since joining the company three years ago, he has helped the innovative biopharmaceutical company through a new phase of growth as it proceeds with the research, development, production and commercialization of proprietary technologies for international and domestic markets in the human and animal health sector.

"In the last year, we have added 75 employees," he says. "Vie are currently in clinical trials for our proprietary technology Mycobacterial Cell Wall DNA Complex (MCC) for the treatment of bladder cancer and prostate cancer. We recently purchased a manufacturing facility in Montreal and bought a small business in Australia. We are currently scaling up our plants to manufacture GMP material related to cancer treatment and continue to expand our product offerings in animal health products and specialty pharmaceutical markets."

The company is in a unique position among R&D firms. Most companies will invest exceptional amounts of money into research work, slowly working through trials before gaining approval from regulatory bodies to market their products. In a competitive environment where you accept a non-profit line for years, Bioniche, with a range of products already on the market, has a steady income to help fund R&D activities.

"In the last fiscal year (ended June 30, 2002) our sales were up 29% over the previous year," says Howe. "We're fortunate that we have a cash flow on sales of other products that are experiencing strong growth."

In the last fiscal year, the company reported consolidated revenues of $40.5 million, a 29% increase from the same period the year before. It exports 80% of its products, primarily to the U.S. and Germany and last year won an Ontario Global Traders Award for Market Expansion.

The 20-year-old company moved its head offices from London, Ontario to Belleville three years ago and hired an entirely new accounting staff in the process when former employees in the finance department were unable to relocate to Belleville for various reasons. Howes, who earned his CMA designation in 1985, spent many years in the health sector with Bristol Meyers Squibb and was also general manager of a small company in Belleville; he and his family are from the Belleville area. The new environs were very much to his satisfaction.

"You could not ask for a better group of people," he says of Bioniche, which has 220 employees, 120 in Canada and the balance in the U.S. or overseas. "We've been described as a 'mini-multinational' because we have operations in Ireland, Australia and the U.S. as well as several international distributors worldwide. A lot of the infrastructure needed for growth is already in place. When I started here, our sales were $27 million and we've gone up to $40 million. At our recent Annual General Meeting, it was anticipated that we would achieve up to $50 million in sales this coming year. We have numerous projects on the go and we're at a point where we're at a critical mass."

Howes' role has been instrumental in making that growth work for Bioniche. He works closely with government agencies on technical partnerships, is responsible for external reporting and coordinates the company's acquisitions activities.

"There's a great deal of analytical work involved in meeting government requirements and we have a complicated consolidation process," he says. "There are 10 companies in all that we have consolidated. This company is committed to drug discovery and clinical development programs and is building an integrated and profitable global biopharmaceutical company."

Overall, the future looks very promising. "We've tapped into a well-trained group of people. And as a highly entrepreneurial company, we're small and we're able to manoeuvre."

Jacques Nadeau, CMA, controller of the R&D Department of Novartis Pharma Canada, has worked for the firm for four years, since it was conceived in the merger of Sandoz and Ciba. He was a senior cost accountant at Ciba before being asked to manage Novartis Canada's $35 million budget for R&D, which represents 11% of its annual operating budget and makes it among the leaders in research in the country. The main business interests of the company, headquartered in Basel, Switzerland, are pharmaceutical products, consumer health, generic products, eye care and veterinary health. It has some 67,600 employees worldwide, located in 140 different countries.

The R&D budget managed by Nadeau essentially consists of funding for the company's various clinical trials. "We conduct mainly phase 2 and 3 trials here--those involving human patients, but also some phase 4 trials, which are post-launch studies," he explains.

Before he started to work in the pharmaceutical industry, he spent 16 years in manufacturing and has no regrets about his change of focus. When Ciba was looking to fill a cost accounting postion, it initially looked for a person with some scientific expertise. After searching for months, the company changed gears and decided to hire Nadeau.

"There is an immense difference between a pharmaceutical product and an ordinary product," Nadeau points out. For ordinary products, he found he was mainly applying the theoretical principles learned in his training. He finds the pharmaceutical sector much less complex. When he moved to the drug industry, profit margins were much higher and costs were considered less important. But Nadeau finds that recently there has been a shift at pharmaceutical companies--they're putting more emphasis on costs to gain better control of their profits.

Since Canada is one of the 10 major Novartis research sites, it obtains a sizable share of the budgets allocated to clinical studies, which are always done in several countries at once. Nadeau is part of a team of 130 people who manage the clinical budgets and see to drug monitoring and the registration of pharmaceutical products before they are marketed.

Novartis invested more than $3.5 billion in R&D in 2000. In the future, the company intends to increase its research budget and the proportion of its annual revenues spent on R&D.

Diane Daniel, CMA, vice-president of finance, IT and supply chain at GlaxoSmithKline Consumer Healthcare, has seen both sides of the pharmaceutical business--prescription medicine and consumer healthcare. In 1988 she joined what was then SmithKline & French, and held various positions at that company, including manager of planning and sourcing and manager of financial analysis and control.

"I got into pharmaceuticals quite by accident. I was simply looking for an accounting job within a 50 km radius of my home," she says. "Now, I hope to stay in the industry for the duration of my working career. It's fascinating."

For Daniel, the job marries together a passion for medicine and a sound business education.

Her experience on the prescription medicines side of the business was enhanced after the merger of SmithKline & French and Beecham Laboratories in 1990. In 1994, she was promoted to director of finance and administration and CFO at SmithKline Beecham and held the position until 2000.

In 2000, SmithKline Beecham merged with Glaxo Wellcome, forming GlaxoSmithKline, a powerhouse in prescription ([R.sub.x]) and over-the-counter (OTC) medication. As part of the merger, Daniel took on the role of vice-president of integration.

"Glaxo and SmithKline had a lot of therapeutic areas that fit well together," she notes. "There wasn't a lot of overlap. We had to divest two products worldwide, and that was handled successfully."

Since Glaxo didn't have a consumer healthcare franchise, the merger with SmithKline more than made up for that. "With OTC products like Gaviscon, Turns and Contac, SmithKline had a lot of solid brand and marketing experience," Daniel explains. "Advertising direct to the consumer presents a significant opportunity to build a brand, and now the combined company has that. The expertise that SmithKline brought to the merger helps in the [R.sub.x] to OTC switch process, a critical part of the business."

Marketing is definitely key in attracting and keeping consumers for big pharma. Daniel aids this process in her role as VP of finance, IT and supply chain.

"We have to remain competitive in an ever-changing environment," Daniel notes. "That means keeping our product on the shelves where customers can see it. That's a challenge even for us as the retail environment of today and, in the future, is fiercely competitive. It means we need new product innovation and we have to cut the timelines between a product's conception and the day it gets onto the store shelves."

Daniel's experience on the prescription medicine side of the business has also been a benefit in her current position. "My past pharma experience is a helpful resource at times," she notes.

Her CMA has also helped her along the way. She got her designation in 1987, while working at Sun Microsystems and finds that it's always useful.

"The CMA is a solid grounding, no matter what level you're at. You have to make sound decisions, and that takes training as well as experience."

Nadeau profile by Julie Demers. Julie ([e-mail]) is associate French editor of CMA Management magazine.

John Cooper ([e-mail]) is a Whitby, Ont.-based freelance writer.