Cold Comfort

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By Kristine Archer

At a recent conference on convergent medical technologies, keynote speaker Steven Arless characterized himself as “a simple chemist that got sucked into a very complex technology.”
In his current role as president and CEO of Montreal, Que.-based CryoCath Technologies Inc., Arless has certainly come a long way from his humble chemist beginnings.
Since joining CryoCath in 1996, when the company was still in its infancy, Arless has grown the complex technology into a successful business. Most recently, he was honoured for his achievements by Ernst & Young (Toronto, ON), winning their 2005 Entrepreneur of the Year Award in Health Sciences for the Quebec region.
Arless was able to transfer the lessons he learned in his previous occupations and apply them to a risky new venture — a venture that is about to pay off.

A Risky Path
Having earned his chemistry degree from McGill University (Montreal, QC), Arless went on to Concordia University (Montreal, QC) to pursue his MBA. After three years at Burroughs Wellcome Inc. (now a part of Middlesex, U.K.-based GlaxoSmithKline), he began a 17-year stint with Smith & Nephew (London, U.K.).
“After three years in pharmaceuticals, (I switched to) medical devices, which I liked a lot more because it was more tangible,” Arless says. “Instead of developing new drug compounds, it was building and designing new medical devices.”
Following an almost five-year term as president of Smith & Nephew’s Canadian operations, Arless was approached by a headhunter who was looking for someone to lead a new startup medical device company.
“It was technology that came up from Harvard and the initial funding was organized by a couple of Quebec-based venture capitalists,” he explains, noting how risky a proposition it was to get involved with such a young company.
“There was hardly any money in the bank and the product was in its very primitive, early stages,” Arless continues “But when I did my due diligence and talked to some cardiologists about this, it seemed to have a lot of merit — so I made the decision to take the plunge and get involved.”
Now that once-risky startup, CryoCath Technologies, is making its mark on the Canadian biotech scene. Along the way, Arless saw the company through a record-breaking $40-million IPO in 2000 — at the time, the largest in Canadian biotech history.
“A good story, a management team that’s well-perceived by the Street, and a good banking syndicate — those are the three ingredients that you need to have a successful IPO,” he says, noting that going public offered a prime opportunity to get more financing at a lower cost.

A “Cool” Idea
CryoCath’s “good story” lies with its technology. The company produces catheters for the treatment of cardiac arrhythmias. While these catheters look and handle like traditional models, they do not destroy tissue in the same manner.
Rather than applying heat, CryoCath catheters remove heat from target tissue, thereby slowing cellular activity. Sub-zero temperatures created by the catheter induce intracellular and extracellular ice crystal formation. CryoCath products provide electrophysiologists with a precise, minimally invasive solution for treating cardiac arrhythmias.
But Arless is looking beyond these current applications and planning for the future.
“We have three longer term initiatives. One is to deal with the plumbing problems of the heart, versus the electrical problems, by providing therapy inside the coronary arteries to keep them open after an angioplasty procedure.
“We also see an interesting world in the brain,” he continues. “There’s a lot of electrical problems of the brain that I think could be treated similarly (to how) we treat electrical problems of the heart,” Arless continues, noting epilepsy as a potential target for brain-based therapies.
“There, you’re talking about miniaturization of your catheter so that it can get up into the brain through your carotid artery system. That will be a big long-term arena for us. And then, ultimately, we’re also looking at the whole area of cancer — treating a tumor using cryotherapy.”

Learning From the Past
With CryoCath approaching a major milestone — profitability — Arless says new challenges are arising in regards to the company’s direction and philosophy.
“For the last four years we’ve been totally focused on growing the top line, and suddenly, when you start coming close to profitability you have to re-focus the whole organization on the bottom line — and that’s not a trivial exercise,” he explains.
Arless notes that shifts in corporate culture are recurring issues, likening the upcoming challenges to those the company has already overcome.
“One of the biggest challenges I ever had to face with CryoCath was about four and a half years ago, when we went from R&D mode to commercialization mode and had to change the culture and the attitude of this place.
“There was a very challenging process involved — hiring different kinds of people with more of a customer focus and with more of a commercialization background,” he continues.
Hiring the right people is always an issue, and as a medical device company, CryoCath has taken a unique approach, going outside of the traditional biotech employee pool and recruiting people from within Quebec’s sizeable aerospace industry.

In Full Flight
Arless, who had some experience working in the aerospace sector, was approached by an acquaintance who just happened to be the president of SPAR Aerospace Ltd. (Edmonton, AB).
“He approached me and said ‘Can you do a little bit of a feasibility study about getting aerospace industries branching out into health care and medical devices,’” he explains.
After doing some investigating, Arless says he found remarkable similarities between the seemingly disparate industries, especially in terms of product development.
“Aerospace and medical devices have a lot of things in common,” he explains. “You’re developing very sophisticated technology that typically involves a multi-disciplined engineering approach, and that process also needs to be well documented, because you have regulatory people that review different submissions for approval.”
Arless used this knowledge in his recruitment efforts for CryoCath, yielding positive and lasting results.
“One of my first hires was an engineer — a mechanical engineer from Boeing Co. in Seattle, Wash. — who turned out to be fantastically productive and successful with us, and so we continued to pursue it even more.”

The Next Step
Looking confidently towards the future, Arless is ready for whatever comes next, including the prospect of CryoCath being acquired by a multinational conglomerate.
“It’s, unfortunately, a fact of the times that if you develop great technology in the life sciences field, in this era of consolidation and mergers and integration, that ultimately you will become a part of a bigger organization,” he says. “That doesn’t mean that the company goes away or the technology goes away, it’s just that the control ends up moving abroad.”
Arless points out that the technology, wherever it may reside, is they key.
“If we develop a core competency, there’s no reason why that core competency — or competencies — can’t flourish within the halls of the multinational. It might even accelerate the growth and size of the operation,” he explains.
And while some may bristle at the thought of a Canadian company becoming a part of a larger U.S. or European organization, Arless argues that acquisition does not mean extinction, but simply another step in a company’s evolution.
“There’s no reason to think, even if we ultimately did get acquired, that it would mean the end of CryoCath. Conversely, I think it could be the start of a great new era.”