Gut Instincts

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By Deborah Komlos

Three decades in, Léon F. Gosselin still has the bug, and he’s not planning to shake it off any time soon.

President and CEO of gastroenterology firm Axcan Pharma Inc. (Mont-St-Hilaire, QC), Gosselin first became acquainted with the pharmaceutical industry during his MBA studies in the early ’70s. This was when, Gosselin says, he “got the pharma bug.”

After completing a B.Sc. in biochemistry, Gosselin enrolled in an MBA program at the University of Sherbrooke (Sherbrooke, QC), for which a portion of the evaluation came from the work setting.

“I knocked on some doors where I thought the scientific training could help a little bit and wound up with a small company that is now actually part of Aventis (S.A.),” Gosselin says. “And I’ve been in this industry since then.”

Aside from his role as assistant general manager at that small firm, Nordic Laboratories Inc., Gosselin held various positions in the pharma industry and did a lot of private consulting. It was in 1982, along with Dr. Herbert Falk, that Gosselin founded Axcan’s predecessor, Interfalk Canada Inc.

In 1994, the company was renamed Axcan Pharma Inc. following major corporate changes in the early `90s.

GI Growth
“That is a time when several things happened,” Gosselin recalls of 1992 and `93. “First, I bought out this former partner. Secondly, the first venture capital firm became a shareholder of Axcan — that’s the Caisse de dépôt et placement here in Quebec, a government pension plan management group. So that was the beginning of access to capital, so to speak.”

Axcan has since grown to become a leader in the field of gastroenterology, with approximately 430 employees in North America and Europe. The firm has over 15 products in its pipeline, including ITAX™ (itopride hydrochloride) — a therapeutic for the treatment of functional dyspepsia, an upper gastrointestinal (GI) system disorder — that Gosselin says has blockbuster potential. Axcan licensed the therapeutic from Abbott Laboratories (Abbott Park, IL) last September.

Gosselin’s reason for entering the GI arena in the first place is straightforward enough. “It was basically opportunity,” he says. While working at Interfalk, Gosselin says he came across potential uses of medications that, back then, were being registered for other indications.

“Through contacts that we already had, for instance, the Mayo Clinic in Rochester and other centres in hepatology and gastroenterology . . . the Canadian company was able to act as the catalyst to get one or two products approved,” Gosselin says. “And in the beginning, that was the only objective of the company . . . to get a couple of products approved in Canada.

“I often look at the company as being a very long time in the making: creation phase in the first 15, 17, 18 years, when we had small successes, and gradually built a presence in Canada, mostly,” he says.

That base was strengthened in 1986 with the firm’s first product sale in Canada and a world first: SALOFALK®, a mesalamine (5-ASA) compound for the treatment of ulcerative colitis.

Axcan’s presence began to spread south in 1997 when the firm had its first U.S. drug approval. A therapeutic for the treatment of primary biliary cirrhosis, URSO™ was also a global first, Gosselin says.

“So, even though we are small, we’ve been on the innovative side of things forever, since the beginning,” he says.

Market Potential
Axcan has much hope for ITAX, Gosselin says, because the therapeutic has potential to replace a product that was taken off the market four years ago. Sold by Janssen Pharmaceutica Products L.P. (Titusville, NJ) under the name PROPULSID® (cisapride), the drug had sales of $1.2 billion when it was pulled from the market, Gosselin says.

“It was a very successful product, a very effective product,” he continues. “Unfortunately, it competed for certain sites of metabolism with other drugs and eventually induced, either alone or in combination, cardiac side-effects that caused it to be removed from the market.” ITAX, on the other hand, to date has not demonstrated adverse cardiac events, Gosselin says, and still shows the same efficacy profile, or even better, than cisapride.

Many suffering from functional dyspepsia are unable to function well, he says, because of their overriding symptoms.

“It really is a diagnosis of exclusion,” Gosselin says. “So patients present with symptoms of pain, of nausea, heartburn-like symptoms. Really, it’s all a motility problem, whereby the stomach cannot expel food properly.” With ITAX, Gosselin says the firm is still gearing itself toward gastroenterology, but is also “embarking on larger therapeutic markets.”

One of these possible future indications is diabetic gastroparesis, for which Gosselin says patients currently have “absolutely no access to effective therapy.” It is estimated that as many as 40 per cent of Type II diabetics develop the condition at some point in their lives, he adds.

Earlier this year, Axcan reported positive Phase II safety and efficacy results for ITAX, showing the drug to yield significantly improved symptom control over placebo after four and eight weeks in patients with functional dyspepsia, with no cardiac toxicity observed.

Gosselin says one of the firm’s Phase III ITAX trials — the North American study, involving 53 centres in North America — is up and running, and the other study will start shortly.

“We’re hoping to complete enrolment as quickly as possible, and then the duration of the trial, the active, or the acute, phase is only eight weeks,” he says. “So if we enrol all of our patients by the end of the calendar year, slightly thereafter, we would be online to file a New Drug Application towards the end of the summer or the end of our fiscal year, which is September 30th.”

The firm then plans to turn its attention to the diabetic gastroparesis indication, he says.

Eventful Journey
Gosselin says both challenges and fortuitous events have contributed to where Axcan stands today.

A strong relationship with the Mayo Clinic was forged back in 1986-87, he says, and the firm had several of its liver disease trials conducted at that organization, which led to Axcan’s first U.S.-approved drug.

“But then (URSO’s approval) would not have been possible had we not had access to capital once we became a public company in 1995,” he explains. “So, from then, we started on a strategy of eliminating activities that were not core GI, and acquiring products and projects in development to create a pipeline . . . and through product acquisitions, grow year over year on a fairly consistent basis.”

Axcan’s journey has also involved less smooth turns, including an unsuccessful takeover attempt of GI pharma firm Salix Pharmaceuticals Inc. (Raleigh, NC) last year.

“I think that it was our Hostile Takeover 101 course, but you learn from everything,” Gosselin says. “We didn’t spend months and months pining over it. We tried it. In our mind, we had set a value for which we could make a transaction accrued for our shareholders, and when the value of the company went well above that, we did not follow, we stuck to our original game plan . . . I think it gave us a lot more credibility in terms of being able to walk away from a deal that was no longer a good deal from the point of view of our shareholders.”

As Axcan pushes forward, it faces an almost enviable challenge. “We have a very interesting problem in that we have too many opportunities for the funds that we’re able to attribute to research and development. So it’s a nice problem,” Gosselin says.

But, he continues, it can be difficult — not only from a marketing perspective, but also from both a scientific perspective and an unmet medical need perspective — to end projects or put them aside when one knows they have potential.

Aiming High
To channel its focus, Gosselin says Axcan has determined that it will become active in no more than five markets: Canada, the U.S., France, Germany and the U.K.

“We’re looking for strategic alliances, or distributors or sublicencees, other markets so that we can keep the challenge manageable from a human resource point of view and from the point of view of just managing time,” he says.

A strong positive for Axcan’s U.S. growth was its addition to the Nasdaq Biotechnology Index last November. Gosselin sees the company’s next milestone as hitting or surpassing a market cap of $1 billion US. Currently, he estimates the firm to be in the higher $800-million range.

Meeting that monetary milestone, Gosselin says, and becoming a large-cap firm will open the door to many U.S. investors who typically do not invest in “small-cap” firms, which rank at about half a billion dollars. Historically, most of the firm’s revenue has come from the States, a trend that Gosselin hopes will continue. Axcan’s current sales revenue is about $240 to $245 million US, and it is hoped that the company will reach at least $500 million in three to five years.

“When you grow partially by acquisitions, a large acquisition would take place in Europe and that would skew the breakdown of the pie that way,” Gosselin says. “Longer term, it should revert, and by the time we have launched the three, four, five products that are most advanced in our pipeline, (the U.S.) remains the largest pharma market with increasingly a larger and larger percentage of worldwide sales and quietly tracking towards 40, 50 per cent of the world market in terms of sales.”

Outlook for Success
Attaining success takes much work, but much work is also needed to maintain it, and Axcan is actively pursuing this end.

“Where it is today in Canada, once you’ve taken QLT, MDS, Biovail off the table, I guess operationally we’re one of the largest five companies in the biotech-pharma world,” Gosselin says.

“That is a good accomplishment,” he continues. “The challenge now is to make that work for the future . . . to be satisfied when we have the certainty that the next generation of managers can take over the company and move it forward. I think we have a very strong management team; from that point of view, we’ve spent a lot of time and effort on trying to identify candidates for those types of positions and groom them.

“It’s something that you don’t want to think about,” Gosselin says. “But it’s part of life and part of corporate life, and I think in today’s corporate governance environment, it becomes extremely important to address those issues.”

While achievements often involve a bit of luck and coincidence, one thing needed for success is patience, Gosselin says.

Also necessary, as Gosselin mentioned during his guest participation in the opening session of BioFinance 2004, held earlier this year in Toronto, Ont.: “You can over-deliver, but never over-promise.”

Relating to that comment, Gosselin says that while he is an optimistic type of person, he is “not that gregarious about sharing information and creating expectations . . . there have been multiple examples of people overdoing it on that side of things.

“I think you have to build things so that they last, and not create all those expectations and disappoint people,” he says.
With a solid footing established and strong future growth prospects, Axcan seems well poised to keep building things that will last.

“I would hope that people would say that throughout the organization people are really very concerned about the diseases that we treat for patients; that everyone goes a little bit further in terms of fulfilling those needs,” Gosselin says. “I would hope that our core values would come through and shine on what we do in general terms . . . The company has built quite a reputation over the past 20-some-odd years in the field of GI, and we’re all very proud of that.”