(I had to change the title as HC usually blocks cross promotion...

(I had to change the title as HC usually blocks cross promotion articles). It's great to see Imugene are working hard on their PR....

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One of Australia’s leading biotech entrepreneurs

Alan Kohler  June 20, 2018 CEO Interviews


Paul Hopper is one of Australia’s leading entrepreneurs in biotech and he has just been involved in selling Viralytics for $500 million to Merck and Company.

When he took over as Chairman of Viralytics around ten years ago, it had a $4 million market cap and now it’s been sold for $500 million. It’s a fantastic success story; it’s an immuno-oncology business where they use viruses to kill cancer cells and he has got two other companies: one is called Imugene and the other is called Prescient Therapeutics. Imugene is another immune-oncology business, Prescient is what he calls a small molecule business that’s all about setting up resistance to cancer.

He is always worth talking to, great guy, interesting experiences in biotech and worth listening to on the subject of how to invest in it. I spoke to Paul in Los Angeles where he often travels to over there to see what’s going on and to look for deals.

Here is Paul Hopper, formally Chairman of Viralytics and also Imugene and Prescient Therapeutics.

Paul, how did you get into biotech, was that something you decided to do or did you just sort of fall into it as a lot of people do with these things?
Yes, I fell into it.  I co-founded a listed company in the private hospital business called Alpha Healthcare and Paul Ramsay bought that company in 2000.  I then said to myself well what do I do next and I went to the U.S. and had a bit of a wonder around and I met some scientists who were doing a lot of work in the oncology space.  It was sort of like a light switch went on and from then I got involved, it just grabbed me immediately.  That was the start of it, about 2000.

You, in fact, specialised in oncology, or what’s it called?  Onco-immunology, so using the immune system…
Immuno-oncology, yes.

Immuno-oncology.  When you first did that, as you’re talking about back then when you went to the States, was that interested you most?
No.  In fact you’ve just touched on something which is really interesting because there was a watershed – oncology basically stands for cancer but there was a watershed event that happened about six years ago.  Back in the day I got involved the traditional way of treating cancer was either to cut it out, fry it with radiation, poison it with chemotherapy and that was basically it.  The idea that you could harness the immune system to do the killing of the cancer cell was sort of theoretical and there was a high degree of scepticism that that would ever happen.  Then about six years ago there was an incredible event that’s changed the whole industry and brought into vogue and established as a very clear scientific approach that is the immuno-oncology approach.  What happened was Bristol Myers had a drug which basically took the brakes off the immune system.

If you think of the immune system as a fighter surveillance jet flying over your tissues it historically didn’t recognise the cancer cells as being nasty and missed them.  What happened with this event in immune-oncology was that we had a way of suddenly awakening the immune system up so that the fighter pilot in the jet suddenly saw the cancer and was able to kill it.  That was the transformative event in cancer and that led to the avalanche in immuno-oncology that takes place today.  There’s a huge number of drugs that are being developed where what you do is basically harness the immune system rather than attacking it directly.  That’s not to say the old stuff about chemo and radiation and surgery don’t have a place, they absolutely do, but this is a much more elegant approach to it and that’s what we’ve been doing for the last six or so years.

Is it fair to say when Bristol Myers did come out with that drug six years ago you knew enough about oncology and what was going on to recognise that then as such an important event?
Yeah, I recognised the importance but I can’t possibly take any credit for being…

No, I’m just wondering how you responded to it because I think you then went and set about finding technologies and scientists who were working in that area and trying to come up with some technology that would do it, what did you do?
Yeah, that set off a gold rush in the industry to find anybody who had stuff in immuno-oncology and I did, I found quite a few interesting technologies, one was Imugene.  I was already the Chairman of Viralytics which had this virus that actively chose cancer cells to kill and leave healthy cells alone but I found the technology which is in Imugene and another public company on the ASX called Prescient.  There were a whole bunch of things that I found, did the diligence on and got my scientific friends to look at it and tell me that they thought it had merit and we went from there.  Yeah, certainly that really set me on fire to get moving for sure.

What sets Viralytics apart?  I mean you’re saying you were already on the board then so was Viralytics at that point an immuno-oncology business?
What happened was, and I can’t take the credit for Viralytics the credit for Viralytics belongs very much to Malcolm McColl the CEO and of course the scientific genius Darren Shafren at Newcastle Uni who came up with the idea.  He had this idea years ago that if you inject a particular type of virus into the system, into a cancer patient, the virus would hunt out the cancer cells and kill them and leave the healthy cells alive.  About ten years ago a close friend of mine in Sydney rang me up and said I have got this company called Viralytics that I’m a big investor in, it really needs some help, would you mind going on the board and cleaning it up and all that sort of thing, so I did.  You’re probably aware at that stage it was broke and had a market ap of about $4 or $5 million.  In the early days injecting a virus into a cancer patient was a little bit out there, that was regarded as a little bit on the fringe, and we were sort of in the wilderness, the scientific wilderness for the first five years.  

Then what happened was Amgen, which is the huge biotech pharmaceutical company here in Los Angeles bought a hopeful private company called Biovex that had a virus and they paid $400 or $500 million cash upfront and an additional $500 million down the road when the drug performed and they got that drug approved and the scientific community sat up and said my goodness, there’s a virus that actually kills cancer.  Suddenly Viralytics was flavour of the month.

When was that, was early 2015?
No, this would be five years ago.

Okay.
Then suddenly everyone wanted a virus.  In the biotech game it’s all about data.  The big companies who buy you out or the other biotech companies that buy you out it’s about data.  If you don’t have the data you can hype the stock and the story as much as you like but at the end of the day you rise and fall on whether your drug performs.  If your drug doesn’t perform then you’ve got nothing and we were very fortunate as we went through the clinical trial process that is putting patients through clinical trials the drug did what we thought it would do and the data kept maturing and so it kept sending nice signals that it was working and the end result as that Merck said we think we’ll have that.

It’s interesting that Viralytics did get up to $1.20 or something in the beginning of last year but then the share prices sunk basically by half, what happened there?  Did people start to lose faith in what you were doing?
I really don’t know.  It perplexed the board and it was the source of constant discussion because the company a year later after the stock had gone down 60 to 70 cents was in so much better shape, the data was good, everything was travelling nicely, financially we had a lot of money in the bank, it was extremely well-managed under Malcolm.  Sometimes the ASX is a little bit irrational but the market doesn’t value companies it prices them.  It was a bit of a bug bear to me as the Chairman and to Malcolm as the CEO that here we were producing fabulous results and the market was marking us down.  It was very frustrating I have to admit.

You eventually hit the holy grail and got a bid of $1.75 a share which is phenomenal.  There’s a couple of questions that arise from that really.  How can investors like our subscribers, ordinary investors, recognise that that’s a possibility, can see that sort of thing coming because if you’re looking at Viralytics share price you’d go there’s something wrong, actually there was nothing wrong at all, it was fine.
There wasn’t, that’s right.  You get completely the wrong signal from the share prices.  The predicting how a biotech company will perform is not easy in the future because in our game a lot of the drugs fail, so how to pick the winners is not easy.  I think you’ve got to first of all look at the technology, if it’s sound, does it have a good pedigree, are the investors highly regarded, is the technology well-published in peer review journals in the good journals because that gives some credibility to the science.  Then you look at how is it going through clinical trials and what’s coming out of the clinical trials.  That is really the indication, if the data looks interesting then you have a chance.

At what point in the clinical trial journey was Viralytics at?
We were in phase two, we were in phase two.  The frustrating thing about biotech of course is it’s very patient capital, so investing one day and getting out later at a higher price, sure that does happen but the reality is it takes a bit longer.  Phase two data is the data is the data where you usually get brought out by a big pharma company and the data has to be good.

And your data in Viralytics was coming out already so it was clear from phase two that the thing worked.
Well it was clear that it had a very good chance of working.  Of course I can’t tell you that I know it’s going to become a drug, I am extremely hopeful and Malcolm was very hopeful that it will.  The indications are that it will make it.  The signals from the trial were sufficiently strong to encourage Merck to want to own it.

The other question that I was thinking of was what did you have to do to get the transaction with Merck, was that difficult?  Were you just sitting there in the shop window waiting for them to go passed or did you have to do it?
No, so what happens in the biotech industry, one of the functions of the CEO is to spend his or her life on the road and Leslie Chong at Imugene does this and Steve Clarke at my other company, Prescient, does it all the time.  They basically go to all the conferences around the world and in the life science biotech industry there are many and to put it crudely you peddle your wares and you make appointments because all the big pharmaceutical companies book rooms or floors at these conferences and they have a specialist in immuno-oncology and they have someone in insulin and someone cardiac, and they sit there and you make an appointment.  You go and you get your slide deck out and you pitch to them and say how good it is.  When Amgen bought Biovex and then they got it approved everyone sat up and said using a virus to cure cancer has merit and so everyone wanted to know about it.  What happened was that they went to all the companies in the field and they opened files on everyone.  Viralytics was on the file of every major pharmaceutical company and they all watched intensely as we reported our data over the years.

Malcolm worked very hard at seeing these people and presented the materials to them, etcetera, but there was already a level of interest.  If you have a drug today particularly in immuno-oncology and it’s half decent you should be able to get a hearing from the pharma companies.  You’ve got a receptive audience because they’re looking for pipeline.

Tell us about Imugene, what’s it’s technology?
So what Imugene is I licensed the technology from the University of Vienna Medical School and put it into the public company about four or five years ago.  I’ll try and make it simple because the technology is a little bit complicated.  Basically we inject these things called peptides into the patient and the peptides basically instruct B cells.  B cells are little antibody factories so there’s two ways of making antibodies, you can make them in a facility in big stainless steel tanks and grow them that way or the other way is to get your body to make antibodies.  Your body does that normally anyway, it’s making antibodies all the time to nasty things that go into your system.  We give these things called peptides to the patients and the peptides tell the little antibody factory called the B cells to make particular antibodies against a target.  The target might be breast cancer, we can sort of program the peptides so they tell the little antibody factory what to make.  It’s in immuno-oncology which is a very hot area, quite exciting.  We just made a big acquisition of some technology from Ohio State University and the Mayo Clinic about a week or so ago.

What stage of the journey is Imugene at in the clinical trials?
Now we have what they call a phase 1B gastric cancer trial which is up in Asia in Thailand and Hong Kong, etcetera.  In Ohio and the Mayo Clinic we have a phase two clinical trial and we’re about getting ready for entering a phase one trial for a very exciting immuno-oncology thing called a PD1 which is a checkpoint inhibitor which is another very hot area in immuno-oncology.  We’ve got two trials running and we’ll have a third early next year.

What does the data look like?
We haven’t got any data out of the trial in Asia yet because it’s too early, you have to be careful you report when you have a sufficient body.  If you get one patient with results sure it will be exciting but that can easily be followed by a patient that has no decent responses.  The phase two which is in Ohio State University and in the Mayo Clinic has got quite encouraging data and of course the third one we won’t know until we start next year.

I gather Prescient Therapeutics, which is your other one, PTX is the code, is in more inhibitor rather than immuno-oncology.
Yeah, correct.  So PTX is what they call small molecules and it’s got clinical trials running in Albert Einstein University in New York and a couple of trials at the Moffitt Cancer Centre in Florida which is a huge American cancer centre and is running a trial there in leukemia and ovarian cancer.  It’s a very nice little company, it’s got a rich pipeline, it’s still fairly small by market cap, it’s well run by a guy called Steve Clarke who’s very capable and that one we’ve got a lot of hope for as well.

Do you think that investors should follow you because you’ve got a Midas touch or is that your one big win, Viralytics?
I think it would be immodest of me to say people should follow me because I’ve got a Midas touch.  I think they should make an assessment of the technology as they see it.  Both Imugene and Prescient are, I think, really interesting companies.  I’m very hopeful for both of them.

In general as you said before investing in biotech requires patience.  Where would you put immuno-oncology in the sort of pantheon of things to invest in with biotech, would you say that that’s the most exciting area at the moment?
That’s the area that the life science investment funds internationally look at, they also invest in small molecules like Prescient.  You can have a blended approach to it but where the big money has been made in recent rimes has been in immuno-oncology.  Small molecules remain very much the mainstay of cancer treatment today, there are many drugs in that area and there’s a lot of work still going on in them.  I certainly would never dismiss small molecules versus immuno-oncology.

This isn’t an investment question but do you think with all the money and interest and effort going into it are we going to cure cancer?
I’m not a scientist but when I talk to my scientific friends about it, because I ask that and I’m an optimist, you have to be an optimist in the biotech field but I’m an optimist, and they say to me maybe we can bring it within the foreseeable future so that it’s a bit like insulin where you could maintain it.  In other words you don’t die from it but you’re able to live comfortably with it and have a good lifestyle without it being terribly debilitating and that sort of thing.  That’s my hope.  I’d love it to be cured and most of the approaches today are sort of cocktails, they’re mixes of different drugs.  Yeah, in answer to your question I am excited and I’m very hopeful.  I work with the most incredible people just spending their whole lives working on this and the amount of effort that goes into it is just incredible.  They’re very inspirational people.

I read something very nice about you where when you travel you come back and your wife asks you what other geniuses you’ve met this time.
I know, and that’s true.  I was at the City of Hope in Los Angeles today and I met – I mean I’m sure he won’t mind me saying it, I was with a fellow called Larry Kwak who was named by Time as one of the 100 most influential people of the year and he’s just the most delightful man.  He’s just doing absolutely incredible things and it’s just a pleasure to know him.  You walk out and you think wow, it’s worth being involved in that area.

Yeah.  Great to talk to you, Paul, I appreciate it a lot, thank you.
Alright, Alan, thanks very much for your interest.

That was Paul Hopper of Viralytics, Imugene and Prescient Therapeutics.