Innovation Conversations: Q&A with CDRD president and CEO Gordon C. McCauley

When saying ‘no’ means a win

Vancouver-based Centre for Drug Research and Development (CDRD) is an 11-year-old organization that helps “bridge” scientific discoveries and commercialization in the life sciences sector. It traces its roots from the Network of Centres of Excellence federal program where it has received funding as a Centre of Excellence for Commercialization and Research (CECR) from 2008-18. It has also been receiving federal funding in the budget, the latest of which is $48 million in Budget 2018 over three years starting FY2019-20. With a Canada-wide network of 52 affiliate universities and research centres, and several partners in the investment community, CDRD has now spun off seven companies and helped raise over $270 million in risk capital.

RE$EARCH MONEY spoke to CDRD president and CEO Gordon McCauley - a veteran life sciences executive in the investment community - about how it is helping companies scale up and its strategy for attracting capital in a sector that is growing exponentially but is perceived to be risky.

R$: How do you go about identifying promising discoveries or innovations that can be commercialized?

Gordon McCauley: We evaluate at different layers of depth, but we make that process as proactive as possible. It’s not a question of sitting around and waiting to see what comes our way. Quite the opposite where there are areas that we think are interesting, we focus on them and look very aggressively at them. We’ve got a high quality team that can figure out fairly quickly whether or not something has enough interest to justify further depth and if it does, we kind of go through a handful of steps there.

One of the things that’s interesting about our foresight process is usually there are things that surprise. For example, we had a recent discussion (within the organization) and discovered that over the last year and a bit, there is almost a billion dollars of venture capital into one space that we haven’t done anything for. Venture capital’s putting a billion dollar into that space, that’s surprising and something we should look into a little more deeply.

The 80-20 rule tends to hold pretty nicely at each stage of the evaluation process. We look at what’s happening around the world, we tend to reject 80% of them. The 20% that goes through to the next stage, we do diligence and we reject 80% of those. And we go from diligence to seeing if we can design a killer experiment that will tell us whether or not there is value there, and we end up killing about 80% of those. And when we get to ideas that are interesting themes that might move forward, we tend to kill 80% of those. And I don’t want to sound so negative but at the end of the day, the courage to say nothing’s going to work is as important as the optimism that you identify early. You have to be that rigorous about it. I’m pretty sure our spin off companies will continue to develop (but) I wouldn’t be surprised if, over time, we discover that the 80-20 rule holds there too.

R$: How are you helping companies scale globally?

GM: Creating companies to scale takes up the lion’s share of our efforts. About 60% of our energy goes into this area. That is basically the result of our work and our network - not just in Canada but also around the world as we identify promising areas where the science is going to go. Given the stage at which we invest and which we work, there’s no point in doing what everybody else is doing right now because others with capital will do it more effectively than we can. We have to spend a lot of energy using our network around the world with global venture capital companies, with global biotech and pharmaceutical organizations … to try and figure out where things are going. Then, we start to assemble at any given time from eight to ten teams going where we think there are interesting areas and then what we try to see is two or three of those projects a year kind of graduate into a full project that we will ultimately spin out into a company. We’re doing that work and doing a lot of it in stealth mode within the organization.

Then, we do help companies scale up. We have 100 people, 75 of whom are commercially trained scientists who understand the nature and the quality of work that needs to be done to attract capital. When we’re working with those companies, there’s typically a scientific issue that could be a road block to risk capital. Or it could be a formulation issue or a chemistry issue. Or, we could be helping them with a pipeline product where they are spending all of their resources on a lead product, but they know as we all do that it’s wise to have a secondary product to move forward and develop. The third area we tend to help them is with business issues: whether it’s licensing advice, financing advice or business development work. The reason why we’ve been successful is usually we’re coming up with a solution to the problem — be it a scientific one or a business one. We’ve also realized that if a problem can’t be solved, you should dedicate your resources somewhere else.

R$: Life sciences is still considered a risky sector to invest in. How do you attract risk capital?

GM: There was a previous study of what determines whether a drug will be approved. The number one determinant is whether the organization kills a program early on. What it says about you as an organization is that you ask the really hard questions early in the process. You don’t avoid them. You ask those questions robustly enough and generate data sets that are robust enough so that you can make a decision (whether to kill the project early on) and so you have outcomes that are as unequivocal as possible. Then, you follow the data. As simple as that sounds, in an industry full of scientists who trained rigorously to generate and analyze data, when you add in the element of risks and rewards, it becomes harder and harder to follow data. That’s basically what we do which is frankly what global risks investors would look at.

R$: Do you know when to say no?

GM: Absolutely. And it doesn’t matter ... if we’re working with the most prominent researchers in the country. Their outstanding reputations count for a lot. But at the end of the day, the data are the data and where they need to tell you—to go ahead or don’t – that’s what matters.

R$: Do you have targets for how many companies you’re going to spin off in a year or are there timeframes for spinning off companies and launching them globally?

GM: We have tried really hard to identify what logical timeframe there is, and what the standard model is. I guess there isn’t one. It depends on the circumstances. For Kairos Therapeutics (established in 2013), which is now an essential part of Zymeworks, it consumed a lot of our time and energy and resources for about four years. Then it spun out but is still a part of the organization. We still provide scientific service to them. In other cases, the company just spun out. We continue to provide all of the business management infrastructure. But in terms of objectives, we want to be spinning out projects of scale that are really able to move forward on their own.

The reason for this is because we know what Canada needs … We lead the world in starting up companies; we’re good at that. Except that Canada is the only major pharmaceutical market in the world without an anchor company. Without a billion-dollar company … organizations like ours have to step in to provide a lot of the company creation work, the ideation kind of work and training.

We also have a long and great track record in training scientists to be more commercially minded. Our success data is stunning -- We have trained over 200 people and 96% of them have gone on to relevant jobs. One of the things we realized though is that just as it is important to train scientists to be more commercially minded, we also have to train the next generation of business leaders in life sciences, and it’s a very unique space. We teamed up with Pfizer Canada who put in $1 million on the table to allow us to create the CDRD Executive Institute, which is a 10-month program for the next generation of CEO, chief business officer or chief science officer. We’re getting to announce our first student cohort, and it will launch in September. It’s open to a maximum of 20 people a year and clearly designed for people with 10-15 years of experience in life sciences. While doing their regular job over the course of 10 months, participants do focused sessions that alternative between Vancouver, Toronto and Montreal with a view to graduating next May.

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