Achieving the Exit with Troy Wilson & Intellikine

Shareholder Representative Services’ latest Q&A features Troy Wilson.  Wilson led Intellikine to an acquisition by Millennium, a U.S. subsidiary of Takeda, for up to $310 million. As a serial entrepreneur, he looks for opportunities with clear value inflection points that bring discipline to the development process. He discusses his approach to value creation, the difference between tech and biotech innovation, and new business models that have the potential to enhance flexibility.

Q: As a serial entrepreneur, how do you decide which new venture to pursue?

I look for several elements in a new venture. The first is really innovative science. The second is a very strong team–not only a scientific team, but also a clinical team and a business team. The third element is the ability to determine whether you can actually get to a significant value-inflection point. That is key for financing the venture.

Biotech companies never have a problem creating value. The problem is that they spend too much money to get there. I started Intellikine with the view that we were going to create several hundred million dollars worth of value, but that we needed to do that by spending less than $50 million in venture capital. Ultimately, we raised $41 million in venture capital and we sold the company for up to $310 million.

The challenge is to be focused and efficient, and to not overspend. That’s what lowers the returns for investors. I put a lot of thought up front on the financials, and I really try to engineer these companies for success right from the start.

Q: How did you draw upon your prior experience as a founder when you launched Intellikine?

There’s no magic formula for success. You look at the technology and the market opportunity, and then determine the best way to solve the problem. Maybe it’s a platform-based model, maybe it’s a product-based model and maybe it’s a hybrid model.

I’m a huge fan of the build-to-sell model of company formation. With this model you ask: what is the product and who are the likely buyers of the product? Then, you involve prospective buyers in the process at a very early stage. That creates very good alignment among the company, the investors, and the ultimate end user. I like that model because it brings discipline to the process.

Q: How did you differentiate Intellikine from competitors?

We differentiated Intellikine in two key respects. We were the only private company that took on the entire PI3 kinase pathway. Our goal from the very beginning was to develop drugs against every one of the targets on the PI3 kinase pathway, and we succeeded in that goal.

We also moved unbelievably fast to put three of those programs into human clinical testing. Even to this day, people come up to me and say that they’ve never seen a company that was able to execute as efficiently as Intellikine, putting so many programs into clinical trials for so few dollars in a short amount of time. I think that’s why we were so successful. You can do all the mouse experiments that you want, but at the end of the day, people want to see that your drug is having an impact on patients. That’s the goal, so get there as quickly and as cheaply as possible. The results will take care of themselves.

Q: What are some challenges of having a larger investor base?

The reason our venture capital group was so large and diverse was that I wanted to have the ability to remain independent. You have to be able to go it alone, and drug development can be a very expensive undertaking, particularly if you have three clinical trials under way. We were fortunate that we had the participation from a number of great funds and willingness on their part to put more money to work. They had significant money in reserve had we chosen not to take the offer from Millennium Takeda.

I probably spent a quarter of my time communicating with my board members, getting their input and getting them to talk with each other. Our board meetings were very constructive because everybody had time in advance to think and provide their input. An investor at a previous company once told me that venture capitalists don’t like surprises, either positive or negative. Make sure that you share late-breaking information on a real-time basis with them.

Q: How did you determine that the deal with Millennium Takeda was your best exit opportunity?

We had M&A discussions, licensing discussions and venture financing discussions all going on at the same time. Whether you are taking a company public or doing another round of financing, I’m a big believer that, as CEO, your job is to make sure that the company has all of the available options in front of it.

Our challenge was getting a handle on the risk, and that was ultimately why we decided to sell the company. It was clear that we could have created significantly more value for the investors, but we would have had to take a significant amount of dilution to do so. We couldn’t really forecast the likelihood that we would succeed. If my job was to return capital to the investors and focus on maximizing the cash-on-cash return, the right answer for us was to do an M&A transaction.

Q: Is there a philosophy that sums up your approach to creating value?

Don’t innovate for the sake of innovation. Innovate with a product and a need in mind. If you have really sexy technology, that’s great, but that technology needs to be married with a really strong market need.

People often troll through universities looking for interesting technologies and then ask what they can do with them. I do exactly the opposite. I like to innovate with a clear product in mind, because that’s ultimately how pharma executives and buyers think. You have to believe that every clinical experiment you do is the true value-creating event.

Q: Is there a fundamental difference in the way biotech and tech entrepreneurs approach innovation?

What separates tech from biotech is that tech has the potential to break even or become profitable relatively quickly, and it can become self-sustaining. I have yet to see a drug development program that can become self-sustaining.

It’s not to say that it can’t be done, but it’s just a different business model. Biotech is much more like making Hollywood movies or oil drilling in the sense that it takes large amounts of money, and when you hit it, you hit big. It’s a very discovery-based business model and one that can be highly profitable if you set it up correctly. In that way, it’s a little different than tech, software or networking. In biotech or pharma, you really only have around 15 customers and that number seems to be shrinking.

Q: What’s next for biotech?

Looking forward, I’m thinking about how we can continue to innovate in our business. We have innovated in the science and in clinical development, but we need to innovate in the development of our business models. I’m paying attention to the firms that are organizing themselves so that their programs are separate companies. They are financed independently, and that gives them more flexibility in selling them and in how they think about the downstream when they are working out partnerships and earnouts.

I’m moving away now from the idea that everything should be organized under one umbrella, and that if somebody is going to buy it, they’ll buy the whole company. Pharmaceutical buyers want to buy the assets that they want. There is increasing innovation around how we think about structuring new companies and finding business models that are going to give venture capitalists and entrepreneurs a lot more flexibility.

There is a real desire and a hunger for innovation inside of pharma. That provides an opportunity to create significant wealth and significant value for society. That, more than anything, really excites me because I see this tremendous need in our industry to continue to innovate and get stronger.

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