SILICON
VALLEY / SAN JOSE BUSINESS JOURNAL – NOVEMBER 25, 2007
APT Moves Are Closely
Followed
by Sara Solovitch
During his 11-mile bike ride through the
back roads around Highway 101, from his office in Foster
City to his house at the top of the ridge in Hillsborough,
Dr. Stephen Dilly likes to think and decompress.
One of the things
he's thought about lately is the relative size of his company,
APT Pharmaceuticals Inc., as compared to Novartis Inc.
"I've worked it out," he says happily. "We're
10,000 times smaller. It makes you think. One of the things
it means is we can make decisions incredibly quickly. It enables us to do some
stuff that bigger companies simply can't do."
This kind of David versus
Goliath comparison doesn't come out of thin air. APT was
a two-man company when it licensed an orphan drug -- a lung
transplant rejection drug called Pulminiq -- from the Swiss
giant.
Now, with all of eight people on staff,
APT is attracting attention far beyond its
small size.
Much of it has to do with the man at the
helm. Dilly is an extroverted and
unpretentious man whose preferred dress -- a well-worn flannel
shirt, loose-
fitting trousers, a ring around his thumb -- belies the accomplishments
for which he's widely admired.
"We invested in APT specifically
with Stephen coming on board," says Albert Cha, managing
partner of Vivo Ventures Inc. of Palo Alto. "He's
articulate and
compelling. One of the reasons he's so compelling is that
he comes from the
clinical/regulatory side of the world as a drug developer,
but he has a good
understanding of what makes drugs work. He's touched a lot
of different products in large companies and now he's taking
advantage of that experience to think strategically and smartly
about the assets of a small company."
The enthusiasm
of investors was evident in early October when APT reaped
its Series A funding with $22 million -- a striking figure
given the company's size, age and focus on unmet medical
needs.
Its main product is an inhalable liquid
drug aimed at the prevention and
treatment of lung transplant rejection. Pulminiq, or cyclosporine,
was licensed
from Novartis in May, more than a year after that company
acquired Chiron
BioPharmaceuticals Inc., the Emeryville company where, not
accidentally,
Dilly and the majority of his team last worked.
For the "Chironites" who
successfully bid against several mid-sized companies for
worldwide rights to develop and commercialize the drug, the
acquisition
represented a triumphant reclamation.
"We thought it
was a crying shame when Novartis acquired Chiron, that we
weren't going to get this drug to the finish line," says
Dilly. "We have a better chance of success with this
drug because we know it.
"Many of the papers we acquired
through licensing we'd written ourselves. We
worked on the drug from 2003 to 2006, when Novartis acquired
Chiron. We'd
taken the application to the FDA to get it approved. We developed
relationships with the key transplant doctors and the key
decision makers in the FDA."
If successful -- Phase
3 trials begin early next year -- Pulminiq will double the
life of a lung transplant patient from 4.5 years (the shortest
of all organ transplants) to up to 10 years.
"We need one more clinical trial to nail it," Dilly
says.
His broader strategy is to acquire late stage orphan drugs
("We're going for drugs we know work, drugs that are
already approved") and
lie low ("We're staying quite deliberately below the
radar of the big guys.")
While the company's focus is on pulmonary medicine, Dilly
is ready to pounce
when the right opportunity presents -- which one did, recently:
a cardiac drug
aimed at preventing congestive heart failure in women undergoing
chemotherapy for breast cancer.
APT snapped it up.
A medical doctor with
a Ph.D. in cardiac electrophysiology, Dilly has worked in
many different therapeutic areas and has a knack for drawing
analogies between seemingly unrelated conditions.
"Stephen
has a real ability to take lemons and make lemonade," says
Bryan
Walser, now CEO of Perlegen Inc. and former vice president
of corporate
strategy at Chiron.
"He looked at our pipeline at Chiron
and saw that what we had at best was
ordinary," Walser recounts. "We had a program in
cancer with a drug we'd
licensed. He looked at the results and saw that they didn't
support going forward with the project. The company had invested
heavily in it, but the results didn't justify going forward
with it.
"In a case like that, it's easy to just keep
going forward, but he stopped it cold.
He's absolutely not afraid of any setback in getting high
quality drugs to patients with unmet needs."
The London-born
Dilly always knew he wanted to work in medical research.
He began his career at Pfizer in Sandwich, England, then
moved to SmithKline
Beecham Pharmaceuticals, where he began generalizing -- first
in cardiac drugs, then on to pulmonary medicine, gastrointestinal
medicine and psychiatry, heading up development for Paxil's
clinical indications.
If something hadn't come along to change
him, he says, he might always have
remained "your ultra geek in a science box." But
in 1996, a personal tragedy set him on a different course:
the "catastrophic birth" of
his oldest son, George, who was left severely disabled with
cerebral palsy.
"After all the grieving, the beating
of your chest -- of course, you go through a
period of 'Why us?' And then you get over it and say, how
can we turn this into a force for good?"
Dilly's wife,
Dr. Lynette Mullens, whom he describes as "my
mirror image" (like
him, a medical doctor who also has a Ph.D. -- hers is in
neuroscience -- and a long history in drug development),
answered that question, in part, by co-founding The Avalon
Academy, a Burlingame school for children with movement disorders.
George, now 11, has had a major force -- "collateral
benefit," Dilly calls it -- on the entire family.
"I
had a fabulous conversation with my 9-year-old daughter a
few days ago and she told me, 'I don't quite know how to
say this, but I'm kind of glad George is disabled.' Of course,
I knew exactly what she meant. There are relatively few life-
changing experiences that put you in touch with a whole new
set of drivers."
Dilly credits his oldest son with making
him the person -- and leader -- he is
today.
"What it does for me as a person in
industry is it makes you unflappable. It helps you keep things
in perspective. There are worse things that can happen."
That
quality became quickly apparent to Walser when Dilly arrived
at Chiron in
2003 for a round of interviews as head of drug development.
Chiron had just
been the target of an animal rights bombing, and the surrounding
streets had
been cordoned off; police were everywhere.
"It was not
the way to make a good first impression," concedes
Walser. "But
Stephen didn't mind. Not only that, he viewed it as a challenge,
a momentary
glitch. I knew immediately he was the person we wanted."
Dilly,
according to his colleagues, is a Renaissance man, erudite
and well-read in areas well beyond the world of business
and medicine, a 48-year-old triathlon competitor who regularly
places in his age group.
On weekends, he might be found coaching
his daughter's soccer team or behind a bulldozer, fundraising
for The Avalon Academy, or clearing the family property up
at Lake Shasta.
"You never sense his whole heart isn't
here but his whole heart is in a lot of
different places," says Howard Raff, Chiron's former
vice president of
development management, now COO of APT.
"He is extremely
perceptive of people," Raff continues. "You're
never fighting for recognition with Stephen. He puts all
of us in front of the board, and he never puts anyone up
for failure. He leads from the rear of the room."
Though
Dilly's current strategy is to lie low, "below
the radar of the big guys,"
word about the company has leaked out. After the latest funding
round was
announced, the office was deluged with hundreds of calls.
"People
want to be part of our story," says Raff,
who insists that he and Dilly have no intention of creating
a Chiron spin-off. Instead, they say, they are building a
vertical slice of their old company, tapping not only the
people whose skills they most admired but those they most
enjoyed working with.
Gregory Baigent is one of them. As
project leader, he is, in Dilly's words, "a
master of tradeoffs between scientific purism and real-world
practicality."
Dilly was his boss for three years at
Chiron, a period that Baigent now calls "a
great period of my professional life, three years of feeling
like a new wind had
blown through the organization."
So when Dilly called
to see if Baigent might be interested in coming back to work
for him, he says he jumped at the chance.
"It's amazing
what he can do with four simple words: 'What would you do?'" says
Baigent. "You never
go to Stephen with the question, 'What should I do in this
circumstance?' He forces everyone to think through the ramifications
and consequences of what he's doing.
"You have to figure
it out and take a position with Stephen. He has a great skill
for bringing out the best in people. He lays out a vision
more than a set of
requirements, a strong sense of ownership for the company.
The flip side is that I can't just bump this responsibility
to someone else."
Sara Solovitch covers health care and biotech for the Business
Journal. You can reach her at (408) 299-1841
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