Episode Transcript
Julia: Hello and welcome to the Be Inspired series. I'm Julia Hoggett, I'm the CEO of the London Stock Exchange, and I'm utterly delighted to be joined by James Harrison, who is the CEO and founder of Cycle Pharmaceuticals.
James: Thank you for having me.
Julia: Now I get the privilege of doing this quite a lot. And it means I get to dig into business models, and I love these things. I'm a bit of a geek about this stuff.
James: Cool.
Julia: But there is a common theme that I find more often than not, which is that founders of companies very often have identified a problem, and it's almost an itch that they need to scratch, that they've got to try and step in to solve it. And it feels true about so many of the things that I, so many of the CEOs I talk to, but it almost feels never more so in the case of Cycle Pharmaceuticals. So can you just explain what you do, how you do it? I know that's a big question.
James: I guess the job of an entrepreneur is to find some part of the community and do something for them a bit better than everyone else. Our choice is what I would argue is some of the most fragile members of our community, which is children born with rare genetic diseases. You never choose to have such a disease, and then your life is different to everyone else's. And the amount of people involved is large. It's not just the family carers, patients. But then through their life they are treated by a village of healthcare professionals of all different types. So helping them sounds like a good thing, because they didn't choose to have the condition that they have. And we should do what we can to help. I've done this from a blank sheet of paper. 12 years ago. But it kind of wasn't blank because of what I'd done before. I mean, it really was a blank sheet of paper. So I'm a chemist from Cambridge. I had a first half of my career in the City. I joined Morgan Stanley's M&A department, which is probably the definition of not knowing what you want to do. And then I worked in private equity for ten years for a guy called George Soros.
Julia: Who some may have heard of.
James: And I guess you learn to look around corners a little bit. We had a strategy of investing from dollar one and backing entrepreneurs, which is not a normal private equity venture capital strategy. And so I'd seen quite large businesses, quite well-known businesses, be created from dollar one. And so I thought rather than doing that from the investor side, I'd have a crack at starting by myself. We improve medicines, we don't discover new medicines, which is a very different risk profile. A standard biotech has to spend hundreds of millions of dollars to prove a new drug. We have a different level of proof, which is called 'equivalence' if we're trying to improve medicines. And the reason I say this, is that why bother improving medicines? And there are many medical conditions where that isn't such a need. So if you have a an infection and you need an antibiotic, but your course ends next Thursday, if it's four times a day dosing, you will get up in the middle of the night for your fourth dose because you've only got to do it till next Thursday. So clearly, I could try and improve that and reduce the dose frequency, but you're still going to get up in the night and have that four times a day pill for other factors, if it's cheaper.
Julia: If it's a drug that you have to take for the rest of your life then.
James: Precisely, yeah, precisely. So if you have a lifelong condition, and this is why we've been led to rare diseases, because most are genetic in origin and therefore drugs treat, they do not cure, and are lifelong.
Julia: Yeah.
James: Most of them are life threatening. Then we can really help that big group of people, not just the patients that are connected to that issue.
Julia: So you're not only improving the health of the patient, you're improving the life of the patient and the life of the family around that patient?
James: It's a big focus on quality of life. And what we found through our journey, we now have six drugs on the US market, and 99% of our business is there. And I'll explain why. We do have three children in the UK, which is wonderful, but we have over 1500 in the US. And those numbers sound small, right? But not in rare disease world. As much as any physical differentiation of a product that might take that four times dosing down to twice a day, for example, in that simple example. All of our products rely on patient support provided by Cycle, which is a large group of people that we brand Cycle Vita, which includes teams of dietitians and nurses that provide care to patients when they're on our medicine and support, helping them with their daily challenges, helping them with the compliance with their medicines.
Julia: You become almost embedded in the life of the patient in a way. So you've talked a bit about the rationale for I think selecting the diseases that you focus on. And you've got six drugs you said at the moment.
James: Yeah.
Julia: How do you select those? How does it come about that those are the ones that you identify? And can we dig a little bit into the business model of how all of this works as well?
James: Yeah so that's what gets me up in the morning. That's where I have a close team in our development side of the business. There are very few scientists in our science company because most people are doing other jobs. We focus on diseases that we call 'high touch', where patient care is necessary, so that we can provide this excellent support. The sad truth in rare diseases is there's something like seven thousand rare diseases. And depending on which source you go to, there's a thousand or less that have a medicine. And the number of rare diseases that are untreated is growing because they're getting stratified and understood at a faster rate than drugs are being approved to treat. So it's an open field. And that gets quite profound about capital allocation and where you choose to invest into product development projects, because there's a patient need at the end of every one.
Julia: And so you could do anything, so the problem is which do you do?
James: Right. And you're choosing between sets of patients that need help.
Julia: Hardest choice ever.
James: That keeps you up at night. We have a stacked pipeline. It's almost, our issue is capacity and keeping up with what we can do. I would argue that rare diseases is one of the only places where you can afford to build a commercial business, because the patients are fewer and they self-aggregate, because if you have a child with one of these conditions, you will drive hundreds of miles to see the physician.
Julia: And you will have found a network in some way, shape or form of other parents who may be going through something similar.
James: The social, media, networking is incredible, but that also means that we can't mess up.
Julia: Yep, yep.
James: So we have to deliver drug every month to these patients. Insurers won't let us deliver a year's worth of supply, because they don't want the patient to die with that amount of drug in their bathroom cabinet. If you see what I mean.
Julia: Yes, I do.
James: So we have to deliver every single month. So we have a product distribution which we control.
Julia: So you have to get that right?
James: We have to get that right.
Julia: And all the support.
James: Support and all the support and the sales side of things. But it is, we have a proven model now. It's repeat business because none of our patients are going to get better. And so we're all very motivated to do more.
Julia: Talking of doing more, and you talked about the US market, but you also have the Free Goods Programme?
James: We do.
Julia: Which is a remarkable exercise in doing more, and also expands as I understand it, your reach not just to patients in the US or in the UK,
James: Yeah.
Julia: But much more broadly than that. You want to talk a little bit, explain what it is and then a little bit about how it came about and, and what it's doing, because it is remarkable I think.
James: Thank you. This is important about our social responsibilities. So our first drug, there were three of us on the patent as inventors. Myself, a guy called Steve from Cambridge. Who is very smart. And a guy called Toby who is no longer with us. And he was a mentor of mine. All he wanted was that if we had excess inventory, we should give those drugs away for free in the developing world. That has been written into our articles of association since incorporation. And we're very proud about that. And we like telling people. And so that's a deep commitment in our company. And you can't just give people a couple of packets of pills.
Julia: It doesn't work like that as you've just described.
James: Because it's a lifelong condition. So it's a lifelong commitment when we make to these patients. So we currently have about 30 children in Pakistan, India, Bangladesh, the Sudan. And we're opening up this programme to about 20 other countries. And I get so much quantitative data about Cycle, but the nicest messages are when you hear from the families of these children. So there's one lad in Bangladesh where we got an email from the father in 2018, and we've been supporting that child since 2019, and we recently have pictures of him going to school for the first day. Now the disease that we help with, this Free Goods Programme is so acute, it's very rare fortunately, but it's so acute that if you are not diagnosed and not treated you will not see your second birthday.
Julia: And obviously you've got you've got doctors in the U.S. who are experts in these rare diseases. You're then having doctors, how do they even understand that this might be what the presentation for the patient is? And how do they then find out about you? Because there's even more hurdles I would have thought in those countries to overcome than there are in just in the healthcare system in the U.S. or the UK.
James: You're absolutely right Julia. So I think that, so diagnosis is one of the biggest challenges across all rare diseases. It's heartbreaking where you hear of diagnosis journeys that can be measured in decades in some diseases, and that happens in the developed world.
Julia: Yeah.
James: So very tough in developing countries. There are shortcuts. One of the sad shortcuts is usually there's probably more than one child in a family with the disease.
Julia: Right.
James: So the second, third child might be benefiting from knowledge about the first child. And living in our digital age people look up and find.
Julia: People can find things now.
James: People can find us. And there's a network of doctors too. So the rare disease specialist in Karachi is connected to US and UK physicians. So we regularly get a cry for help. Two weeks ago we had a cry for help from Gaza. A mum who had lost her daughter, had lost her house, was living in a tent and was trying to save her son who has this disease. We're doing what we can.
Julia: So I think we really have unpacked the purpose behind the organisation. I'd love to ask you a bit about the wider ecosystem, but let's go on a little bit more about where do you see yourself going from here? Obviously generating revenue, you've got a proven track record. You've got a sense of where you're going and a very clear purpose. Where do you see things progressing from here?
James: I wish I had a good answer. I think I have a better answer than 12 years ago in that we've made lots of mistakes. We've learned from them. We have a system that works. We know how to help these patients in the U.S. So our future is less cloudy because we know we will continue to do that because that is right. I think that the still nebulous part of our future, which is probably the same for all companies, is that we've now I think earned the right both through knowledge of how to sell drugs and help patients is the right way round to say that, and to be very financially secure. To look at adding, bolting on things and sort of having an inorganic chemistry growth plan as well as the organic pipeline that we have. So we're very active there now and I expect that to continue.
Julia: And with that inorganic activity, you'd also then look to wrap your model around that incremental those incremental assets, I guess?
James: I think looking at acquisitions is about values for me. I think that we have our own set of values about patient care and how to go about that and how to convince the doctor and the next patient that we're the right long-term home for them. And so I think we look at others and think, you know what, we think we could do very well with your products if we brought them into our network. Yeah. So I think we'll be doing, or trying to do, some of those things as well. So I think that just allows us to think about jumping curves. We're on a growth curve. Very happy with it. Super proud. And that there's opportunities to jump curves.
Julia: And in terms of the overarching future and the ability to finance those acquisitions and think about what structure you want to have. Now obviously you've seen a lot of the investment banking and finance world from the inside, as much as you've seen the pharmaceutical industry from the inside. So what's your take on how you want to manage that process going forwards for you?
James: So our shareholders are long-term thinkers, the University of Cambridge and other individuals who support the strategy. So we don't have any transient capital in our capital structure that need to exit at a certain time, the fund or whatever.
Julia: So they can go at a pace that you want to set?
Julia: Yeah. And I think that's one of the problems here that a lot of other companies get caught out by that. That fund lifetimes don't match up typically with drug development times. So we are very fortunate that we have a very stable equity base. We're profitable and cash flow generative so we can lever and we do, and we have a lot of debt capacity I think. So that would be our first capital source with regards to acquisitions.
Julia: That makes perfect sense. Now just to talk about the ecosystem a bit as well. I mean you may have heard me in other fora, but I'm passionate about the fact that I think that in the UK we have so many of those hard to generate bits of the ecosystem. So we've got world leading science coming out of our universities. Actually our spin out rates now are looking comparable to the US. We create more unicorns than anywhere outside the US and China. And we have a world leading capital market by any measure. The trick really is to make sure that all of those things work together and support one another. Now life sciences is an area and pharmaceuticals is area where we are 'hitting the ball out of the park', as the Americans would say, in terms of our fundamental science. There is work to do in terms of making sure the ecosystem as a whole can support that great British innovation. But I'd love your take on what you think's working, what you think we continue to need to work on in that regard?
James: So I fully agree we have world leading science here and we need to cherish it and protect it.
Julia: And celebrate it.
James: I fully agree. I think that that moves in kind of generational cycles, and we need to be mindful that if we don't solve other issues, then we risk that crown jewel, I think.
Julia: Yeah.
James: Because the leading academics is a global pool for talent. And I think our universities have never had the same competition money wise for academics that they do from the West in the US and now from the East with China for our amazing academics that choose to spend their academic life here in the UK. So I think that that needs to be protected at all costs. I think our issue is that, is not necessarily the first individual seed and start-up capital, there's lots of that. But that sets you on a train in a biotech business model where you need much more for the typical biotech plan. And it's that ability that if you're successful, you need more money. If you're unsuccessful, you're unsuccessful. If you're successful, you need more money. And we're not very good at that funding. And I think, and the US is the place that everybody goes. And I think that's, the reason they do that is because there's clearly much more liquidity there. But that's because they have this environment there that breeds liquidity. And if only we could get things right here, then it would breed the liquidity that people would then choose to stay here when there's a choice.
Julia: And that's exactly what we're seeking to do with all the reforms, which is with the Mansion House Compact, having our pension funds actually devote more of their portfolio to UK private companies. But then with this crossover market Pisces actually generating that liquidity within that space, that begets hopefully that confidence and builds the ecosystem, because it isn't the absence of great companies and it isn't the absence of capital. It's just making sure that we create the vehicle by which they can meet. Because I mean, I think everything that you're doing that your team is doing is illustration of exactly what we're capable of in the UK. Now, you've described a lot of your motivation for this, but let's take ourselves ten, fifteen, twenty years’ time. If you're looking back and reflecting on everything that Cycle Pharma has done, what would you want to be reflecting on at that point?
James: Everything starts with the patient, because everything that follows from that, however you think of doing well and what that means, comes from helping those people. In the future looking back if we've seen that we're treating more and more patients.
Julia: That's it.
James: That's it. Because everything else is a result.
Julia: You can reduce it down to actually a very simple metric.
James: Yeah.
Julia: Yeah.
James: So the only thing that matters is the number of patients that choose to have our medicines. Yeah, so there's no end game. There's no end date. This company needs to outlive me.
Julia: For the sake of the very patients that you're talking about.
James: Yeah. And it's as simple as that Julia.
Julia: It is when you think of it down to that fundamental metric. I mean I am passionate about being able to articulate purpose within companies. I don't think of it as a soppy thing, I think of it actually as the foundational thing to the strategy that, if you can elucidate your purpose, your strategy falls from that very straightforwardly, and it becomes the easiest thing to centre as a business what you do thereafter. It feels to me that you've done exactly that, and actually being able to simplify it down to that very point of how many people are we treating? How many people are we supporting? It feels like exactly the right the right way to think about it, and probably the right way to end this interview as well.
James: Thank you very much.
Julia: The one thing I would say, and thank you everybody for joining the Be Inspired series, is we call this Be Inspired because we want everybody to be inspired by the range of different journeys and stories that we talk about. I don't think we could have picked a better name for this series with a better company to genuinely inspire. So thank you and to all your team for everything that you're doing. May you go from strength to strength and may that roster of patients be even longer by the time that you're looking back on it. So many congratulations for what you've done, and more power to you.
James: Thank you Julia.
Julia: And thank you very much for joining us. I hope you've found this an inspiring session. I certainly have. And we look forward to seeing you soon. Thank you.
