Flu fight spawns multimillion-dollar payday for pioneering Vancouver biotech

Co-founder Tony Holler recounts the $1.7 billion deal that put ID Biomedical in the hands of Euro-drug giant GlaxoSmithKline PLC

Business in Vancouver March 28-April 3, 2006; issue 857
By Bob Mackin

Nobody likes the flu, but Tony Holler never knew how profitable the battle against the illness could be until last summer. The former emergency room physician at UBC Hospital co-founded ID Biomedical in 1993 and would later take on the title of chief executive officer. A dozen years later, he shook hands on a deal that put the Vancouver-based biotech concern in the hands of European drug giant GlaxoSmithKline PLC for $1.7 billion. GlaxoSmithKline wanted and got a company that strategically acquired assets and developed products to immunize against influenza.

“Flu vaccines have become more and more valuable, in terms of the price they get, the perceived value to the public,” Holler said. “The big manufacturers who weren’t in the flu vaccine business were clearly looking at the business.”

Holler spent 11 years in the emergency room before going to the boardroom in 1993 with ID Biomedical to serve as the startup’s medical director. The turning point came after the company’s work on a tuberculosis vaccine was licensed to Aventis Pasteur in 2000 for a lump sum payment of $4.5 million, plus milestone payments worth more than $30 million and royalties.

“We thought we hit the jackpot,” Holler recalled.

ID Biomedical paused for soul-searching and figured it would be better off developing its own products than handing them off to bigger companies. “We wanted to develop our own expertise,” Holler said.

ID Biomedical bought Montreal’s Intellivax in 2001 for $25.7 million, then snapped up Shire Pharmaceuticals’ vaccine division for US$120 million in 2004. That acquisition included the Fluviral flu vaccine, and that’s what last year caught the eye of GlaxoSmithKline, which had announced its desire to become a dominant player in the flu vaccine business.

GlaxoSmithKline’s purchase of ID Biomedical came on the heels of renewed concerns that a deadly 1919-style flu epidemic could be imminent after the contamination of millions of vaccine doses made by Britain’s Chiron Corp.

Before the acquisition, Holler had assumed GlaxoSmithKline wanted to build a plant somewhere in North America, but “it struck us that anyone who wanted to become big in flu could become big in flu by acquiring us,” he said.

GlaxoSmithKline approached ID Biomedical to discuss an alliance or buyout and opened negotiations in August 2005. GlaxoSmithKline’s CEO, Jean-Pierre Garnier, and its vaccine division president, Jean Stephenne, were involved to varying degrees.

Holler recalls that there were times when the parties had to step away from the table. Once, Holler said, he would’ve been better off holidaying with is wife in the Okanagan.

“When the price was in question, we said let’s not talk, let’s spend our time more fruitfully doing other things.”

By late August 2005, GlaxoSmithKline’s senior executives came to Vancouver for what Holler described as a “make it or break it negotiation session.”

ID Biomedical eventually got the value it thought it deserved after the climactic friendly session with ID Biomedical’s straightforward team.

“Our management team did a great job of getting the best deal. This was a very valuable, sought-after asset by a number of companies, but we never got another bid. The reason why we never got another bid was this was a very good deal for the shareholders.”

GlaxoSmithKline completed the deal on December 8, 2005, just over three weeks after ID Biomedical shareholders gave it thumbs up.

It was quite a climb for Holler and fellow executives president Todd Patrick, chief financial officer Richard Bear and chief operating officer Staph Bakali. Seven years earlier, the company had been in trouble. It had a market capitalization of $30 million, which wasn’t necessarily deserved, Holler said.

“It was windfall for our shareholders, good for our employees and a very good thing for Canada, because Glaxo-SmithKline is setting up its whole biologics division in Montreal basically.

We looked at the deal in total and felt everybody came out a winner.”

The Ste Foy, Quebec, plant will be the largest of its kind in the world by next year and will complement GlaxoSmithKline’s existing operation in Dresden, Germany. Together, they’ll produce 150 million doses a year by the end of the decade. The ID Biomedical purchase positions GlaxoSmithKline at the forefront of battling both seasonal and pandemic flu.

Holler has moved on now to chair Medsurge Medical, a Vancouver-based company offering devices to treat hemorrhoids and developing a chain of colorectal treatment clinics. He no longer wants to be a CEO, a 365-day-a-year job that was as satisfying as it was taxing.

“I basically was married to my job,” he said.

How bad did it get?

“One morning I was having a shower, I had my cell phone in the shower with me, it was six in the morning, and then my wife [Barbara] came in with our house phone and she said, ‘I’ve got another call for you.’ I tried to put my cell phone down on the shelf in the shower and she looks at me and says, ‘You’re the definition of a person who has no life.’ ”

Now he has more time to chase his passion: ski racing. His four sons are involved and he’s the president of the Whistler Mountain Ski Club. He’s also raising funds to build a science centre at his sons’ alma mater, Vancouver College.

“I’m a big believer that kids should think about these industries. Look at me: I was a medical doctor and I loved being a medical doctor, but this was an incredibly satisfying job at ID Biomedical. The products we were developing were all products to save lives.”

bmackin@biv.com