CASE STUDIES

Two Pharmaceutical Companies Join Forces

Merging two struggling biotech firms from opposite sides of the globe solved a lot of financial problems—despite some logistical headaches.
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The Problem
In our May 2010 issue, we wrote about the merger of vaccine development companies Inviragen and SingVax. Both companies had been struggling to raise capital to continue their research work. SingVax, which is based in Singapore, was working to develop a vaccine for hand, foot, and mouth disease, a sometimes fatal childhood illness, while Inviragen, in Fort Collins, Colorado, was aiming its resources at creating a vaccine for dengue fever. Venture capitalist Fred Schwarzer believed if the two companies merged, the combined entity would be an attractive investment for his firm.

SingVax chief Joe Santangelo and Inviragen CEO Dan Stinchcomb worried that it would be difficult to resolve issues such as how to prioritize research funding and how to combine two entities separated by 9,000 miles.

The pair ultimately decided that the deal could work and created a new company with the Inviragen name. Stinchcomb became CEO, Santangelo took the COO title, and Schwarzer invested. The company focused first on the dengue fever vaccine, the most advanced project in the pipeline.

What the Experts Said
Bhaskar Chakravorti, a partner with McKinsey & Company, said management should put a lot of effort into communicating, including face-to-face time, to overcome the distance problem. Craig Taylor, a partner with Alloy Ventures, said the new company faced a challenge figuring out how to deploy its scarce resources among competing projects. And Keith Larson, vice president of Intel Capital, warned that mergers like this, born out of desperation rather than strategic fit, often run into trouble.

What's Happened Since
The dengue fever vaccine is in Phase I clinical trials in the U.S. and Colombia. Early-stage clinical trials for the hand, foot, and mouth disease vaccine are expected to begin in Asia in the second quarter. "The integration has gone incredibly well," says Stinchcomb. "And the merger has allowed us to start trials on three continents, which is important when you are dealing with worldwide diseases."

What's Next
Stinchcomb would like senior management to communicate less on the phone and more during regularly scheduled face-to-face meetings. His goal is to get the group together six times a year. And if the vaccines perform well in early trials, Stinchcomb says, Inviragen will begin looking for partners, possibly established vaccine manufacturers, to help finance the expensive later-stage studies.

From the June 2011 issue of Inc. magazine




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