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RxBio’s Shannon McCool following a non-traditional commercialization path

By Tom Ballard, Director of Innovation and Entrepreneurial Initiatives, Pershing Yoakley & Associates, P.C.

A conversation with biopharma entrepreneur Shannon McCool about his strategy for growing RxBio, Inc. evokes memories of a Frank Sinatra song that was later covered by Elvis Presley.

The song, titled “My Way,” aptly describes the non-traditional path that the seasoned pharmaceutical industry executive turned consultant has adopted to bring his product to market. He’s doing it from Johnson City, a community that McCool has adopted and now calls home. More important to him, however, is the fact that he is approaching it in a way that few in the life science sector would believe possible.

During a recent interview with teknovation.biz, McCool, RxBio’s Chair and Chief Executive Officer, described his earlier professional life, the impetus for starting the company, the unique approach to market that he is taking, and the challenges that he has faced.

McCool graduated from the University of Tennessee (UT) College of Pharmacy in the early 1970s, just a few years behind recently retired Pharmacy Dean Dick Gourley. This college connection would prove important to the technology that RxBio is developing.

McCool says he tried being a pharmacist for about three years, but soon elected to pursue a different career path. The decision led him to “carrying the bag” as a sales representative for pharmaceutical giant Eli Lilly and Company. Although McCool did not think he would be good at sales, he found that he was – in large part because of his professional preparation.

“Lilly wanted us to establish a collegial dialogue with the doctors,” McCool said. This meant that he was focused on sharing information about drugs with the physicians and answering their questions. In Lilly’s view, being a valuable resource to the medical community would pay handsome dividends in the form of increased sales, a belief that McCool says he validated.

He rose through the ranks at Lilly before accepting an offer with Beecham Labs in Bristol to become head of strategic planning, licensing, and business development.

“My job (for Beecham) was to figure-out the future,” McCool said. “Since my job was newly created, no one knew exactly what it was that I should do and so I was given an enormous amount of leeway.”

Three years into the strategic planning role, McCool said that two things were obvious to him – he and his family had fallen in love with Northeast Tennessee, and Beecham needed more critical mass than it currently had and was likely to acquire in the United States.

So, at 40 years of age and with 13 years in middle and senior management positions in pharmaceutical companies, “I hung out my shingle as a consultant.” McCool thought the client base would be small start-ups, but it was actually “big pharma” companies. His consulting work, now totaling 17 years, continues under The Fallon Group, LLC name.

McCool, who became a member of the Dean’s Advisory Board for the UT College of Pharmacy, recalls that Gourley called him one day to describe what the Dean believed might be a “significant invention” and asked for McCool’s independent evaluation.

McCool agreed that the small-molecule technology had possibilities. When he asked the researchers what they wanted to do with their technology, he said they were “chomping at the bit to start a company.” Knowing it was not that simple, he decided to ask a few probing questions. One was, “Who wants to resign their tenured positions to go with the start-up?” The second was, “Who wants to put their house on the line to finance it?”

“The hands went down and stayed down,” McCool said.

He was undeterred, however, and incorporated RxBio about a decade ago with the goal of financing the start-up in a non-traditional way. RxBio has a license for the technology that was executed with the UT Research Foundation. McCool says the company is currently focused on developing novel products that protect against whole-body radiation as well as damage to the gastrointestinal tract due to radiation, chemotherapy and various toxins. Over the long-term, he wants to focus on novel cancer agents and those that block plaque build-up in blood vessels.

“If we were going to create a company around novel technology, what’s the most cost-effective way to do it,” he asked himself.

McCool’s first conclusion was that he wanted to put together a management structure that did not “cost an arm and leg.” To do so, he drew on The Fallon Group for talent rather than hiring full-time staff. He also decided to focus only on the things needed to advance the technology, not bricks and mortar. Again, The Fallon Group had a building and equipment that he was able to use for RxBio’s purposes.

He then recruited an Executive Management Committee comprised primarily of seasoned industry professionals with solid track records, a team that no start-up company could afford if it had to buy them at market value.  Collectively that team had been instrumental in the development and successful commercialization of nearly 30 new chemical entities.

Most significant, however, has been McCool’s ability to advance the technology thus far without following the traditional biotech commercialization path that involves venture capital. He describes this as a “deliberate part of the strategy” and an option that was possible because the technology “allowed us to sidestep a good deal of product development and avoid diluting the dollars that angels invested.”

Timing is also important in technology development, a reality that McCool noted in terms of RxBio’s focus and the Fukushima nuclear disaster in Japan about a year ago. He says that experts examined the arsenal of technologies that were available to treat whole-body radiation exposure and found nothing.

“When they asked about technologies in the ‘wings’ that could be effective in treating or preventing death from high-dose radiation, they found Rx100,” he said. Preliminary animal studies suggest that the drug can significantly improve survival for those exposed to lethal whole-body radiation if administered within 72 hours of exposure.

About nine months ago, RxBio received a two-year grant from the Biomedical Advanced Research and Development Authority (BARDA) of the U. S. Department Health and Human Services for up to $24 million ($15 million base and up to $9 million in exercisable options). This followed several million in funding provided earlier by National Institute of Allergy and Infectious Diseases, a division of the National Institutes of Health. In addition, the Department of Defense just awarded the company another $1 million to augment the studies being undertaken with BARDA).  This latest federal funding will allow RxBio to further study the efficacy of its Rx100 drug and plan for its manufacturing.

McCool says the federal funding to date has allowed him to avoid venture money thus far.

“We have a really unique model,” he says proudly, adding that RxBio has been able to use federal grants and/or contracts to bring in $3 to $4 of non-diluted revenue for every $1 of private equity financing.

One of McCool’s biggest complaints is the lack of help from the state to keep his company in Tennessee, “We have other states trying to recruit us,” he says and cites other states that are focused on recruiting and retaining life science companies. “There needs to be a mechanism in Tennessee outside venture capital. There are ways to fix these things,” he believes.

McCool is optimistic about the company’s future and the fact that his way of product development without venture funding will be successful.

“My team and I are running 12-14 and sometimes 20 hours a day to keep our burn rate as low as possible,” he says, adding emphatically that there is “no technology or team better than RxBio.” McCool believes RxBio will be in a “pretty pivotal position” in the next two years.

He’s less confident that the company will be able to stay in Northeast Tennessee. “I like where I’m living, but I can run the company from anywhere,” says the man who has been a consulting road warrior for decades.

“I want our initial investors to be able to walk away pleased that they took the journey with McCool and able to say that the ride was worth the taking,” he says.


Tom Ballard

By Tom Ballard, Chief Alliance Officer,
Pershing Yoakley & Associates. P.C.

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