Five Questions With…

John LeonePartner Paul Capital HealthcareOn April 15 you will join Paul Capital Healthcare, which pays upfront cash for the rights to future drug royalty streams. Your background is as a biotech executive, most recently as CEO of Cambrex Corp. Why did you make the jump from corporate to private equity?

I asked myself that many times going through this transition. I’m a pharmaceutical veteran and have a rather extensive background running pharmaceutical companies. This is a way of taking that and putting it to work in a new and exciting way, and an interesting way. The need for alternative revenues for biotech companies is great. [As a consultant over the last year and a half] I have helped some of the better known equity guys in an advisory capacity. I started to see the excitement and intellectual challenge of helping companies that have a need to move forward.

What kinds of companies will you be looking at?

We’re looking at companies that already have a [pharmaceutical] product or will have a product soon. That’s where I have the ability to help. I’ve been dealing with the success or failure of products for years. We want to evaluate a product and a management team. My learning curve there is very small. My learning curve on financial structures, that’s longer.

So, what are the top few reasons that drugs succeed?

They succeed when they are fulfilling a real need, bringing something to market that has a reason to be. Sometimes you have to help the market understand how a product fits that need. Sometimes you create one. Cholesterol’s [dangers were] known, but not an issue, until companies told people, “You need to worry about this.” The other way to have a successful product is to craft it in development or in the commercialization stage to differentiate it from competitors.

And why do drugs fail?

Sometimes the management of a product doesn’t quite understand how to position it. They may have set themselves up for failure. Or they can under-resource it. And sometimes they are just supplanted by a better mousetrap.

Is the health care industry as a whole really a promising one for LBOs?

The health care market is a very dynamic market. You have to be in the market quickly and you need innovation to succeed. Many companies are born every day. As a result of that proliferation of ideas and innovation there’s going to be the need for financing. I see a continuation of buyouts and merging of smaller companies with other companies. I also see the need for more revenue, whether it be revenue from debt or equity, to go forward.