Axcan Pharma Inc.

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Axcan Pharma Inc.

597 Laurier Boulevard
Mont-Saint-Hilaire, Quebec J3H 6C4
Canada
Telephone: (450) 467-5138
Toll Free: (800) 565-3255
Fax: (450) 464-9979
Web site: http://www.axcan.com

Public Company
Incorporated: 1982 as Interfalk Canada Inc.
Employees: 439
Sales: CAD 325.6 million ($292.3 million) (2006)
Stock Exchanges: Toronto NASDAQ
Ticker Symbol: AXCA
NAIC: 325412 Pharmaceutical Preparation Manufacturing

Axcan Pharma Inc. is a Quebec, Canada-based company listed on the NASDAQ. The multinational pharmaceutical company specializes in drugs to treat gastrointestinal problems, including irritable bowel syndrome, inflammatory bowel disease, cholestatic liver disease, and problems due to pancreatic insufficiency. In-house marketing is focused on gastroenterologists in five countries: Canada, the United States, the United Kingdom, France, and Germany. More than 80 percent of sales are generated in North America, with the United States producing the lion's share. Axcan offers some 40 products and dosage strengths, mostly the result of internal development but also coming through acquisitions. The company's highest selling product is ULTRASE, a digestive aid for people suffering from exocrine pancreatic insufficiency.

COMPANY FOUNDED: 1982

Axcan was cofounded by Dr. Herbert Falk and the company's longtime CEO and chairman, Leon F. Gosselin. A native of Quebec, Gosselin earned an undergraduate degree in biochemistry before turning his attention to business in the early 1970s and enrolling in an M.B.A. program at Quebec's University of Sherbrooke. It was here, according to BioScienceWorld, that he "got the pharma bug." With his M.B.A. in hand he sought employment in the pharmaceutical industry where he thought he could best put his science background to use. He took a job with a small company, Nordic Laboratories Inc., eventually becoming general manager. Other positions in the pharmaceutical industry followed as did consulting contracts. In 1982 he joined forces with Falk to create Interfalk Canada Inc. Gosselin owned a controlling 51 percent stake and Falk, 49 percent.

Interfalk's focus on gastroenterology was more a matter of opportunity than design. While investigating certain medications, Gosselin realized that in addition to their registered uses, the drugs held promise in dealing with gastroenterological disorders. "Through contacts that we already had, for instance, the Mayo Clinic in Rochester and other centres in hepatology and gastroenterology … the Canadian company was able to act as the catalyst to get one or two products approved," Gosselin explained to BioScienceWorld. "And in the beginning, that was the only objective of the company … to get a couple of products approved in Canada."

The first drug for which Interfalk was able to gain approval and begin selling in Canada was SALOFALK in 1986, used to treat ulcerative colitis, a form of inflammatory bowel disease. A modest success, SALOFALK allowed the young company to begin to establish itself in the Canadian market, and help it forge research ties with other companies. In 1987, for example, Interfalk and the Mayo Clinic began working together to develop treatments for Primary Biliary Cirrhosis (PBC), an autoimmune disease of the liver, using ursodiol, a drug better known for its ability to dissolve gallstones. Although PBC was a relatively rare disease, affecting about 50,000 people in North America, the drug, which would take the name URSO, had an estimated annual market of CAD 100 million. Moreover, due to this relationship, Axcan would be able to later turn to the Mayo Clinic to conduct clinical trials on some of its liver drug candidates.

NAME CHANGE: 1994

Gosselin formed a company called Axcan Holding Ltd. in 1992 and he bought out Falk to become the sole owner. Gosselin then sought funding to expand the small company. In 1993 he sold a 25 percent stake for CAD 5 million from a Quebec venture capital firm, Caisse de Depot et Placement, investing government pension funds. With these funds Interfalk was able to complete its first acquisition, the 1993 purchase of Biopharm Laboratories Inc. and Biopharm Inc., which included a laboratory and manufacturing facility. Then, in June 1994 the company bought a 75 percent interest in Calgary-based Western Dialysis Supplies Ltd., maker of concentrated acid solutions for hemodialysis. A month later, Interfalk changed its name to Axcan Pharma Inc. It was also in 1994 that the company acquired a pair of antacids, AMPHOJEL and MUCAINE, from Wyeth-Ayerst Canada Inc.

In 1995 Axcan allied itself with the Swedish firm Althin AB, creating a joint venture to manufacture concentrated solutions for hemodialysis at the Biopharm and Western Dialysis facilities, the product to be sold in Canada and distributed worldwide by Althin. Gosselin was ready to take Axcan public to gain further access to capital in order to expand the company into the United States and seek Food and Drug Administration (FDA) approval to sell URSO. In December 1995, the company raised about CAD 25 million in its initial public offering of stock. Axcan's shares then began trading on the Montreal and Toronto stock exchanges.

In March 1996, Axcan filed a "New Drug Application" with the FDA for URSO. In the meantime the company made advances on other fronts. It launched a pair of new products: the PROTECTAID contraceptive sponge using low levels of spermicidal agents; and the HELISAL RAPID Blood Test, used to detect antibodies to Helicobacter pylori, an ulcer-causing bacteria that increased the risk of stomach cancer. Axcan also acquired another drug from Wyeth-Ayerst in October 1996, picking up VIOKASE, used to treat exogenic pancreatic insufficiency.

Axcan began 1997 by raising another CAD 17.4 million in a secondary offering of stock, and ended the year by gaining FDA approval for the use of URSO in the treatment of PBC. In between the company acquired the U.S. marketing rights to VIOKASE, which had been owned by American Home Products Corporation, and soon began selling the drug in the United States. More products were added to the company's portfolio in September 1997 through acquisition. Gastroenterology products, MODULON (a relief medication for irritable bowel syndrome) and LANSOYL (a laxative jelly), were purchased from Jouveinal Inc. Furthermore, several cystic fibrosis treatments licensed to Scandipharm Inc. were acquired. Also in 1997 Axcan secured additional funding through the private placement of 75,000 shares of stock with Le Fonds Cote 100 REA-Action, raising about CAD 860,000, and placement of another 450,000 shares with Mutual Asset Management, raising another CAD 5.8 million.

Axcan began selling URSO in the United States in April 1998, the drug distributed through Axcan Schwarz LLC, a joint venture with Schwarz Pharma US. At the same time it introduced two new products in the Canadian market: ENDOSPRAY and HELISAL ONE STEP. Axcan also gained approval in Canada for the use of SALOFALK as a preventive for Crohn's disease patients who underwent bowel resection, a tablet form of URSO to replace the capsules that had been sold previously. Furthermore, in May 1998 Axcan sold Biopharm Laboratories Inc. to Warner Pharma Inc.

COMPANY PERSPECTIVES

Axcan's mission is to improve the quality of care and health of patients suffering from gastrointestinal diseases and disorders by providing effective therapies for patients and specialized caregivers.

Axcan expanded its marketing capacity in 1999. In August it acquired Scandipharm Inc., a Birmingham, Alabama-based pharmaceutical company, picking up its sales force to become Canada's first pharmaceutical company with a national sales force in the United States. As a result, a few months later Axcan bought out Schwarz in their joint venture and began to independently market URSO with its new sales force. At the end of the year Axcan raised another CAD 45.9 million to acquire a minority interest in Scandipharm owned by another company. Over the course of 1999, Axcan also gained a toehold in Europe, buying a 50 percent stake in a Polish company, Bonne Sante SP. z.o. o., which distributed gastrointestinal products in Poland. Moreover, Axcan furthered its commitment to the gastroenterology field by selling the subsidiary that sold the PROTECTAID contraceptive sponge, while also assuming complete ownership of the Helicobacter pylori single capsule patent. Several months later, in May 2000, the company went a step further in reducing its focus to gastrointestinal drugs by selling its half-interest in Althin Biopharm.

As it began the new century, Axcan was poised to enter the next stage of its development. To help in that regard, Gosselin hired David W. Mims to serve as chief operating officer. The company made a further commitment to the important U.S. market. It made a stock placement in the United States, raising $40.1 million from three institutional investors. The company then gained a listing on the NASDAQ National Market, and its stock began trading in the United States as well as on the Toronto Stock Exchange where it was added to the TSE 300 Composite Index of Canada's 300 largest public companies. To bolster its product mix, Axcan licensed Lym-X-Sorb to flesh out its cystic fibrosis product offerings; secured the marketing rights in Canada, the United States, Europe, and Japan to some therapies for Helicobacter pylori eradication; added marketing rights for a new generation of the ULTRASE pancrelipase minitablets; and acquired the worldwide right to PHOTOFRIN, allowing the company to become involved in the emerging field of photodynamic therapy. Eight European countries had already approved PHOTOFRIN, and in a matter of weeks Sweden, Italy, and Ireland followed suit. PHOTOFRIN and other products in Axcan's pipeline also achieved positive results in 2000 as they worked their way through the process of gaining FDA approval in the United States.

In early 2001, one of those products passed muster with the FDA: CANASA, a suppository used to treat active ulcerative proctitis. The product was then launched in the United States in April. A month later, Axcan began selling PHOTOFRIN in the United Kingdom. Also of note in 2001, Axcan acquired a Paris-based firm, Laboratoires Enteris, a marketer of gastrointestinal products. Its addition helped Axcan to establish a presence in France and Western Europe.

To fuel its growth, Axcan raised another $66.1 million through yet another stock offering. About $12.6 million of these funds would soon be used to acquire Laboratoire du Lacteol du Docteur Boucard, a French company that manufactured and sold products used to treat diarrhea. At the end of the year Axcan looked to further bolster its product pipeline by acquiring the worldwide rights to PANZYTRAT, an enteric-coated microtablet used to treat exocrine pancreatic deficiency, from Abbott Laboratorie.

FAILED TAKEOVER BID: 2003

The year 2003 was marked by a failed hostile takeover bid of Raleigh, North Carolina-based Salix Pharmaceuticals Inc. Axcan offered $236 million for the company but was rebuffed. For four years Axcan had been trying to buy Salix, which also specialized in gastroenterology products, but once the asking price increased beyond what Gosselin believed was warranted, the company abandoned the effort. Gosselin told BioScienceWorld, "I think it gave us a lot more credibility in terms of being able to walk away from a deal that was no longer a good deal from the point of view of our shareholders."

KEY DATES

1982:: Company is founded by Leon Gosselin and Dr. Herbert Falk as Interfalk Canada.
1986:: First product is launched.
1992:: Gosselin buys out Falk.
1994:: Interfalk changes name to Axcan Pharma Inc.
1995:: Company completes its initial public offering of stock.
2000:: Axcan gains NASDAQ listing.
2004:: Gosselin relinquishes CEO post.

Axcan fared better on other fronts in 2003. It gained U.S. and Canadian approval for PHOTOFRIN for the ablation of High-Grade Dysplasia in Barrett's Esophagus; and Canadian approval for HELICIDE, used to eradicate Helicobacter pylori, and URSO for the treatment of cholestatic liver disease. The company also acquired the rights to market DELURSAN, essentially URSO, in France; licensed HEPAMERZ, used to treat hepatic encephalopathy, and ITAX, used to treat functional dyspepsia; and acquired a slate of gastrointestinal products from Aventis.

ITAX began clinical trials in both the United States and Western Europe in 2004. While they were conducted, Axcan received FDA approval to market URSO 500 mg tablets for the treatment of PBC, and later in the year URSO 1,000 mg began selling in the United States. AXCAN also received U.S. approval for the sale of a 1,000 mg mesalamine suppository to treat ulcerative proctitis, and European approval of PhotoBarr for ablation of High Grade Dysplasia resulting from the condition known as Barrett's esophagus.

In May 2005 Gosselin stepped down as chief executive, turning over the reins to Frank Verwiel while staying on as chairman of the board. After being nurtured by Gosselin for almost a quarter century, the company was beginning to enjoy exceptionally strong growth. Sales reached $103.8 million in 2001, resulting in net income of nearly $20.2 million. In fiscal 2004 revenues reached $243.6 million and net income approached $50 million. His successor was a native of the Netherlands, where he earned a medical degree from the Erasmus University in Rotterdam. Verwiel also earned an M.B.A. from INSEAD in Fontainebleau, France. Prior to joining Axcan, Verwiel worked at Merck & Co., Inc., which he joined in 1996 after eight years with Les Laboratories Servier in Europe. At Merck he became the head of the hypertension unit. Under Verwiel, Axcan saw its growth slip somewhat, as sales improved modestly to $251.3 million, while net income dropped to $26.4 million. Nevertheless, Axcan was well established in the gastroenterology field, possessed a strong pipeline of drug candidates, and appeared well positioned to enjoy continued success.

Ed Dinger