Audacity
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An Excellent Adventure

The late 1980’s saw a breakthrough in transgenic science, the ability to transfer genetic information from one species into another through microinjection of genetic material into an embryo, thereby mixing human and animal genes together. Suddenly amazing new disease models of human diseases, new cheaper production systems for human pharmaceuticals, and incredible opportunities in genetically modified food all became possible. The scramble was on. As New England’s best known biotech CFO, well regarded for my fundraising network, with aspirations of running my own company, my name was in the mix with venture capitalists to become Chairman and CEO of a start-up by my early 30’s.

Most transgenic opportunities would require relocating from Concord, MA to elsewhere, but one opportunity in particular caught my interest, a start-up called Transgenic Sciences Inc. (TSI). During 1988 alone TSI had signed an exclusive research agreement with Tufts Veterinary School on animal models, licensed in vitro drug screening technology from the Massachusetts Institute of Technology, initiated research to create transgenic food animals through a Collaborative Research and Development Agreement with the United States Department of Agriculture, entered into a collaborative research program on transgenic production of human growth hormone at U. Mass Amherst, and lined up a small New York investment bank to take them public in 1989. For their IPO they needed a recognized biotech leader to lead them as Chairman and CEO.

This decision for me was not as straight-forward as it in retrospect might seem. Genzyme was beginning to consider the transgenic area so this company might one day go head to head with Genzyme. In discussions of my career, Henri suggested he might make me his Chief Operating Officer, but at age 33 he expected me to be patient, and wanted me to remain for now his CFO. I liked the venture capitalist who had given TSI their first investment, but didn’t trust some of the other founders of this start-up, and the NYC investment bank had a pretty awful reputation. So this would be a risky venture to lead, but it would be the most interesting start-up within an easy commute from my house, with key scientific relationships and initial funding already in place.

After long discussions with my family, and with some of my closest friends in business, I agreed to accept this role in January 1989. I needed to complete Genzyme’s 1988 annual audit and prepare the transition of my responsibilities at Genzyme so needed to still work for Genzyme through March 1989. To manage this extraordinary career risk I wanted to be elected TSI’s Chairman, President and CEO, and to approve at least four of the eight members of the Board of Directors. This company needed to be built on integrity, in its science, with its people, and with its external relations, and it hadn’t begun entirely in that fashion. With that understood I was embarking upon this excellent adventure, and would rename the company TSI Corporation. This would turn out to be the riskiest and wildest ride of my risky wild career.

In a flurry of activity we went public in May 1989 at $1.25 per share netting $1.9 million after repayment of the investment bank’s bridge loan. We doubled the size of our scientific team even though that meant our IPO cash would last less than 15 months. The Boston Business Journal did a full page description of our newly public company with a very well dressed, serious, businesslike portrait of this very young Chairman and CEO. I earnestly began to look for ways to leap frog our competitors into the preclinical drug testing business, while finding a cheaper way to fund our growth, drawing on both my experiences at Bain and Genzyme to make this an outstanding company. With so little cash we needed to show our success very quickly.

I found a small unprofitable animal testing laboratory in downtown Worcester, MA owned by a local multinational conglomerate for which the business was no longer strategic. This facility would give us immediate operating revenues. It would provide us a platform to utilize our developing transgenic human disease models on behalf of their existing customers. And we could possibly improve their operating margins enough to pay off the acquisition costs largely with their own cash. The large conglomerate was more concerned with how the sale of this small division would appear on their balance sheet, so it needed to look non-dilutive for stockholder’s equity, and give them a onetime gain, rather than a lot of cash. So we structured an $8 million purchase consisting of $1 million cash, $2.5 million in our redeemable convertible preferred stock, and $3.5 million borrowed from a local bank collateralized by the operating division we were buying. We scheduled to close the transaction in early December 1989, but over Thanksgiving the banking environment declined, making closing much more difficult.

I had sold my Genzyme shares earlier in 1989, to diversify our family’s finances, avoid any conflict with Genzyme’s potential transgenic interests, pay off our mortgage, and set up a small investment portfolio. A week before TSI’s transaction was scheduled to close the bank manager called to say the credit committee had agreed to go forward only if I personally guaranteed the loan, and personally pledged the title to my house, stock and personal assets. While my assets wouldn’t cover their $3.5 million loan, it meant a loan default by the company would result in our personal bankruptcy. Loretta and I had a long conversation about what it means to be a biotechnology entrepreneur that weekend. She agreed for us to do this on two conditions, first when our house’s title was returned to us it would forever after be in her name alone, and second we would change banks at the earliest opportunity. In taking on financial risk there are considerable advantages to being married to a loving, hard headed entrepreneur as well.

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