The biotechnology company EGeen, which mostly carries out clinical trials in Central and Eastern Europe, has demonstrated stable growth. CEO Kalev Kask (pictured) says in the interview that nowadays pharmaceutical industry has made progress and most illnesses are at least to an extent treatable and he predicts that the prices of medications will fall considerably in the future.

Kalev Kask lives in the Silicon Valley in the US, where the headquarters of EGeen are located. He manages the international business of EGeen – clinical trials – on the European front, ranging from Finland to Turkey. Estonians mostly know the company as a major financial backer of the “national gene bank” Geenivaramu.

Kask is in his element when dealing with the pharmaceutical industry and venture capitalists. He acknowledges that the keys to the company’s success have been active communication, sales work and staying focused on its core business. Although the first half of 2009 was slow in the US pharmaceutical market due to the financial crisis, it started to pick up in the second half of the year.

What is needed for pharmaceutical research?

Patients with an appropriate group of diseases are certainly necessary. For example, there is a region in Ukraine which is twice the size of Estonia. There is a hospital there which is the size of all the Estonian hospitals put together. We provide medication to these people and research the effects. For example, we determine whether there is any pain and what kind of pain.

What are the phases of clinical trials and which ones in particular are EGeen involved with?

In the so-called Phase I clinical trials determine whether the medication is safe. Such trials are usually carried out in the USA or Great Britain, and we do not carry them out.

In the Phase II trials, we identify whether the medication has efficacy, in addition to considering safety. Such research is well suited for us and we do quite a lot of these kinds of studies. We also carry out Phase III research, where a larger group of patients is used to ensure that the medication does not have surprising side effects.

No product is as tightly regulated as medicines before they are released onto the market, and therefore drug trials may last a very long time. For instance, in the case of cancer medications, for those which are efficacious, the quality of life of patients is studied and their overall survival is measured. This means that research lasts for years. One of our largest prostate cancer studies took three years.

So you write reports on the impact of medication?

Yes, exactly. With biotechnology companies, research results are the main stock exchange news. The data comes out and, depending on whether it is good or bad news, the stock prices of companies move up or down.

We have many customers – if something should happen to one, the others will still be there. Some of those are also listed on the stock exchange.

What is your field of work most dependent on – the financing of clinical trials?

It depends on how much money is circulating overall. There is always spending on health care because, just as people want to eat and have shelter, they want to live good and healthy lives.

At the moment, the investment climate in the pharmaceutical sector is very good, because large pharmaceutical companies have not made much of an effort, but there is a great need for new drugs.

Until now, the medications and sales have been good. Pharmaceutical companies have grown indulgent due to the large volume of sales of many drugs, such as for example cholesterol-reducing drugs and drugs for rheumatism. Starting this year, their exclusive patents are starting to run out, which means that generic equivalents of expensive drugs will come onto the market.

Those are the same drugs but manufactured by someone else and sold without the price of the patent, which means 90 per cent cheaper.

This is a positive trend mostly for those countries that don’t have a lot of funds to purchase drugs. But the situation is catastrophic for those large pharmaceutical companies who have built their business models exclusively on patents. As they themselves do not work on drug development, they have started to buy up biotechnology companies, often paying much more than they’re worth.

This does not mean that we have it easy. We have to continue working and looking for export opportunities. EGeen has also a representative in Paris who deals with European pharmaceutical companies.

What kinds of drugs have you studied recently?

For example, we ran large Phase III trials on a drug for multiple sclerosis, as well as on a drug for ulcerative colitis.

Currently a large trial for a drug to treat Parkinson’s disease is underway.

You once said that Parkinson’s disease does not have a sufficiently large market value for capitalists, that it kills “only” 500,000 people a year in the United States!

Compared to the number of people suffering from depression, Parkinson’s is indeed marginal. But there is a trend in the US pharmaceutical market for companies that have realised that the time when one drug earned 10 billion dollars are gone forever. They have to find something new, more specific drugs for smaller groups of people.

Pharmaceutical companies have to make more of an effort to benefit more diverse sets of patients.

Some time ago, EGeen expanded to Poland and Turkey. What was the aim of that expansion?

In the case of larger trials, we used to cooperate with US partners. We do not carry out trials in the USA ourselves because the environment for starting is more competitive, very bureaucratic and the business is not that good there. We try to stay with what we know and we know the medical system of Eastern Europe.

Then there was a need to carry out larger research on our own. We needed more hospitals and patients. We considered Russia as an alternative, but we would have had to send people over there in order to guarantee the quality of the trials, and the transportation costs would have been too high. Russia also lacks roads and the planes do not fly reliably. For economic and legal reasons, we decided in favour of Turkey, although there are problems there as well. For example, in some cases we cannot present questionnaires to patients as they are illiterate.

How many hospitals do you work with?

There are at least 30. In the past, we cooperated with as many as 150 hospitals. The equipment in East European hospitals is comparable to that in the States, which is important in pharmaceutical research.

What is the benefit of trials for patients and hospitals?

For hospitals, trials mean money and the experience of clinical research.
Patients receive innovative treatment, which is often paid for. One Estonian doctor said that a clinical trial is the time when patients receive the most attention. Unfortunately, this is often true.

How big is the business of EGeen?

Our turnover is under 10 million dollars annually, which does not even put us in the top fifty in the States. The turnover of bigger companies is 2-3 billion dollars. But we have our own niche and this is the third year we’ve shown a profit.

During the last year we have even considered buying out some competitors. Those who manage to survive difficult times will have some good opportunities.

By your “own niche”, do you mean Eastern Europe?

Yes. We have been offered the opportunity to expand into Latin America. But imagine someone telling you to go and work as a journalist in Columbia? What can you do? You fly there, but you have no idea who to talk to.

That’s the same with us. We know how things work in Eastern Europe. We know how to do business in the States as well, although lawyers have made things too complicated there: when you do this, there are certain dangers, when you do that, they are such and such – the patient will die before they manage to read the contract to them.

How many pharmaceutical researchers like EGeen are out there?

Very many. At first we had trouble getting clients. Now we have a client base and references and this keeps us going. Larger pharmaceutical companies are making people redundant, as they cannot afford to pay the salaries of such great armies. So they just keep top management and marketing – the rest gets spun off into companies like ours.

What is your opinion of the current swine flu panic?

Panic is the right word. In the USA, it started in the spring. Now they have found that normal seasonal flu kills about 30,000 people a year, while only 4,000 have died of the swine flu, and in many cases the real reason is other illnesses. The panic is now almost over in the US.

A common conspiracy theory has it that the panic was created by pharmaceutical companies to serve their business interests…

The truth is that pharmaceutical companies could not have predicted that people would be so ignorant. Swine flu is not that different from seasonal flu: it is not some horribly severe illness.

Yet countries are equipping themselves with millions of vaccination doses!

In democratic countries, the governments would have been blamed for deaths if they had not ordered the vaccine. For example, in Ukraine they are starting to quarantine hospitals, which is foolish, as patients with other illnesses cannot get medical help. But they are due to have presidential elections and the opposition is already blaming the government for the deaths.

In the States, it has been the elderly who have scrambled to get the vaccine, breaking their legs in the process. The damage to their health on the way to get the vaccine is worse than the complications of the illness against which they are vaccinated. Healthy diet, eating vitamins and washing your hands are better than the vaccine.

Skeptics also say that the longer term impact of vaccines is unclear.

Many diseases, such as polio, smallpox and mumps, which devastated previous generations, have been completely eliminated due to vaccines.

You have claimed that there is a medication for practically all illnesses, but that drugs with a higher “market value” are developed faster.

I am not aware of a real medication for Alzheimer’s. They are working on it, but the mechanism of this illness is still unclear. It is easier to treat illnesses where the cause and spread of the illness are known.

The best example of the power of the pharmaceutical industry is medication for HIV. This virus, which makes one’s immune system break down, was discovered about 25 years ago. Then they studied the virus, investigating the elements of its life cycle. They found three or four proteins which are unique to it and the structures of those proteins were broken down with X-ray spectroscopy.

On that basis, drugs were designed which block the spread of the virus. These days you take one tablet per day and HIV is under control. The treatment is relatively expensive, but nonetheless it exists.

In general if you produce a drug which delays the death of very ill people by three months, you already have a market in the United States. The American Medical Association dictates 70 per cent of this business. Americans practically pay for the pharmaceutical development of the rest of the world.

So cancer is curable, and HIV can be kept under control – for patients, it is just a question of money?

Yes, it depends on whether the patient or the state is able to pay for it. The best approach, of course, is to prevent disease. The fact that the HIV medication exists does not mean that you can now do anything. You have to exercise! Personally I keep my cholesterol level low.

What is the trend in the pharmaceutical industry today?

The trend is clear and it originated in Europe. Up until now, medications have constantly been improved, but have also become more expensive. As Europe is a bit poorer than the USA and not that much treatment is paid for, good drugs must now become cheaper and there must be more of them.

The market has already started to stabilise the prices of medication. Producers have to make more of an effort for clients to buy their products. That has a positive impact on the patient’s wallet.

When will our GPs start to analyse our gene data and identify potential illnesses?

I think there is no business at the moment in genetics.

The Icelandic gene technology company Decode spent billions of dollars but recently went bankrupt. The company 23andme, which is linked to Google, and where you can buy a genome card for five hundred dollars, recently sacked its staff. Their genome card only tells you that you are a white and a man. But that is pretty obvious, although perhaps not always in San Fransisco. There are definitely easier ways to make sure than to pay a hefty sum to sequence your genome.

EGeen unites US venture capitalists and Estonian businessmen

• EGeen is a company founded in 2001 which carries out clinical trials in areas such as cancer, urology, neurology and several internal diseases.
• The headquarters are located in California, with sub-branches in Estonia, Latvia, Lithuania, Romania, Ukraine, Poland and Turkey.
• The owners of EGeen include the risk funds Draper Fisher Jurvetson (one of the owners is the Estonian-origin Steve Jürvetson), Oxford Bioscience Partners, New Markets Fund, Baltcap and Biobank Technology Ventures.
• Via LHV, several Estonian businessmen, including Andres Liinat, Rain Lõhmus, Neinar Seli, Urmas Sõõrumaa, Tarmo Sumberg and Koit Uus, have a stake in the company.
• EGeen’s mother company from 2001 to 2004 was the owner and main financial backer of Eesti Geenivaramu.
• By 2004, the data of 10,000 Estonian gene donors was in the bank, but there was no agreement between the owners and management of Geenivaramu about what to do with the data. EGeen left the project.
• EGeen’s customers are mostly US and European biotechnology companies. Currently, four clinical trials are underway.
• Kalev Kask, Ph.D., completed his graduate degree with Prof. Tamas Bartfai at Stockholm University, and his post-doctoral training with Prof. Peter Seeburg at the Max-Planck Institute for Medical Research in Heidelberg.
• He then joined the neurogenomics company AGY Therapeutics of South San Francisco as a senior scientist, followed by research at Stanford University and advisory work with Asper Biotech and Toshiba, prior to founding EGeen. Dr. Kask has authored numerous scientific publications and has patented genomics-derived drug and diagnostic targets.

This interview) was first published in the quarterly magazine Life in Estonia Winter 2009/2010 edition. 

I have published a somewhat more entertaining interview with Kalev Kask last year. Read it from here.