CEO Interview: Cerus Corporation - Claus Glassell

• On 12:47 pm EDT, Tuesday October 20, 2009

67 WALL STREET, New York - October 20, 2009 - The Wall Street Transcript has just published its Biotechnology Report offering a timely review of the sector to serious investors and industry executives. This 70-page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Heightened M&A Activity - Trend Toward Orphan Disease Drug Development - Generic Drug Competition - Current Length Of FDA Approval Process - Ownership Ego Preventing Shareholder Returns - IPO And Secondary Offering Window Opening - Big Pharma R&D Pipeline - Decreased Clinical Development Risk - Impact Of Health Care Reform - Convergence Of Large-Cap Biotech And Pharmaceutical Companies - Easier Credit For Small Cap Biotech Companies - Developments In Cancer Chemotherapeutics - Gene Delivery Technology

Companies include: ADVENTRX (ANX); Abbott Labs (ABT); Advaxis (ADVX); Amedisys (AMED); Amgen (AMGN); Amylin Pharmaceuticals (AMLN); Antares Pharma (AIS); BioDelivery Sciences (BDSI); Biogen Idec (BIIB); Biomarin (BMRN); Boston Scientific (BSX); Bristol Myers (BMY); CVS Caremark (CVS); Celgene (CELG); Cerner (CRN); Cerus (CERS); Coke (KO); CombiMatrix (CBMX); Coventry Health Care (CVH); DARA (DARA); Eisai (ESALY); Eli Lilly (LLY); GenVec (GNVC); Gilead (GILD); GlaxoSmithKline (GSK); Health Management Associates (HMA); Human Genome Sciences (HGSI); Inspire Pharmaceuticals (ISPH); Intellect Neurosciences (ILNS.OB); InterMune (ITMN); International Stem Cell (ISCO.OB); Javelin Pharmaceuticals (JAV); Johnson & Johnson (JNJ); Keryx Biopharmaceuticals (KERX); Kraft (KFT); MAP Pharmaceuticals (MAPP); Medco (MHS); Merck (MRK); Merit Medical (MMSI); Novartis (NVS); Novelos (NVLT.OB); Novo Nordisk (NVO); Nutrisystem (NTRI); OSI Pharmaceutical (OSIP); Orexigen (OREX); Pepsi (PEP); Pfizer (PFE); Rite Aid (RAD); Schering-Plough (SGP); Takeda (TKPHF); Teva Pharmaceuticals (TEVA); Viropro (VPRO.PK); Walgreens (WAG); Wyeth (WYE); XOMA (XOMA); ZIOPHARM (ZIOP).

In the following brief excerpt from the 70-page report, Claus Glassell, CEO of Cerus Corporation, discusses the outlook for the sector and for investors.

TWST: Please give us a history of Cerus.

Mr. Glassell: The company was founded back in 1991. The three original founders were all Bay Area scientists affiliated with UC San Francisco (UCSF) and UC Berkeley, contributing different skill sets. One of them, Dr. Larry Corash, he is still with us as our Chief Medical Officer. In the 1980s, while working at UCSF, Larry witnessed firsthand the HIV tragedy, where his patients were transfused with tainted blood components and got infected with AIDS. That motivated him to research whether we could prevent transfusion transmission of HIV and other pathogens. He worked together with skilled chemists from UC Berkeley, and they took a very clever approach. They designed a system to inactivate any kind of pathogen, whether it's a recognized pathogen or not, to prevent these threats to blood safety.

TWST: How does that work?

Mr. Glassell: If you want to think of it as an analogy, think about pasteurizing milk. By heating the milk, in this case you basically kill bacteria that might be present. This is different from conventional blood safety techniques used today, which rely on excluding particular blood donors who may present a higher risk and on testing donated blood for a limited set of specific pathogens. The technology developed by Cerus (CERS), what is now called the INTERCEPT Blood System, can cross-link both DNA or RNA, which prevents an organism or cell's ability to divide and multiply. Blood components don't require intact DNA or RNA to function. However, most types of pathogens, including viruses, parasites and bacteria, do contain DNA or RNA. When their nucleic acid is cross-linked during the treatment, the pathogens essentially die.

TWST: Are there many funding opportunities out there right now for you?

Mr. Glassell: I think there are. We've actually been receiving funding for a number of years from the Department of Defense, and it's been moving up and down a little bit, but typically it's been several million dollars per year. Then you have NIH funding of different types. I think that there is money out there.

TWST: You were once partnered with Baxter - what were the circumstances of that partnership's end?

Mr. Glassell: The partnership with Baxter ended in 2006 after both parties felt the launch of the product in Europe was not meeting expectations. For us the goal was always to have the product as compatible with any kind of blood collection or processing as possible, but for Baxter there was sort of a conflict of interest. For them, having it compatible with their own platform and driving the sales of their own blood collection equipment was a priority. You can see that our interests weren't quite aligned even when we are working productively together. Compatibility of the product for a broader customer base was a very big incentive for Cerus to take back the rights to commercialize the product. I joined Cerus as CEO during the break-up with Baxter, and the past several years have been a significant transformation for Cerus, during which we have transitioned from a classical R&D company to a commercial business. We're proud of our recent robust growth in product sales, going from $3 million in 2006 to $8 million in 2007 to $15.5 million 2008.

TWST: How is this different from other technology to keep the blood supply safe?

Mr. Glassell: The concept of pathogen inactivation is not new. It's been highly successful in the plasma fractionation industry for years. Recall that blood consists of plasma, platelets and red blood cells, and there is a big business in plasma fractionation, by which plasma is further isolated into individual "factors." Big players in this are Talecris, Grifols, Baxter and CSL. They have more than 15 years' worth of experience with different methods of pathogen inactivation, and use of these techniques has all but eliminated the transmission of pathogens by plasma-derived products. These manufacturing processes have been around for a long time and function very well. However, we are in many ways pioneers of pathogen inactivation for the transfusion industry. Platelets and red cells are challenging to inactivate because the treatment process has to leave these cells intact while destroying the pathogens. And treating a single unit of plasma in the blood center is different from a large-scale manufacturing process during plasma fractionation. There are other companies with products for blood component pathogen inactivation, but Cerus was the first to develop and market a process for platelets, the first to offer a process that could be applied to both platelets and plasma using a common platform, and we have the most extensive clinical experience with red blood cell pathogen inactivation.

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