Allen Eaves, CEO, Stemcell Technologies | BCBusiness
“There is no board because I own the company outright,” says CEO Allen Eaves.
In the wake of this province’s biotech meltdown, Allen Eaves has quietly built a $70-million company catering to the world’s leading research labs— all without the help of venture capitalists and with no exit plan in sight
To tour the R&D lab of Stemcell Technologies Inc. is to come face to face with your maker, in a way. “These cells I’ve got in here are iPS cells: induced pluripotent stem cells,” says Erik Hadley, a senior scientist. Down the barrel of the inverted microscope, at a total magnification of 400, is a circle of granular dots, the cells that Hadley refers to as his department’s “bread and butter.”
Each one holds the potential to differentiate into any one of the 200 or so types of cells that make up the human body. It’s like looking back in time, at my proto self, before I differentiated into various cell types, before those cells formed tissues, which made up my organs and, eventually, me. Then again, to look at these cells is a bit like looking into the future, because in them is the promise of generating all the cells and tissues that make up a human body, and perhaps of curing such ills as cancer, diabetes and neurodegenerative and autoimmune disorders.
The real star of the show, however, isn’t the cells themselves; it’s the watermelon-pink medium they’re grown in, called TeSR-E8. After all, in order to study cells, you have to keep them alive in the lab, which is where the cell-culture media come in—300 of which Stemcell Technologies has in its catalogue. (TeSR-E8, for example, comes in 500ml kits selling for $206.)
Cell-culture media, together with kits that help scientists separate and sort cell types (i.e., the EasySep product line), is the cornerstone of the company that president and CEO Allen Eaves founded 20 years ago. Amid this province’s wreckage of fallen biotech giants such as QLT Inc. and Angiotech Pharmaceuticals Inc., the unassuming manufacturer of research products has emerged as the steady winner. It currently employs about 500 people worldwide (450 of them in Vancouver) and its sales topped $72 million last year.
Stemcell Technologies has been profitable since its first year of business in 1993, and growth has been steady and rapid. In its first year, the company had eight employees and did almost $1 million in business. Sales have grown by an average of 20 per cent a year since. From the outset, Eaves used profits to fuel growth. “We were basically bootstrapping by getting sales right away and plowing all the profits back into further growth,” he says.
The success of Stemcell Technologies is especially remarkable since Eaves, a cancer researcher and hematologist, owns 100 per cent of the company. It’s a story that defies the typical startup model involving multiple cycles of buying in and cashing out. An exit plan has never been a part of Eaves’s plan: “I’m not interested in selling it,” he says bluntly from his office at Stemcell’s headquarters at Ash Street and West 7th Avenue in Vancouver. “It would basically kill the company.”
But what he does have is a master plan. “I want to cure cancer. That’s the motivation. It’s all about curing some of these diseases, wiping them off the face of the earth.” In their own way, the products his company makes will contribute to doing just that, because in order for researchers to study those cancer cells, or to one day treat patients with their own personalized tissue culture, the researchers must grow those cells outside of the body in a way that they can replicate. To do that requires high-quality cell-culture media.
“Let’s pretend that science is a bit like cooking. Then we provide the groceries,” explains Joan Sheehan, vice-president of sales for Stemcell. Groceries, that is, to the world’s leading regenerative medicine and stemcell laboratories, including those of at least three Nobel laureates. Nearly half of the human embryonic or induced stem-cell research published in 2012 in the U.S. cited the use of Stemcell Technologies products, all of which are manufactured in Vancouver. Its bestselling mTeSR1 medium (500ml kit: $316), used to grow human embryonic stem cells and induced pluripotent stem cells, has been cited in 466 peer-reviewed science publications. The company’s products currently ship—via courier and usually frozen at -20 degrees Celsius—to 79 countries and 7,000 laboratories in the U.S. alone. The company processes some 4,000 orders on average each month. “The idea that so much of this fantastic leading-edge research being done around the world is done with products developed and manufactured in little old Vancouver is fascinating to me,” says Terry Taciuk, Stemcell’s former vice-president of marketing.
In addition to cell-culture media products and kits that separate and sort different types of cells, the company also sells associated antibodies, growth factors and research instruments. Its entire catalogue has 1,200 products. While the company now has offices in France, Germany, the U.K., China, Australia and Singapore as well as distribution centres in four locations worldwide, the lion’s share of the company’s space and employees are in Vancouver, spread across five properties including the old Angiotech building off Terminal Ave. (“We’re bottom feeders,” Eaves jokes.) The majority of the company’s sales are done to academic institutions and Stemcell’s Sheehan remarks that sales are conducted in a very consultative way (all of the company’s 150 sales and support staff have science degrees and more than half have graduate science degrees). A sale usually starts with a discussion about the customer’s research and product needs. While 10 per cent of Stemcell Technologies’ sales are done through the company’s website, the remainder are phoned, faxed and emailed in. “Sales is not about selling stuff; it’s about finding out what people need and helping them,” says Eaves.
In his fourth-floor office, Eaves speaks quietly and evenly in a wispy voice, but quickly. A tall man with a square chin and twinkling eyes, he leans back against his chair as he talks. His rectangular face has a wry quality to it. It’s clear this 72-year-old is having a lot of fun.
He offers to give me a tour of the building and as we traverse the hallways, he walks in a steady, plodding manner, yet covers a lot of ground in little time. He pauses at a large meeting room on the fourth floor, but then he turns around and dismisses the room with a wave. “This is our boardroom, but there is no board because I own the company outright.” He chuckles to himself. Perhaps it’s the story of how a UBC faculty member in the hematology department came to build a company that’s done over half a billion dollars in business over the past two decades that he finds amusing. Or maybe the joke’s on all the venture capitalists he never needed. Or the big American companies whose buyout offers he’s turned away.
Eaves grew up in the small village of Upper Canard, Nova Scotia. His father, Charles, was a scientist with Agriculture Canada and pioneered controlled atmospheric storage for apples. “So I was brought up to see the value of science,” Eaves says. He also credits his great grandfather, railway engineer T. T. Vernon Smith, for inculcating him with the value of building things well, via his meticulous 14-volume journals that young Eaves would pore over in the attic of his childhood home.
By the time Eaves wound up at the University of Toronto to do his PhD in the early ’70s after studying cell physiology at Dalhousie for his M.Sc., the strength of his character was evident. “The things that showed up most clearly when he was with me were an independence of spirit and a determination,” says Bob Bruce, Eaves’s PhD supervisor and a medical biophysicist at the University of Toronto. “He did everything his own way and always did everything extremely well.”
In 1981, Eaves founded the Terry Fox Laboratory for Hematology in Vancouver, with his wife, Connie Eaves, a medical geneticist at UBC. “Allen’s always wanted to build things, develop things and create organizational structures that expanded, facilitated and promoted the benefit of science,” says Connie. “It’s in his character.” Four years after founding the Terry Fox Lab, Eaves became the head of Hematology at UBC, Vancouver General Hospital and the B.C. Cancer Agency. During his appointment across the three institutions he spearheaded one of Canada’s first bone marrow transplant programs for leukemia patients. “It’s a life immersed in science and research; combine that with leadership capabilities and a real desire to make the world a better place and it’s a huge force,” says Terry Thomas, senior vice-president of R&D at Stemcell Technologies, and the company’s first scientist hire in 1994.
Terry Fox Laboratory was bringing in research grants and funding to conduct its cancer and leukemia research, but it could still use more so Eaves, as director, began to sell the lab’s own culture media for growing blood-forming stem cells to colleagues around the world. (There was no intellectual property related to the media’s recipes. The Terry Fox Lab simply knew how to make them better than most, thanks in part to the high-quality ingredients it sourced.) Eventually, his media-preparation operation outgrew the Terry Fox Lab, so in 1993, with a $500,000 loan from the Western Economic Diversification Fund and a $500,000 mortgage on his Kerrisdale home, he founded Stemcell Technologies. “There was a natural series of events that fit his desire to build things,” recalls Connie Eaves. “And so he did.”
“Before companies like Stemcell Technologies came about, and them in particular, labs were left to prepare their own media and that takes a lot of work to validate,” says John Dick, a senior scientist at Princess Margaret Cancer Centre in Toronto, which was one of Stemcell Technologies’ early customers. “To have somebody generate the highest-quality material is very important.”
“It was an awful lot of fun,” Sheehan says of the company’s salad days. “We were doing every single thing on a wing and a prayer and we were figuring things out as we went.” At the time, the new company had only one major product line: MethoCult, which was used to grow stem cells from blood and bone marrow. “We all had enormous faith in Allen. He painted a very big picture and we bought into it and believed in it,” she recalls. “That big picture was that we were going to provide tools to scientists all around the world and that we were going to provide tools that were going to allow leading-edge science.”
Back then, the only stem cells that the field of medicine knew of were the blood-forming stem cells in bone marrow that were discovered by University of Toronto cell biologists Ernest McCulloch and James Till in the early 1960s. The discovery of human embryonic stem cells and human-induced pluripotent stem cells was still years away. “They hadn’t even been thought of 20 years ago,” says Connie Eaves. “That’s an example of something that wasn’t anticipated and definitely helped the company to become what it has today.”
The Canadian Institutes of Health Research estimates that in the past five years, between $460 million and $560 million was spent on stem-cell research and regenerative medicine in Canada. South of the border, the National Institutes of Health has funded some $1.4 billion worth of stem-cell-related research this year alone. “Health care is the biggest industry in the world now if you look at all its components, and stem-cell biology and its applications in medicine is the new revolution,” says Eaves. “But you have to be able to grow the [cells], so it’s all about providing the media. That’s sort of central to being able to do all this and then also you want to be able to separate different cell populations, and that’s where our cell separation comes in.”
Eaves likens Stemcell’s products to the picks and shovels that researchers use to mine the stem-cell gold rush. But this metaphor sells the company’s role in science short, because in their own way, the “picks and shovels” drive the science and discovery process forward. “I think [Eaves] truly wants to foster scientific excellence through the products that his company is providing and support science in its most broad way, as a community, and to see it flourish in Canada and to really promote Canadian stem-cell research on the international stage,” says John Dick. “As much as academic science requires the tools in order to make progress, to have a company be able to provide those high-quality tools is essential to move the field forward.”
Stemcell Technologies’ R&D department involves a lot of money (an annual budget of about $7 million), staff (90) and products (between 20 and 50 launched on average annually, with 60 to 100 new products in development at any one time). “Researchers are always going on the cutting edge. They’re going to want something better, something new, and that’s why the R&D aspect of the company has had to be big,” says the department’s vice-president, Thomas.
Back at the R&D lab, Erik Hadley returns his induced pluripotent stem cells back to the incubator. Around the corner, his colleague, senior scientist Michael Riedel, is bringing up a video of beating heart cells that R&D lab members cultured from induced pluripotent stem cells (of the sort that Hadley just showed me). A grey wall of cells pulsates and joggles on the computer monitor in a semblance of a heartbeat. Stemcell’s R&D department is working on new media that will, in combination with other reagents, enable researchers to take adult skin cells and turn them into pluripotent stem cells and from there, get them to differentiate into specific cell types, like the heart cells beating on screen.
“We’re trying to allow for researchers to have the tools at their disposal that allow them to make the groundbreaking discoveries that they make,” says Riedel. “If they don’t have to be concerned about developing new media and new reagents in order to perform their work and test their hypotheses, then they can get on with the work of actually making those significant discoveries.”
Eaves has a different way of summing it up: “Our tagline is ‘Scientists Helping Scientists,’ but it’s really scientists helping health-care scientists cure diseases.”