IVCA Profile Q&A: Jeffrey Aronin, Founder & CEO of Ovation And Dean Mihas, Principal of GTCR.

IVCA Profile Q&A: Jeffrey Aronin, Founder & CEO of Ovation And Dean Mihas, Principal of GTCR.

November 24, 2010

CHICAGO - “ Continuing the series profiling the IVCA Award winners, the IVCA interviewed Jeffrey Aronin, Founder & CEO of Ovation Pharmaceuticals, and Dean Mihas, Principal and Co-head of the Healthcare Group of GTCR, the Private Equity Partner of Ovation. Mr. Mihas will present the award to Mr. Aronin at the event.

IVCA: Mr. Aronin, what in the research and development elements of your company made you most attractive to eventual investors and how did you best emphasize that advantage when seeking funds?

Aronin: I focused on a very unique model, which didn't emphasize research but emphasized development of drugs. I brought in drugs that were already shown to be effective at universities or other drug companies, acquired them, and then finished the development work. This was very attractive private equity investment because I could get positive cash flow from approved products that I bought and then use that cash flow to do this development work without the risk of new drug research.

IVCA: Mr. Mihas, as co-head of the Healthcare Group at GTCR, how are you keeping up with healthcare legislation and changes in the industry that seem to be in the news on a daily basis?

Mihas: A big part of our strategy at GTCR is focusing on a few attractive areas of the economy and then developing deep domain expertise and investing experience in those areas. Healthcare is one of our principal sectors, in fact, we've made investments in over 40 healthcare companies since our founding in 1980.

We spend a tremendous amount of time developing relationships with senior industry leaders and other experts, tracking and evaluating companies, and assessing current and prospective changes to the industry, be they economic, legislative, regulatory or otherwise. Staying on top of developments in the industry is really critical. But given our experience in the industry, it's certainly easier.

IVCA: Mr. Aronin, how will Ovation most interact with the current healthcare reform legislation? How will it effect the distribution and sales of pharmaceuticals?

Aronin: I was on the board of directors of Pharma, our industry association. We were very active in helping to shape the legislation as best we could. However, at Ovation, because we focus on a high-need, rare disease drugs, the legislation doesn't affect us that much.

In the short run, the legislation doesn't affect pharmaceuticals too badly, but in the long run it will start to have a unintended effect because it gives too much control to one buyer, the government, which may create a negative atmosphere.

IVCA: What is the most exciting advance in new drug development technologies and how are you applying it to your company?

Aronin: The most exciting advance is using genetics and genetic biomarkers to help identify and develop new drugs. Understanding what drugs will work on different people, based on their genetics, is really the future of medicine. It's already being utilized in oncology, and now we're seeing it moving into other areas such as neurology and psychology. I've actually begun a new company, Paragon Pharmaceuticals, and we have a company that is very involved in using these genetic biomarkers to identify new drugs.

IVCA: Mr. Mihas, what changes do you see in the private equity industry that might impact most firms? How does GTCR counter those changes to be more effective?

Mihas: The private equity industry has certainly become more competitive over time. In order to generate differentiated returns for our investors, it's important to have a clear strategy. For us, as I noted, we focus on specific areas of the economy, and over several decades we have developed real expertise in those areas.

Second, similar to our success with Ovation, partnerships with industry leaders is a key element of our strategy; GTCR pioneered this strategy and it's a big part of how we differentiate ourselves in both finding attractive opportunities and creating differentiated value with those companies.

IVCA: A question for both of you: How important is the IVCA for the private equity community? How does recognition from this association help promote the overall industry?

Aronin: I couldn't have done what I did, in building Ovation from scratch ten years ago, without private equity, specifically my partner GTCR. When I started it was just me and the vision to build the company, and only private equity allowed for the type of capital needed to do that. And clearly the IVCA helps lead this industry, and provides a cohesive voice for private equity issues.

Mihas: I think the IVCA is terrific for the private equity community. IVCA is a critical and tireless advocate for the Illinois venture capital and private equity industry. As well, it's an important forum for those of us in the industry to come together and share ideas about how we can grow our industry here at home in Illinois.

IVCA: Finally, how important is your Midwest and Illinois location in making Ovation Pharmaceuticals the success that it is? And for Mr. Mihas, how important to Illinois and the Midwest are companies like Ovation Pharmaceuticals for the growth of the area economy?

Aronin: It was a real strategic advantage. When I started Ovation, many people told me I should move out East or out West, that's where biotech and pharma was. I stayed in Illinois and was very fortunate in that, because we were a high-growth, private equity-backed company. I found that a lot of Midwest talent wanted to get back to the Midwest or people at the big pharmaceutical companies in Illinois wanted more of an entrepreneurial opportunity. That combined with the great research institutions in the state makes this area an ideal place to build in the life sciences.

Mihas: There's no question that venture capital and private equity backed companies can help drive job recovery here in Illinois. As you know, Chicago is currently a hub of the healthcare industry with companies like Abbott and Baxter, among others. I think attracting even more pharmaceutical and healthcare companies to the area would be highly beneficial.