The Sparsely Populated Path from Medical Degree to CFO

Leland Gershell, CFO at Tonix Pharmaceuticals, has an M.D. and a PhD., and spent eight years as a life sciences stock analyst. Now, it all comes to...
David McCannAugust 21, 2015
The Sparsely Populated Path from Medical Degree to CFO

Leland Gershell is a doctor twice over, having earned both a medical degree and a PhD in organic chemistry from Columbia University.

He’s also a CFO.

But Gershell didn’t decide at some point after his scientific training to simply drop what he’d learned and go into finance instead. His career path has been somewhat more complicated than that, and while it may not be unique, it is certainly unusual.

While working on his dual degrees in the late 1990s, Gershell didn’t know whether he’d become a clinician, a professor, or a combination of the two. But two things happened during those years that ultimately set him on a different course.

Leland Gershell, CFO, Tonix Pharmaceuticals

Leland Gershell, CFO, Tonix Pharmaceuticals

For one, interest in the human genome exploded as a public entity, the National Institutes of Health, competed with a private one, Celera, to be the first to fully map the genome. That contributed greatly to a biotechnology bubble, with hordes of startups and hot stocks that likewise drew great attention. “I was spending my time in a lab at Columbia working on experiments, but I was aware of the market interest in the biotech sector,” Gershell says. “I was reading about it, and every night you’d turn on the news and hear something like ‘Genentech is at an all-time high,’ and then the next day it would go even higher. It was intriguing.”

He had some friends from college who were working at investment banks that were looking at biotech firms but didn’t have the in-house wherewithal in life sciences to fully understand the market. He started talking with them and soon was getting invited to health-care conferences that the banks sponsored. There he would see biotech companies present on their new drugs and give his take to the banks on whether the technology could be useful and the likelihood of the drugs being approved and succeeding commercially.

From that experience Gershell landed a couple of consulting gigs with investment funds that likewise didn’t have life sciences expertise. “So, my first foray into business was by happenstance and timing,” he says.

A Toe in the Entrepreneurial Water

At the same time, while he was in the PhD. program at Columbia he worked on a cancer drug development project that led to the creation of a company called Aton Pharma. Gershell didn’t work for the company, but his graduate work contributed to its intellectual property. Aton was acquired by Merck in 2004, and its primary drug won FDA approval in 2006 as a treatment for a rare form of lymphoma.

Right after he completed his PhD., he worked with a professor of medicine at the school, Seth Lederman, to start a company called Targent to develop a drug to treat colorectal cancer and raise seed financing from high-net-worth investors.

How did he know how to raise financing? “You kind of pick it up,” Gershell says. “What life sciences investors care about is the drug, the technology, whether someone is involved who’s a ‘brand name’ in the area the drug is in, and where you are in the trials process,” he says. “It’s not so much a financial thing, it’s more an ability to frame the story and make it appealing.”

Long after his involvement ended, Targent was sold in 2006 to Spectrum Pharmaceuticals. The drug was approved in 2009, and Spectrum has sold more than $500 million of it under the brand name Fusilev.

Working on the drug that launched Aton and helping Targent get going were experiences that changed everything for Gershell. Referring to Aton, he says, “To see that initial process, with compounds that I worked on going to a company that would conduct clinical trials and have investors, was very interesting for me. That, plus the market work I had done, took me in a direction that I hadn’t really anticipated.”

Determined to work in the area of drug innovation, he knew he’d have to learn more about how companies work, because universities are generally involved only in the earliest stages of drug development. That interest plus his combined experiences ultimately led in 2004 to a job as a life sciences securities analyst at Cowen Group, an investment bank and research firm owned at the time by Société Générale.

Gershell’s lack of business or finance education was not a roadblock. “Even now, there’s really no requirement to have a business-type background to get into that field,” he says. “The team at Cowen put an emphasis on intelligence, knowledge of biology, chemistry, and science, a willingness to learn, and an ability to express oneself clearly, both verbally and in writing.”

As an associate, he learned the ropes of finance and financial modeling by supporting two senior analysts in their coverage of about 20 companies. After two years of doing that he was promoted to senior analyst himself, and now it was his name on the top of research reports.

Gershell continued to work as an analyst, at Cowen and later three other firms, until 2012. That’s when his former professor, Lederman, who a few years earlier had formed another company called Tonix Pharmaceuticals, brought him aboard as CFO. Tonix had just gone public through a reverse merger and was listed in the pink sheets.

Commercial Commitment

Now Gershell is achieving his longtime ambition of working directly for a company that’s engaged in drug development. Tonix’s products, all in developmental phases, address common or chronic disorders of the central nervous system, including fibromyalgia, post-traumatic stress disorder, and tension headache.

One of Gershell’s chief contributions so far has been leveraging relationships with institutional investors that he forged over his years as a sell-side analyst. The company by press time had raised more than $100 million in equity capital, mostly from institutional investors.

While he acknowledges he doesn’t have as much technical training as most CFOs, relying on his staff to do most of the financial reporting work, he believes he has some advantages as well.

As an analyst, he had observed that life sciences CFOs sometimes didn’t understand what he, an expert in the field, wanted from them in order to complete his analyses.

“I think the line of communication between the company and the securities side is sufficiently important that if a CFO comes in with the background that I have, it is really helpful,” he says. “Not only because of the relationships I had and the ability to call people and say ‘hey, look at Tonix, it’s interesting and here’s why,’ but also because I know what to spend my time on — I know what institutional investors are sensitive to, so I can be efficient in conversations with them.”

Even CFOs who are great at messaging their company’s story may not appreciate its full context, Gershell says. “If you come from a background where you’ve been following scientific developments that may be broader than what the company itself is doing, the types of conversations you can have with investors can be [richer].”

He also suggests that having looked at many companies over a number of years gives him perspectives that CFOs who have spent their whole careers at a handful of companies may lack. “They may not have a landscape view of the industry,” he says. “I have reference points like, ‘Oh, back in 2010 this company was able to file a new drug application off of one trial, and it worked,’ or ‘That company had a safety issue in Phase 2 but then they did X, Y, and Z to get around it in Phase 3.’ ”

Not that Gershell operates only on the finance and fund-raising side of the house. Based on his scientific expertise, he helps inform Tonix’s strategies for developing its clinical programs, trials, and recruitment. “We are an R&D-intensive company, so I make sure to spend time on the science,” he says.

Tonix’s fibromyalgia drug is in Phase 3 trials, with data scheduled to be reported in the second half of 2016. So, revenue is still a ways off, although the company had a $50 million cash cushion at the end of the second quarter and picked up $20 million of new equity funding in July.

It’s possible that revenue could come sooner than later, if Tonix opts to strike a partnership with a bigger company. “We are a small company without any commercial infrastructure,” Gershell says. “We could license a drug to a big company before Phase 3 or before it goes to the FDA. We’d get an up-front payment, milestone payments, and eventually royalties. Most of our drugs are for primary-care conditions, and for a small company to build a primary-care sales force is often not the smartest way to go about it.”

Tonix achieved a Nasdaq listing in August 2013, and Gershell knows that reporting, compliance, and other core finance and accounting issues will grow more complex as the company scales and revenue begins flowing in.

He doesn’t appear concerned. “I have a great team, and if I hadn’t been analyzing companies and following stocks for years, I couldn’t do this job,” he says.