From carve-out to pan-European platform with CNX Therapeutics

Speaker A: Hello and welcome to Inflection Point, the podcast that explores those crucial moments in a company's journey that change the trajectory of success. Through conversations with business founders and entrepreneurs, we'll explore what those moments look like and how to recognize and harness them. I'm Tim Smallbone, and in my 20 years as a partner at Inflection, I've been lucky enough to witness a huge number of those moments that are a part of every success story. In today's episode, we head into the world of speciality pharmaceuticals, a sector focused on complex long term conditions such as schizophrenia, multiple sclerosis and Parkinson's.

Speaker B: The whole idea really was to create a platform that was able to be used as a vehicle to acquire products and then through that, to really scale and build a company with a pan European presence.

Speaker C: We've moved from acquiring small national products with sales in a few countries to something that has genuine global potential.

Speaker A: What makes CNX Therapeutics unusual is that it did not even exist before 2021 when inflection carved it out of US based Synovion. Five years on, it has grown from a small business into a pan European platform with revenues quadrupled, a presence across more than 60 countries, and in 2025, the distinction of becoming the first UK pharmaceutical company to achieve B Corp status. In the studio with me today is Guy Clark, chief executive for CNX Therapeutics, who joined shortly after the carve out, and Christian Fellows, managing director at Inflection, who sits on the board. Guy, Christian, welcome to you both. Thanks for joining me.

Speaker B: Thank you.

Speaker A: So first of all, Guy, just tell me a little bit about yourself because you came into the party after Inflection had already done the deal. So what were you doing beforehand?

Speaker C: Well, I've spent most of the last 15, 16 years working in corporate development for private equity owned businesses, uh, focused on buy and build enterprises, looking at taking existing, existing platforms, acquiring assets or acquiring products, uh, in licensing new products and finding growth opportunity for those businesses. I've been in the pharmaceutical industry for this is my 34th year and so

Speaker A: what was attractive to you about this?

Speaker C: The opportunity to build and grow something from a small base and to really, uh, help create value, uh, out of what was a small but cutely formed business into something that is, as you say, pan European with a presence in 60 countries and with plenty more journey to go.

Speaker A: Uh, so it's gone a long way very quickly. But go back to the beginning. This was your idea, Christian.

Speaker B: Yeah, it was actually. I mean the spec pharma area was an area that we've always been interested in investing in and again just purely focused on the investment side is an area really characterized by favorable demographic trends, non cyclical sort of end market demand and also actually the potential to really be able to scale companies and deploy further capital behind. And we spent a long time trying to find companies to invest in but what we found is in the market structure that exists they were either far too big for us or far too small and didn't really have the appropriate governance, institutional governance infrastructure to really get behind. And just through the network ultimately we came across rumors and subsequent confirmed the fact that Synovium was thinking about getting rid of its non core assets and digging a bit further. That's what ticked many of the boxes. That is it had the governance infrastructure, it uh, had a really nice single product that gave it stability from which to really carve out right size and then really start the growth journey that

Speaker A: without using inflection insider speak. What was the investment thesis? Just to help me understand what was the whole idea?

Speaker B: Yeah, so the whole idea really was to create a platform that was able to then uh, be used as a vehicle to acquire products that target certain conditions or as of a go to market route and then through that to really scale and build a company with a pan European presence that ultimately becomes uh, a partner of choice for other companies looking to launch their products within the European healthcare system. And Tim, when we actually did the investment, I still remember literally writing down the thesis of the vectors of the thesis on it on a liter napkin saying these are the bits we're going to do. And it's been quite fun seeing that slowly being played out.

Speaker A: And the original idea was to focus on the central nervous system. CNX stands for central nervous system. So why that.

Speaker B: The fundamental reason is really you said it in your introduction, is that you have patients who there's frequently a sort of an unmet need. So it's an area where there's low, lower uh, historically lower innovation uh for new, for new chemical entities, for new breakthrough therapies. And these are chronic conditions which really impact the lives of patients. So you can, you know from, from a financial perspective you have longevity and sticky, sticky user base. But actually from a human perspective you also have an area where if you can do anything to help improve compliance or get those medicines to patients, you really impact their life. And so it's that combination of both which is an attractive mix uh, that we believe to, to, to get behind.

Speaker A: So just help me understand what the company does, what your idea was to, to develop new Drugs presumably costs billions and millions of pounds. That's way beyond our reach.

Speaker B: Absolutely. So, so day one really is to say we had the platforms to acquire unloved or what you call mature, established brands. And these are typically brands that big pharma companies have. And they're small, they're non cool because they're looking over, you know, into the shiny new stuff. And these are products where they just, they just let them just tinker along. Whereas actually. And uh, then therefore not meaningful for these companies. Whereas someone like cnx, we can acquire those, they become meaningful for us, and actually we can put new commercial, uh, rigor behind them and actually improve the penetration of those products in the market and therefore patient access to them. So that's the first bit, the first building block of getting that scale and delivering that. And then the next bit really is then to start in licensing products, so buying the rights to products, rather than the actual product being sold already and acquiring the active product and then using the infrastructure that we've developed through that first pillar to really launch those and improve patient care. And to your point, those aren't new chemical entities. They are products which are frequently derivations of current treatment. So it may be taking a tablet which, uh, someone takes three times a day, and then someone's m come up with an idea that you can take the tablet once a week, for example, and therefore that improves compliance, it's easier for the patients to take, and that just really improves quality of life as well as, you know, hopefully, uh, has good clinical efficacy with patients.

Speaker A: And do we take these products into other markets?

Speaker C: We can do. And in fact, with a recent acquisition, that's something that we're very much looking at a product that was licensed in dozens of countries, uh, but which hasn't therefore been licensed in 100 or more countries where patients with the disorder could potentially benefit, uh, from that product being licensed in those markets.

Speaker A: So Christian led, uh, the deal to buy from the original platform from Snovian. And you came on board at that point, did you?

Speaker C: About six months later, yeah.

Speaker A: Okay. And what have you learned about whether or not this thesis actually works?

Speaker C: Well, I know the thesis works because it was part of my previous, uh, experience and roles. And I think that's one of the reasons that my path and inflection's path collided. We had met many times in previous years. I'd met Christian, I'd met with other inflection colleagues previously. And there was a clear synergy in terms of what we were both looking to do.

Speaker A: Christian, you talked about Buying a platform initially, how much of that capability actually existed and how much of. Between the pair of you had to build?

Speaker B: Uh, the short answer is not much. Yeah, so when, when we acquired the European operations of Synovian, I mean this, this was a platform that had basically been stagnant for a while and was just looking after this one product and just fundamentally very sleepy. So it could maintain, it could look after products and it could. Had a little bit of marketing capability, but there wasn't what we needed at that point in time. So we had to really right size it to get the company stable. And then really with a vision in mind, uh, really led by Guy, we started really bringing in the team and the expertise to start driving those pillars. So the first bit was the acquisition of products to get the scale. So Guy used his network career, frankly to bring people in and use his Rolodex to find opportunities and then really allowed us to start acquiring. Once you get a bit more cash, Ebitda, uh, you can start investing in the people in infrastructure to then sort of go for the next level. So it's been a real journey, actually Tim of it's basically been a growth investment at many levels in terms of that infrastructure build. You know, the company is radically different today than it was back four years ago.

Speaker A: So presumably you've had to recruit an entire team from scratch.

Speaker C: Yes, probably on more than one occasion. I mean, the company metamorphoses almost every couple of years. Um, uh, so we're constantly looking to complement, uh, augment the team, uh, bring in the skills required for the next phase of the journey. Uh, but yeah, it's a very different company today than the one.

Speaker A: It's a specialist business as well, isn't it? Presumably you can't just bring in anybody to start going selling complicated drugs.

Speaker C: Certainly not to start selling. Uh, but I mean, let's go before selling, fundamentally you have to have the right quality systems, the right regulatory systems in place, and all the right permits to allow you as a company to operate which is regularly audited. So you need to have robust systems, processes that would be subject to the audit of any, uh, regulatory authority at, um, any moment in time. So the fundamental is getting all those permits and everything in place. And then the next part of our journey was very much about understanding our therapeutic segments and what are the sorts of opportunities that we could bring in that would meet both the needs of our patients, our customers, uh, and our

Speaker A: strategy and the thesis. Guy is dependent upon a real pace of acquisition. Have you been able to keep up with the pace as much as you would have liked.

Speaker C: Never as much as I'd like, but I set pretty high standards for myself and the team. Uh, but look, we've managed to close five acquisitions in four years. We've grown, as you said, we've more than quadrupled in that four years time. We've grown from being 17 people to nearly 70 now. Uh, having a presence in 60 markets. Uh, we now have a portfolio of not just one product but 25 products. Those all require quite complex regulatory and quality monitoring, uh, systems, uh, and a commercial infrastructure that can ensure and supply chain that can ensure that we continue to supply and meet the needs of our customers and also looking for new opportunity for those products. So many challenges along the way.

Speaker A: And of those deals, which one stands out for you as being a uh, real step change?

Speaker C: The two that I would call out first, the first one was a acquisition of a small UK critical care medicines company. It was transformational in that it got us the right side of positive cash flow. It was a critical business for enabling to support that growth journey that Christian was talking to and really set us on our path. And then the most recent acquisition is probably the most landmark acquisition we've done. Uh, we acquired the rights to the world's first cannabis based medicine, a product called Sativex for the treatment of multiple sclerosis. Uh, it was widely touted in the press during the early 2000s as a product that was developed by a company called GW Pharma, um, which was later acquired by ah, an American company called Jazz Pharmaceuticals from whom we acquired the rights uh, just last year.

Speaker A: And what have you learned along the way Christian, about not specifically about the use of cannabis but about our ability to buy and develop these drugs ourselves.

Speaker B: I think the key thing is when looking at these opportunities is being, is the importance of clarity and that's clarity of why you're buying a product, but clarity of how you're going to make it work, why it fits in the, how it fits in the strategy as well. And I think if you can't answer those questions crisply, it's very easy to get creep I suppose in the way the products you look and if you're not careful you do two or three deals which uh, don't quite fit what you're really trying to build and suddenly you end up with a bit of a mess of a portfolio which uh, means that you end up managing other headaches down the line in terms of that strategic purity or the capabilities that you need. You just need to start investing in stuff that's not aligned with where you really want to drive the business going forward. And I think to me that's been the one real big learning. Because sometimes in this world with product acquisitions, there's a whole bunch of opportunities out there, but it's having that discipline to say no and to go hard for the right ones.

Speaker A: How do you know? What are your yardsticks? How do you say to yourself, that's something we can really do something with?

Speaker C: We undertake a screening exercise and sometimes opportunities fall in our lap. And those would go through the same screening process as any would. How close is it tied to our strategic scorecard? Whether it be geography, therapeutic, uh, area, financial profile, customer segmentation. Having done that, then it would come to a wider company discussion. Is this the sort of product that we can easily integrate into our, uh, quality systems? Sometimes you need different permits for different types of medicines. Anything that would require a whole new range of quality system improvements might be more challenging. Even if financially it's attractive, doesn't rule it out, but we have to look at it from a dozen different angles to begin with. And then if it floats through management, uh, analysis, then we begin more rigorous, uh, financial evaluation. And we work very close with our investors to ensure that we understand the strategic rationale, uh, for the product fitting our long term vision, but also then the financial robustness of the product we may be acquiring. And that's definitely an area where inflection's rigorous question and answer methodology helps us challenge ourselves and understand.

Speaker A: Listening to you both, it sounds like an extremely difficult thing to do. I mean, we do a lot of buy and builds. We're very familiar at inflection. We're doing, uh, buying a platform and building lots of extra businesses on top. But here it sounds as if every single company has its own regulatory regime that you need to satisfy. It's in different countries, presumably. It's all got different customers you can't cross sell. So how do you know each one is an individual challenge?

Speaker C: The market access landscape in pharmaceuticals is incredibly complicated. Traditionally, Europe was full of small local heroes that would be focused on a single market. And developers of these products used to have to find a partner per country, which would lead to a very complex web of, uh, different prices, distribution. And as the European market evolved and in the mid-90s, they created the single regulatory system for the approval of medicines. It simplified how to get products approved in Europe, but it didn't simplify how you can commercialize those assets. Because each country retains sovereignty over how it approves the product for use and the pricing that can be used. So these are all very complex problems for a non European company to be able to navigate. And that's really the solution that we're looking to bring at CNX Therapeutics to

Speaker A: develop a product, a pan European solution.

Speaker C: A pan European solution for products that are subscale for the large European based manufacturers but who don't want to license to a network of.

Speaker A: But they need someone who can respect the regulatory, the compliance regimes. Presumably these products vivo been around for many years. When we acquire them and they have a certain number of users, are we trying to find more users or are we trying to open up to different markets? How do we drive sales growth in these drugs that have been around for a long time?

Speaker C: It's a question we ask with every acquisition we bring in. And sometimes the answer is it's not possible. If you look at uh, the first asset that we inherited through the carve out from Sunovian, uh, we had a treatment for schizophrenia that was never launched in France or Germany. And so one of the obvious questions to us was, well, surely we should be able to bring the product to that market. But it was indicative of the idiosyncrasies of the key European geographies. As we dug deeper the level of price reimbursement you could get in that country, we wouldn't even be able to generate a profit, uh, based on the cost of goods that we had. So it was commercially completely unfeasible, even if it would be a brilliant solution for schizophrenia patients in those markets.

Speaker A: So do you find yourself in a position where you have uh, a drug which provides a solution which you know will be therapeutically extremely beneficial to people with these complicated conditions, but you just can't get it to them because of the regulatory regimes?

Speaker C: Exactly correct, yeah. They're there for historic reasons. So each uh, so whilst we have a European regulatory system, we don't have a European healthcare, ah, budget. So each country has its own healthcare budget that it has to manage in and amongst the pressures to spend on other welfare or whatever other um, costs a regime may be prioritizing.

Speaker A: Now Christian, you've had a career yourself focused on the medical, on the healthcare side. Guy was kind enough earlier on to mention how inflection's been able to help. From your perspective, you bought this platform, you've created a team. How do you feel inflection's been able to add value?

Speaker B: I mean aside from capital and that sort of thing? I sort of ignore the standard piece apart from the money, apart from the money. Um, I mean I actually think it's really encouraging ambition and driving a culture, uh, that supports management to have a goal and you know, and, and doesn't, doesn't sort of wallow in failure or mistakes, but just really just moves on and helps think past those problems and, and, and, and fostering that environment where, you know, I, I would say with cnx we have probably the most open board that I, that I sit in any company where, you know, no one points fingers but we put issues on the table and then to work out how we can really drive, drive through those. And doesn't, doesn't mean we don't have, say we don't have heated discussions, but it's never in the spirit of, you know, pointing fingers and just being like, that's rubbish. And I think giving management the confidence to be able to go out and do that sort of thing I think is critical in this environment of basically rapid evolution of a company where it's gone from 17 people to 70 with all the textbook growth challenges. Tim of that evolution of governance infrastructure from a small team calling all the

Speaker A: shots to 17 for 70 in no time at all. A few people challenges along the way.

Speaker C: Many. Um, and look, genuinely that's one of the areas that inflection has been super helpful within its value acceleration team. There is a people function. Ah, we've been very, uh, reliant on the support of that team to help us navigate and think how we develop our operating model and the types of profiles of person that we need at each stage of our uh, journey.

Speaker A: And in terms of maintaining yourself at the cutting edge, you're the first company to be B Corp status, the first pharmaceutical company.

Speaker C: We're the first UK headquartered pharmaceutical company. There is another pharmaceutical company that has B Corp status. It's an Italian headquartered company.

Speaker A: Why did you do that?

Speaker C: I think it just fit the culture of both, uh, the management team and our board. Yeah, it's something we aligned and agreed on. We thought it was a big, hairy, audacious goal to go for, but it's something we achieve within two, uh, and a bit years of starting the journey. So we're super proud of it.

Speaker A: Yeah. So Christian, we're up and running. We've done M5 deals. What's the next step?

Speaker B: Last year Scenex was transferred into a continuation vehicle.

Speaker A: This is just inflection, giving it more money.

Speaker B: Exactly, basically. Um, so what's next really? I think it is that three pillars. One is to continue building the infrastructure, the people, the processes, the it to really continue that scaling journey. And actually really now we have a presence in direct capabilities in Europe, but we want to build that more substantively. Um, but more infrastructure in place, more investment in Europe. Yeah, it's because you're then really scaling the platform by acquiring products that we mentioned before. And that's the real sort of in terms of financial, that's a real sort of central part of the thesis. And then really it's to prove out, continue proving out that value added medicine bit. So in licensing, launching and showing that we can do it without the relevant skill sets retained within the platform, uh, and delivering those three uh, pillars. Those three pillars will set up uh, a company that is fundamentally set up for success for the next phase of its journey. And it'd be a really differentiated platform

Speaker A: and a significant birthday heading its way for cnx, your fifth birthday in August. So looking back on that five year journey guy, what would be the moment you might sort of focus on as being a real inflection point, a real M moment where you thought this is working?

Speaker C: Well, I've talked to two of them earlier. One was our first acquisition that gave us the initial financial muscle to expand and grow. I think the continuation vehicle again has been, that's the sort of pathway to growing from childhood through adolescence, uh, as we head towards adulthood as uh, an established pharmaceutical operation. And a lot has been achieved in the last year but the acquisition of Sativex, which is a, a product in global demand, um, we have knocks on the door every week from key opinion leaders, healthcare professionals that want to trial the medicine on new indications. We have interest from companies worldwide that would like to distribute the product. So uh, we've moved from acquiring small, maybe national or a few products with sales in a few countries to something that has genuine global potential.

Speaker A: We started from scratch with 17 people and now it's 17. Clearly there's a real entrepreneurial buzz about the, how do you retain that culture as you've grown so rapidly with some

Speaker C: difficulty because the type of people that you needed then are not necessarily the type of people that we need for the scalable business moving forwards. And everyone played their part in this journey. And that's not to uh, denigrate anyone that's been part of the journey to date. Uh, um, we had 17 people effectively holding hands together, staying informally connected and really understanding how the business operated, uh, which worked well at that scale. And we could work with tremendous agility, uh, and speed as we've grown, um, as our thresholds become tougher to ensure that we're making the right decisions, then a different skill set is needed. Uh, it needs to be much more driven by robust systems, processes. But how do you retain culture if you just overlay too many systems and processes effectively? AI could run your business if it was that simple. So retaining culture has been very important. Our sustainability journey has been a constant in that. So I think that's been, uh, something that's always connected our employees, uh, to the purpose of the organization. In addition, I think there's quite a unique CNX culture that gets observed by everyone that joins the business. I met two new starters yesterday. Both commented on how welcoming it is, uh, as a business, how warm and friendly. So I'm very proud that we've been able to keep that as we've gone through a rapid pace journey and as we've evolved and needed to pull on different people, uh, to take the business forward to the next leg.

Speaker A: Retaining a level of positivity as you diversify all across Europe.

Speaker C: Yes, exactly.

Speaker A: It's a fascinating story. You're starting off with a platform, an idea, and then building it from scratch. Guy, Christian, thank you for joining me.

Speaker C: Thanks, Tim.

Speaker B: Thank you. And also actually thank you to Guy specifically, but also actually to Inflection the board, Inflection Body, for supporting the thesis and really allowing it to, uh, bear fruit.

Speaker A: And on we go.

Speaker B: Yeah. Thank you.

Speaker A: That's it for this episode. Remember to subscribe to Inflection Point wherever you get your podcast so you don't miss an episode. And you can listen back to our previous installments as well. Thanks for listening.