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

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Audio Transcript

Tim Smallbone

Hello and welcome to Inflexion Point, the podcast that explores those crucial moments in a company's journey that changed the trajectory of success. Through conversations with business founders and entrepreneurs, we'll explore what those moments look like and how to recognise and harness them. I'm Tim Smallbone and in my 20 years as a partner at Inflexion, 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.

Christian Fellowes

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.

Guy Clark

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

Tim Smallbone

What makes CNX Therapeutics unusual is that it did not even exist before 2021, when Inflexion carved it out of US-based Sunovion. 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 Fellowes, Managing Director at Inflexion, who sits on the board. Guy, Christian, welcome to you both. Thanks for joining me. So first of all, Guy, just tell me a little bit about yourself, because you came into the party after Inflexion had already done the deal. So what were you doing beforehand?

Guy Clark

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

Tim Smallbone

And so what was attractive to you about this?

Guy Clark

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

Tim Smallbone

So it's gone a long way very quickly. But go back to the beginning. This was your idea, Christian?

Christian Fellowes

Yeah, it was actually. The spec pharma area was an area that we've always been interested in investing in. Purely focused on the investment side, it's an area really characterised by favourable demographic trends, non-cyclical 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 sort of 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 through the network, ultimately, we came across rumours and then confirmed that Sunovion was thinking about getting rid of its non-core assets. And digging a bit further, you know, that sort of ticked many of the boxes, i.e. it had the governance infrastructure, it 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 there.

Tim Smallbone

Without using Inflexion insider speak, what was the investment thesis? Just to help me understand, what was the whole idea?

Christian Fellowes

Yeah, so the whole idea really was to create a platform that was able to then be used as a vehicle to acquire products that target certain conditions or as a go-to-market route, and then through that to really scale and build a company with a pan-European presence that ultimately becomes 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, the vectors of the thesis on a literal napkin saying, these are the bits we're going to do. And it's been quite fun seeing that.

Tim Smallbone

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

Christian Fellowes

The fundamental reason is really, you said it in your introduction, is that you have patients for whom there's frequently an unmet need. So it's an area where there's historically been lower innovation for new chemical entities and new breakthrough therapies. And these are chronic conditions which really impact the lives of patients. So from a financial perspective, you have longevity and a 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 these medicines to patients, you really impact their life. And so it's that combination of both, which is an attractive mix that we believe to get behind.

Tim Smallbone

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

Christian Fellowes

Absolutely. So day one really is to say we have 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-core, because they’re looking over into the shiny new stuff. These are products they just let tinker along, and therefore they're not meaningful for those companies. Whereas someone like CNX can acquire those, they become meaningful for us, and we can put new commercial rigour behind them and improve the penetration of those products in the market and therefore patient access to them. So that's the first building block of getting that scale and delivering that. And then the next bit is to start in-licensing products, so buying the rights to products rather than acquiring products already being sold. 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 treatments. So it may be taking a tablet which someone takes three times a day, and then someone comes 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 has good clinical efficacy with patients.

Tim Smallbone

And do we take these products into other markets?

Guy Clark

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, but which hasn't therefore been licensed in 100 or more countries where patients with the disorder could potentially benefit from that product being licensed in those markets.

Tim Smallbone

So Christian led the deal to buy the original platform from Sunovion, and you came on board at that point, did you?

Guy Clark

About six months later, yeah.

Tim Smallbone

Okay and what have you learned about whether or not this thesis actually works?

Guy Clark

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

Tim Smallbone

Christian, you talked about buying a platform initially. How much of that capability actually existed and how much between the pair of you had to build?

Christian Fellowes

The short answer was not much. So when we acquired the European operations of Sunovion, 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. It could look after products and it had a little bit of marketing capability, but it 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, with a vision in mind, led by Guy, we started 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, you know, Guy used his network, frankly, to bring people in and use his Rolodex to find opportunities. And it really sort of allowed us to start acquiring. Once you get a bit more cash, EBITDA, you can start investing in the people and infrastructure to then sort of go for the next level. So it's been a real journey, Tim — it's basically been a growth investment at many levels in terms of that infrastructure build. The company is radically different today than it was back four years ago.

Tim Smallbone

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

Guy Clark

Yes, probably on more than one occasion. I mean, the company metamorphoses almost every couple of years. So we're constantly looking to complement, augment the team, bring in the skills required for the next phase of the journey. But yes, it's a very different company today than the one…

Tim Smallbone

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

Guy Clark

Certainly not to start selling, but 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 and processes that would be subject to the audit of any regulatory authority at 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 and our strategy.

Tim Smallbone

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?

Guy Clark

Never as much as I'd like, but I set pretty high standards for myself and the team. 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, having a presence in 60 markets. We now have a portfolio of not just one product, but 25 products. Those all require quite complex regulatory and quality monitoring systems, and a commercial infrastructure that can ensure and supply chain that can ensure we continue to supply and meet the needs of our customers and also looking for new opportunities for those products. So, many challenges along the way.

Tim Smallbone

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

Guy Clark

The two that I would call out — the first one was the 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 supporting that growth journey Christian was talking about, and it really set us on our path. And then the most recent acquisition is probably the most landmark acquisition we've done. We acquired the rights to the world's first cannabis-based medicine, a product called Sativex for the treatment of multiple sclerosis. It was widely touted in the press during the early 2000s as a product developed by a company called GW Pharma, which was later acquired by an American company called Jazz Pharmaceuticals, from whom we acquired the rights just last year.

Tim Smallbone

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?

Christian Fellowes

I think the key thing, when looking at these opportunities, is the importance of clarity — clarity of why you're buying a product, clarity of how you're going to make it work, and how it fits in the strategy as well. If you can't answer those questions crisply, it's very easy to get drawn in by the products you're looking at, and if you're not careful you do two or three deals which 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, you know, means that you end up managing other headaches down the line in terms of that strategic purity or the capabilities you need. You end up investing in things that aren't aligned with where you really want to drive the business going forward. To me that's been the one big learning, because sometimes in this world of 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.

Tim Smallbone

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

Guy Clark

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 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 quality systems? Sometimes you need different permits for different types of medicines, so anything that would require a whole new range of quality system improvements might be more challenging, even if financially it's attractive. It 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 analysis, we begin a more rigorous financial evaluation. We work very closely with our investors to ensure that we understand the strategic rationale for the product fitting our long-term vision, but also the financial robustness of the product we may be acquiring. And that's definitely an area where Inflexion's rigorous question-and-answer methodology helps us challenge ourselves and understand.

Tim Smallbone

Listening to you both, it sounds like an extremely difficult thing to do. But we do a lot of buy-and-builds. We're very familiar at Inflexion — building a platform, then 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 they've all got different customers. You can't cross-sell. So how do you know each one is an individual challenge?

Guy Clark

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 different prices, distribution. And as the European market evolved, 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 commercialise 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 for developers.

Tim Smallbone

A pan-European solution.

Guy Clark

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 individual partners.

Tim Smallbone

Individuals who can respect the regulatory and compliance regimes. Presumably these products have 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?

Guy Clark

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 the first asset that we inherited through the carve-out from Sunovion, we had a treatment for schizophrenia that was never launched in France or Germany. And so one of the obvious questions to us was, 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 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.

Tim Smallbone

So do you find yourself in a position where you have a drug which provides a solution which you know would be therapeutically extremely beneficial to people with these complicated conditions? But you just can't get it to them because of the regulatory regimes.

Guy Clark

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

Tim Smallbone

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 Inflexion's been able to help. From your perspective, you've bought this platform, you've created a team. How do you feel Inflexion's been able to add value?

Christian Fellowes

Aside from capital — the standard answer, apart from the money — I actually think it's about encouraging ambition and driving a culture that supports management to have a go, that doesn't wallow in failure or mistakes but moves on and helps think past those problems. And fostering that environment: with CNX, we have probably the most open board I see in any company, where no one points fingers, but we put issues on the table and work out how we can drive through them. And that doesn't mean we don't have heated discussions, but it's never in the spirit of pointing fingers and saying that's rubbish. And I think giving management the confidence to be able to go out and do that sort of thing, I think it's 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 shots to something far more structured.

Tim Smallbone

From 17 to 70 in no time at all. A few people challenges along the way?

Guy Clark

Yes, many. And genuinely, that's one of the areas where Inflexion has been super helpful. Within its value acceleration team, there is a people function. We've been very 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 journey.

Tim Smallbone

And in terms of maintaining yourself at the cutting edge, you're the first company to be B Corp status — the first pharmaceutical company. Is that right?

Guy Clark

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

Tim Smallbone

Why did you do that?

Guy Clark

I think it just fit the culture of both the management team and our board. 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 achieved within two and a bit years of starting the journey. So we're super proud of it.

Tim Smallbone

So Christian, we're up and running, we've done five deals. What's the next step?

Christian Fellowes

Last year CNX was transferred into a continuation vehicle.

Tim Smallbone

This is just Inflexion giving it more money.

Christian Fellowes

Exactly. And so what's next? I think it's those three pillars. One is to continue building the infrastructure — the people, the processes, the IT — to continue that scaling journey. We now have a presence and direct capabilities in Europe, but we want to build that out more substantively, with more infrastructure in place.

Tim Smallbone

More investment in Europe?

Christian Fellowes

Yes. It's continuing to scale the platform by acquiring the products we mentioned before, and financially that's a central part of the thesis. And then it's to continue proving out that value-added medicine piece — so in-licensing, launching, and showing that we can do it with the relevant skill sets retained within the platform. Delivering those three pillars will set up a company that is fundamentally set up for success for the next phase of its journey and it'll be a really differentiated platform.

Tim Smallbone

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'd focus on as being a real Inflexion point, a real moment where you thought this is working?

Guy Clark

Well, I've talked about two of them already. One was our first acquisition that gave us the initial financial muscle to expand and grow. I think the continuation vehicle has been the pathway to growing from childhood through adolescence as we head towards adulthood as an established pharmaceutical operation. And a lot has been achieved in the last year, but the acquisition of Sativex, which is a product in global demand — 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 we've moved from acquiring small, national products with sales in a few countries to something that has genuine global potential.

Tim Smallbone

We started from scratch with 17 people and now it's 70. Clearly there's a real entrepreneurial buzz about the business. How do you retain that culture as you've grown so rapidly?

Guy Clark

With some 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 denigrate anyone that's been part of the journey to date. We had 17 people effectively holding hands together, staying informally connected and really understanding how the business operated, which worked well at that scale. And we could work with tremendous agility and speed. As we've grown, as our thresholds become tougher to ensure that we're making the right decisions, then a different skill set is needed. It needs to be much more driven by robust systems, processes. But how do you retain culture if you 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 something that's always connected our employees to the purpose of the organisation. 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 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-paced journey, and as we've evolved and needed to pull on different people to take the business forward to the next leg.

Tim Smallbone

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

Guy Clark

Yes, exactly.

Tim Smallbone

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

Guy Clark

Thanks, Tim.

Christian Fellowes

Thank you. And also thank you to Guy specifically, but also to Inflexion — the broader Inflexion team — for supporting the thesis and really allowing it to bear fruit.

Tim Smallbone

And on we go.

Christian Fellowes

Thank you.

Tim Smallbone

That's it for this episode. Remember to subscribe to Inflexion Point wherever you get your podcasts so you don't miss an episode. And you can listen back to our previous instalments as well. Thanks for listening.

About the episode

Inflexion Point tells the story of CNX Therapeutics, the speciality pharmaceutical company that supplies medicines for conditions such as schizophrenia, multiple sclerosis and Parkinson's, and how a business that did not exist five years ago became a pan-European platform. Host Tim Smallbone is joined by chief executive Guy Clark and Christian Fellowes, managing director in Inflexion's healthcare team, whose idea the business was and who has sat on the board since the carve out. They reflect on the moments that shaped it: the thesis written down on a napkin before the deal was done, the 2021 carve out from Sunovion that left one product and 17 people, the acquisition of a UK critical care business that got them the right side of cash flow, and the rights to the world's first cannabis-based medicine bought from Jazz Pharmaceuticals. Along the way, they talk buying the brands big pharma has stopped looking at, why a single European regulatory system did not create a single European market, becoming the first UK-headquartered pharmaceutical company to reach B Corp status, and how you keep a culture built by 17 people once there are 70.