Moving towards milestones: the evolving pharma – biotech relationship
pharmafile | January 24, 2012 | Feature | Business Services, Manufacturing and Production, Medical Communications, Research and Development, Sales and Marketing | Deals, Susan Aldridge, biotech, pharma
Big pharma is going through the greatest ever wave of patent expiries, while small biotechs are finding it hard to raise money to fund their pipelines.
This makes in-licensing and other deals in the sector more important than ever, with networking meetings like TVG’s BioPartnering Europe (BPE) facilitating the process.
BPE is now part of a global network of events in key markets: Europe, US, Canada, China, India, Brazil, and Australia. The 19th Annual BPE ‘Driving Global Innovation and Competitiveness’ held in London recently may be the last one held in the city, at least for now, as the conference is taking up residence in Brussels from next year, and will be renamed BioPartnering (Future) Europe.
Recent deal trends
Biotech deal numbers have stabilised in recent years, at between 150 to 200 announcements per quarter (down from a high in 2005-6 of around 250).
Michael Johnson, practice leader at Deloitte Recap, told the conference that his company’s research showed that biotechs had done 369 deals in the first six months of 2011, with a total announced value of around £16.3 billion. If this trend has continued over the full year, 2010’s $25 billion total will be easily eclipsed.
One of the most noteworthy trends in 2010 and 2011 has been the dramatic fall in average upfront payments to biotechs. Johnson concluded that risk sharing between partners in a deal has shifted somewhat, with total deal value in multi-product deals now dominated by contingent, rather than upfront, payments.
These kinds of analyses may help companies compare deal income with other sources of capital when looking at how to finance the next stage of development.
Pharma’s shopping list
Many of the biggest pharma companies were present at the event, spelling out what they’d like from deals with biotech companies.
For AstraZeneca, personalised healthcare is of increasing interest. Bob Holland, head of personalised healthcare & biomarkers, innovative medicines, said ‘‘Personalised healthcare is a paradigm shift in the way we approach the development and commercialisation of medicines”, he observed.
An AstraZeneca survey shows that 8% of medicines now have a biomarker or some other stratified medicine element compared to 3-4% a few years ago. ‘‘There is no sign of this rate of increase declining,” Holland said. ‘‘Personalised healthcare is no longer just talk and hope, it is real.”
Personalised healthcare means a shift in the way the sector approaches drug discovery and development. Big pharma currently has an R&D productivity crisis. Holland said: “We see personalised healthcare as a solution to the problem. It is the right thing to do for the patient, the prescriber, and the payer.”
Therefore AstraZeneca is to invest $200 million in a development platform with personalised healthcare at its heart. The four elements of the platform are: diagnostic science, partnerships, developing validating and delivering biomarkers and companion diagnostics and, finally, supporting lifecycle management to help existing treatments to achieve their potential.
Interest areas include: molecular changes in different cancers, biomarkers in respiratory disease, changes in gene expression and high throughput of samples, and imaging in cancer, cardiovascular disease and neuroscience.
‘‘Partnering is essential to the way we develop personalised healthcare,” said Holland, pointing out that AstraZeneca intends to take this route rather than develop an internal business unit. No single partner will be able to address all personalised healthcare needs. Holland said they are working with both academia and small biotechs. For instance, they have partnerships with the Karolinska Institute and the Banner Institute, while a relationship with Agendia and the Netherlands Cancer Institute is being used to identify new subgroups in colorectal cancer.
They are also working with well-established companies; like Qiagen, on gene expression profiling in autoimmune disease to identify responders to the AstraZeneca drug sifalimumab, and with Dako on tissue diagnostics.
Holland referred to lessons learnt from AstraZeneca’s lung cancer drug Iressa.
It became apparent after the drug’s launch that patients with certain mutations in the EGFR gene did very well on it, but a great deal of effort (with help from Qiagen) had been expended in order to discover this.
“In future our drugs will be developed with companion diagnostics,” he said. ‘‘This is a fantastic moment in the development of our industry.”
Barbara Yanni, VP and chief licensing officer, Merck, noted that the company has averaged 50 significant deals per year in the last eight years. Partnering plays a role in helping pharma meet current challenges, she said. These include helping it increase presence in biologics, overcoming patent expiry, and high scrutiny for reimbursement.
“There has been a huge increase in the amount of money it takes to get a product onto the market. The sum now exceeds $1 billion dollars in some cases. Licensing is more important then ever,” she noted. Merck sees deals as critical to the innovation pipeline; indeed, some analysts say ‘search, don’t research’ but Yanni says Merck will not be giving up its strong basic science group.
Nevertheless, licensing teams are getting bigger throughout the industry and, in some companies the licensing officer even reports directly to the chief executive, such is the importance placed on licensing. In 2010, 62% of Merck’s revenue came from alliance products and patents, especially in vaccines. Biotechs need licensing as much as pharma, Yanni said, but for different reasons including difficulty in raising money.
Merck’s licensing is focused on biologics, which accounted for more than half of all new drug approvals in 2010. The acquisition of Wyeth by Pfizer and the merger between Merck and Schering have increased these companies’ biologics and vaccine capacity. Biosimilars, which are strong at Merck, also show promising growth.
Emerging markets are important, said Yanni; they are very different from one another but share high economic growth and high unmet medical need. In a Merck deal, risk sharing is still the norm.
Profit sharing, rather than royalties, may be sought by a partner – and Merck may be willing to consider this, under the right circumstances. She noted that there has been a lot of merger and acquisition activity recently, mostly in biotech consolidation. These are becoming similar in structure to licensing deals, with many involving contingency payments based on milestones.
In conclusion, Yanni said that the failure of a deal does not mean product failure. It may be that high quality asset no longer fits into the partner company’s strategy. For instance, Exelixis retained the rights to XL184 after the termination of a deal on this compound with BMS. The company then went on to announce promising Phase II data for XL184 in prostate and thyroid cancer.
Deals that work
In panel discussion William Kridel, managing director of the consulting group Ferghana Partners, led a discussion on why deals were done and the various benefits and challenges involved.
John Adamou, head, US Strategic Transactions & Alliance Management, Boehringer Ingelheim, said they had set up a collaboration on therapeutic antibodies with F-star in order to help reach their goal of doubling the number of biologics in production over the next few years.
‘‘For this, we needed new technologies and F-star’s bi-specific molecules with antibody-like properties representing the next generation of therapeutic antibodies,” he observed. ‘‘They are small, easy to manufacture, and applicable over multiple therapeutic areas.”
Kevin Fitzgerald, F-star’s chief executive said there is a big need for antibodies with improved properties such as those based on F-star’s Fcab protein engineering scaffold. For F-star, the deal brings cash, technology validation, and access to the powerful infrastructure of Boehringer Ingelheim.
Meanwhile Takeda has signed a deal with Heptares Therapeutics’ based on its know-how in G protein-coupled receptors (GPCRs), which have massive potential, but are still seen as intractable targets. Heptares received a £1.7 million upfront payment in the deal, and will apply its StaR (stabilised receptor) technology to produce a stabilised form of an intractable GPCR important in CNS disorders.
The hope is that this will help Takeda to discover and develop a molecule against this target that would be first-in-class. ‘‘StaR is a discovery platform which enables structure-based drug design against intractable targets,” said Heptares chief executive Malcolm Weir, noting that the company also has platform and product deals with Novartis, Shire, and AstraZeneca.
Finally, Bayer HealthCare had identified cancer stem cells as an ‘exciting’ area and set up a deal with OncoMed Pharmaceuticals to get access to the latter’s assets in key cancer stem cell pathways. This has resulted in an antibody, OMP-18R5, which is now in Phase I.
Sunil Patel, senior VP Corporate Development at OncoMed, said the deal, a complex one with $40 million upfront and milestone payments, gives the company cash and technology validation.
Making the most of molecules
Biotech companies have products and platforms on offer to big pharma and, in return, they are looking for finance and validation. For instance, French biotech firm Polyplus Transfection has commercialised research from the University of Strasbourg on a range of transfection agents for gene expression, RNA interference, high throughput screening and bioproduction.
There are several products in clinical trials around the world, with partners, and they also have an internal research programmes on siRNA delivery. Chief executive Mark Bloomfield explained that these transfection reagents, based on synthetic polymers, are widely applicable, easy to use, and superior to lipid-based systems.
Bloomfield’s observations on the history and current state of big pharma bear repetition. At one time, there would be a focus on just one or two molecules, which would go through iteration and optimisation. Then came high throughput screening and combinatorial chemistry. Next was the era of the R&D ‘factory’ with multiple research groups.
“They have tried a number of paradigms which have not been very successful and now face a patent cliff. The shareholders put the accountants in charge and they have cut back, restructured, and closed down facilities,” he said.
But amidst this gloom, big pharma has some prize assets that are being ignored, including a huge amount of IP and freezers stocked with potentially valuable compounds.
‘‘These could perhaps be commercialised by biotech companies, but it is hard to communicate with the right person to get the conversation started. Rules need to be changed to allow a different way to dispose of these assets,” Bloomfield stated.
Otherwise there is a real danger that a worthwhile piece of IP or a potential blockbuster drug could just be left, or even destroyed.
Antibodies are of interest as a partnering opportunity to many big pharma companies.
One of the rising stars in this area is 4-Antibody, a biopharmaceutical company with a powerful fully-human antibody drug discovery platform. The technology is a hybrid of animal-derived antibodies and display platform and gives more druggable candidates than the latter, said chief executive Robert Burns.
The technology has been the subject of deals with Boehringer Ingelheim and Human Genome Sciences this year, with a further deal being planned. 4-Antibody also wants to develop an internal pipeline and has partnered with the Ludwig Institute for Cancer Research, which has a long track record in cancer immunotherapy and their own source of finance.
‘‘The question of how the immune system is turned off by a tumour is one of the hottest areas in cancer.” He cited the antibody ipilimumab for melanoma, which inhibits CTLA-4; there are many similar pathways which could be worked on.
‘‘In this deal, we retain all the commercial rights and share profits. Small companies have to do deals like this to get non-diluted funding as raising money from VCs is so hard,” he said, adding that pharma has now got the message on the importance of antibodies.
The drug discovery + CRO model
Finally, UK-based Astex Therapeutics was recently acquired by the US oncology company SuperGen to form Astex Pharmaceuticals, a global company with a focus on cancer and an example of how biotechs can combine their individual strengths.
SuperGen discovered and commercialised Dacogen (decitabine for injection, a hypomethylating drug and one of only two on the market) which is available in over 29 countries for myelodysplastic syndrome, a bone marrow disorder, and in Phase III for acute myeloid leukaemia.
Astex is known for its fragment-based drug discovery platform Pyramid which has led to partnerships with Eisai, Johnson & Johnson, AstraZeneca, Novartis, and GSK, and its own internal pipeline. “Our strengths can combine to make something bigger,” said chairman and chief executive James Manuso. “We have a shared vision. We will be able to serve the pharma industry as a CRO, but we will also have our own portfolio.”
Astex Pharmaceuticals has many interesting compounds in this portfolio including SGI-110, a second generation hypomethylator and a follow-up to Dacogen.
This compound is being developed in association with the Epigenetics Dream Team in ‘Stand Up to Cancer’, an initiative created to accelerate cancer research with the aim of bringing leading scientists together to work in collaboration rather than in competition.
Susan Aldridge
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