The next 10 years: Where is biotech head­ed?

The last 10 years have seen a rev­o­lu­tion in drug de­vel­op­ment. Time­lines have short­ened, par­tic­u­lar­ly in on­col­o­gy. Reg­u­la­tors have opened up. In­vest­ment has sky­rock­et­ed. Chi­na be­came a play­er. Biotechs have mul­ti­plied as gene and cell ther­a­py has ex­plod­ed — of­fer­ing ma­jor new ad­vances in the way dis­eases are treat­ed, and some­times cured.

So where are we head­ed from here? I jour­neyed out to San Fran­cis­co in Sep­tem­ber to dis­cuss the an­swer to that ques­tion at Al­lo­gene’s open house. If the last 10 years have been an eye-open­er, what does the next decade hold in store?

I pitched that to a di­verse pan­el, in­clud­ing Arie Bellde­grun, the ex­ec­u­tive chair­man of Al­lo­gene, along with ex-Roche CEO Franz Humer, UCSF pro­fes­sor and en­tre­pre­neur Wen­dell Lim, Al­lo­gene de­vel­op­ment chief Susie Jun, Jef­feries’ pro­lif­ic Michael Yee and Zi­ad Bakri, who man­ages the health sci­ences fund at T. Rowe Price.

Take it away.

— John Car­roll

This dis­cus­sion has been light­ly edit­ed. Pho­tog­ra­phy by Jeff Ru­mans, End­points News.

John Car­roll: So, great crowd. Wow. In­ter­est­ing com­ing out here. I al­ways love to come to Cal­i­for­nia. It’s a dif­fer­ent kind of a place. I’m based in Ver­mont, and I just do every­thing out of Ver­mont re­gard­less of where it may be around the world it’s hap­pen­ing. And every­thing is hap­pen­ing faster and faster and faster. I’ve been cov­er­ing the field for 17 years. I was in the San Fran­cis­co Mu­se­um of Mod­ern Art on Sun­day, and there’s a land­scape artist called Pi­az­zoni, who was an artist here in the ear­ly 20th cen­tu­ry. And some­body asked him what his re­li­gion was. He said, ‘I think it’s Cal­i­for­nia.’ Which is great, be­cause to me I thought that was a won­der­ful way to ex­press a cer­tain spir­i­tu­al con­nec­tion with the place.

And to me, my con­nec­tion with Cal­i­for­nia is that this is a state of pos­si­bil­i­ties. A place where things are hap­pen­ing. A place where there’s a very for­ward-look­ing ap­proach to every­thing that’s go­ing on right now, par­tic­u­lar­ly in biotech­nol­o­gy. So my task here is re­al­ly kind of a sim­ple one, but at the same time very provoca­tive as well, I hope. Look­ing at where we’re head­ed. Not short term nec­es­sar­i­ly, but 10 years down the line. If you look 10 years back, 2009, you couldn’t do an IPO, no mat­ter what you tried to do. There were no biotech IPOs in 2009. It was ab­solute­ly a desert.

Now you’re see­ing record IPOs, you’re see­ing record rounds. The cre­ation and de­vel­op­ment of com­pa­nies has just been com­plete­ly rev­o­lu­tion­ized. You’re hav­ing com­pa­nies be­ing born overnight, with large staffs, pipelines, and long-term goals. So what I want to do with this con­ver­sa­tion is take it for­ward 10 years. If this is where we are right now, where are we go­ing to be in 2030? And how’s that go­ing to look from a biotech per­spec­tive, a phar­ma per­spec­tive? How is this go­ing to look from a sci­en­tif­ic per­spec­tive and from a mar­ket per­spec­tive? A lot of dif­fer­ent per­spec­tives here. So Arie, if I un­der­stood (Al­lo­gene’s CEO) David (Chang) cor­rect­ly, you’re go­ing to have your first prod­uct on the po­ten­tial­ly by 2023. Is that about right?

Arie Bellde­grun: With an­a­lysts on the pan­el, I’m not say­ing any­thing.

John Car­roll: All right. We’re look­ing for­ward 10 years. I mean this whole area of cell ther­a­py, ob­vi­ous­ly you’ve lived it, from a very ear­ly point. And see­ing the whole process, the ac­cel­er­a­tion of the tech­nol­o­gy, of the sci­ence, every­thing go­ing through it. So when you look down the line to 2030, what do you see?

Arie Bellde­grun: Be­fore we go down the line, we should just re­mind our­selves where did we start from? When I joined Steve Rosen­berg at the NIH in the mid-eight­ies,  af­ter grad­u­at­ing from the res­i­den­cy pro­gram at Har­vard, is we set a goal for our­selves to de­vel­op Im­munother­a­py as the fourth modal­i­ty of treat­ing can­cer , in ad­di­tion to: surgery,  chemother­a­py, and ra­di­a­tion. Har­ness­ing  the body’s own im­mune sys­tem to fight can­cer was not an ob­vi­ous or ac­cept­able op­tion those days. . Very few peo­ple be­lieved in it, but-

John Car­roll: You’re crazy.

Arie Bellde­grun: No, Rosen­berg was very pas­sion­ate and con­vinc­ing! The tools we had avail­able, how­ev­er, were quite prim­i­tive. Our un­der­stand­ing of the ba­sic bi­ol­o­gy of the im­mune sys­tem was poor, gene ma­nip­u­la­tion and vi­ral trans­ac­tion tech­nolo­gies were not avail­able, not to talk about gene edit­ing. The core re­search team in the lab was di­vid­ed ac­cord­ing to a spe­cif­ic tu­mor type: Sar­co­ma, Melanoma, or Kid­ney can­cer. In the era of per­son­al­ized can­cer ther­a­py, and with all we know and un­der­stand now about its bi­ol­o­gy, this might look some­what ar­cha­ic. Since I was the on­ly urol­o­gist on the team, I was for­tu­nate to get in­volved with de­vel­op­ing im­munother­a­py for kid­ney can­cer. For­tu­nate­ly it turned to be a high­ly sen­si­tive tu­mor to IL-2 based im­munother­a­py and  was al­so the first Im­munother­a­py drug to be ap­proved by FDA,  for the treat­ment of metasta­t­ic kid­ney can­cer. That was the start of the mod­ern era of Im­munother­a­py, con­trolled and led by Dr Rosen­berg – a true pi­o­neer.

Arie Bellde­grun

Our un­der­stand­ing of the im­mune sys­tem was in­com­plete. The im­por­tance of T cells in me­di­at­ing an an­ti-tu­mor ac­tiv­i­ty was not clear, let alone the abil­i­ty to mol­e­c­u­lar­ly en­gi­neer T cells to be­come su­per-killers.  For ex­am­ple, we be­lieved that the ul­ti­mate goal to achieve a bet­ter an­ti-can­cer re­sponse was the abil­i­ty to gen­er­ate a large num­ber of ac­ti­vat­ed T cells, by keep­ing them longer in cul­ture.” The more the mer­ri­er” ap­proach.   Then came the im­por­tant work in the lab­o­ra­to­ry, led by Dr Res­ti­fo, that in or­der to em­pow­er cells to bet­ter kill tar­gets one should aim to lim­it the time of these cells in cul­ture, and rather gen­er­ate younger and less dif­fer­en­ti­at­ed T cells . Such prin­ci­ples, based on sol­id da­ta, changed the en­tire think­ing process of our in­dus­try, and led to search for the op­ti­mal in vit­ro Growth con­di­tions of ac­ti­vat­ed and en­gi­neered im­mune cells.

We have made sig­nif­i­cant sci­en­tif­ic progress in the past decade. Based on what we know now im­munother­a­py, cell ther­a­py and tar­get­ed agents are the new fron­tiers.  The next decade, will all be about ra­tio­nal com­bi­na­tion ther­a­py. The true chal­lenge will be de­vel­op­ing pow­er­ful tools to fight sol­id tu­mors.  In re­gard to cel­lu­lar ther­a­py, the next fron­tier will be sol­id tu­mors.  One should al­ways re­mem­ber that 90% of the pa­tients dy­ing from can­cer are those with sol­id can­cers. This is the big box we need to ad­dress. It will re­quire to com­bine cel­lu­lar ther­a­py and tar­get­ed ther­a­py based on per­son­al­ized mol­e­c­u­lar sig­na­ture of a spe­cif­ic tu­mor.  It will al­so re­quire com­bin­ing im­munother­a­py with oth­er emerg­ing can­cer modal­i­ties, such as ther­a­nos­tic, on­colyt­ic virus­es, and can­cer vac­cines.

I don’t think we have even start­ed to scratch the sur­face of cell ther­a­py. Why do we need to go with poi­son when you have your own cells, who know their way in the body and can best home to fight for­eign in­vaders. All we need to do is em­pow­er them with the right tools. The two re­cent­ly ap­proved CAR T prod­ucts are a proof that en­gi­neered T cells can ef­fec­tive­ly fight can­cer and gen­er­ate long last­ing re­mis­sions and even cures. And so far we have on­ly ad­dressed their role in on­col­o­gy, which is the low­est hang­ing fruit. Au­toim­mune dis­eases, IBDs, and even AIDS are oth­er op­por­tu­ni­ties to ex­plore.

Wen­dell Lim: I agree with Arie that we’ve just scratched the sur­face of cell ther­a­py and cell en­gi­neer­ing. I think that the tech­nol­o­gy we have now, the CD19 CAR is amaz­ing. But we’re sort of lucky, right? Be­cause CD19 kills nor­mal B cells, but that’s an ex­pand­able com­part­ment. It’s not per­fect in its recog­ni­tion. I think we have a long way to go in terms of solv­ing the prob­lems for sol­id can­cers. But I think that there’s in­cred­i­ble promise, be­cause the way we look at it as liv­ing cells, es­pe­cial­ly cells of the im­mune sys­tem, are in a sense the most so­phis­ti­cat­ed sort of com­pu­ta­tion­al and ro­bot­ic de­vices. They are a type of nan­ode­vices If liv­ing cells weren’t very pre­cise in what they do, we wouldn’t be alive to­day. So they are very so­phis­ti­cat­ed ma­chines. And if we can re­al­ly un­der­stand more glob­al­ly and foun­da­tion­al­ly how to en­gi­neer them and en­gi­neer how they in­ter­act with, say a tu­mor tis­sue, and have a con­ver­sa­tion with it and in­ter­ro­gate it, I think we can have much more so­phis­ti­cat­ed ther­a­pies.

Susie Jun, Wen­dell Lim.

I view the cell as a plat­form for com­bi­na­tion ther­a­py be­cause you could have a cell that both rec­og­nizes a tu­mor and kills, but al­so pro­duces things that will dis­rupt the tu­mor mi­croen­vi­ron­ment, and the ecosys­tem that sta­bi­lizes the tu­mor. I think we can start look­ing at this prob­lem in a much more nu­anced way, and po­ten­tial­ly open up an in­dus­try that is more like the elec­tron­ics in­dus­try or pro­gram­ming, where the tools are there to do many dif­fer­ent things. And then we can take ge­nom­ic da­ta about dis­ease, use ma­chine learn­ing to fig­ure out what are the op­por­tu­ni­ties that we can rec­og­nize, the vul­ner­a­bil­i­ties that we can take ad­van­tage of, and have an in­dus­try where it’s more about their cre­ativ­i­ty than hav­ing to strug­gle to de­vel­op new tech­nolo­gies.

John Car­roll: Well it’s in­ter­est­ing be­cause the tools al­so seem to be a work in progress as well, right? Gene edit­ing it­self has got to be able to es­tab­lish it­self and prove it­self. And then not on­ly what’s the best way, but what’s gene-edit­ing 2.0, and then on and on and on from there. So, the com­plex­i­ties are ac­tu­al­ly quite ex­tra­or­di­nary. In look­ing for­ward, how do you make pro­jec­tions in terms of what you’re go­ing to be us­ing and how do you pick them up along the way, just in the right se­quence?

Wen­dell Lim: I think we have dif­fer­ent timescales at which we have to op­er­ate, be­ing that we need lots of dif­fer­ent stake­hold­ers, whether it’s star­tups that are re­al­ly try­ing to push things quick­ly in­to the clin­ic, or aca­d­e­m­ic fed­er­al­ly fund­ed re­search that has maybe a longer time­line. Be­cause I think there are dif­fer­ent kinds of prob­lems we have to solve. I think maybe this is a good ques­tion for the an­a­lysts. If cell en­gi­neer­ing goes to­wards say pro­gram­ming or elec­tron­ics, it means that we may have the ca­pa­bil­i­ty of, every year, com­ing up with a ver­sion 3.1 and so on. And that’s not nec­es­sar­i­ly in the best in­ter­est of every in­di­vid­ual com­pa­ny, right?

So there will be some pain. If we suc­ceed, then there will be some trans­for­ma­tion in ex­act­ly how the eco­nom­ics of this work.

John Car­roll: Great suc­cess­es and great fail­ures. So how does the mar­ket an­a­lyze this and take this in­to ac­count?

Michael Yee: Well, I thought you brought up a cou­ple of good points. One is, if you think about back in 2009, you’re ab­solute­ly right. We couldn’t do an IPO. No­body want­ed to touch biotech, health­care.

John Car­roll: Too much risk.

Michael Yee: Thought the health­care sys­tem was go­ing to be turned up­side down with Oba­macare. It was pret­ty bad. I’m sure you re­mem­ber those times. And now it’s 2019. You’ve got 45 IPOs this year, $30 bil­lion in fol­low-ons. $15 bil­lion in IPOs. You can come up with a new com­pa­ny and get fund­ed right away. Now part of why I’m ex­cit­ed and I think most of us in the au­di­ence are ex­cit­ed, are two things. One is, I think we can all agree that the break­throughs in

Michael Yee

sci­ence, gene ther­a­py, gene edit­ing, cell ther­a­py, IP­SC cells, and what is go­ing to come about in the next few years. Ob­vi­ous­ly, we have some gene ther­a­py drugs ap­proved. We have cell ther­a­py drugs ap­proved. And we’re go­ing to get 2.0 and 3.0. And there’s a ton of mon­ey fund­ing all of that to get us go­ing. I’m pret­ty ex­cit­ed about that.

The sec­ond thing I think is ex­cit­ing, is that with all of this mon­ey and with all of these com­pet­ing tech­nolo­gies, there is go­ing to be a con­stant evo­lu­tion. And it’s a bit scary be­cause on the good news that’s great for the pa­tients. That’s great for in­no­va­tion. The most chal­leng­ing part about that, which is prob­a­bly some­thing Zi­ad thinks about, and so many in­vestors think about is, well wait a sec­ond. I’ve got CRISPR CAS9, I’ve in­vest­ed in this com­pa­ny. Wait a sec­ond. There’s a sin­gle base pair gene-edit­ing com­pa­ny right be­hind it. Well, I’m think­ing about al­lo­gene­ic cell ther­a­py. Wait a sec­ond, there’s IP­SC com­ing around the cor­ner. So, the chal­leng­ing thing and ex­cit­ing thing about it is, there’s go­ing to be a ton of in­no­va­tion, and it’s go­ing to be hy­per-com­pet­i­tive, but that’s great for pa­tients. And maybe that’s a de­bate that Zi­ad has to think about.

John Car­roll: Take it away.

Zi­ad Bakri: Yeah, I would echo all of those com­ments. I would say that a lot of the in­no­va­tions that you see are the re­sult of new tools that have been de­vel­oped. It usu­al­ly takes a few years. But down the line those new tools have new ap­pli­ca­tions. And Arie was say­ing it was surgery, chemo and ra­dio­ther­a­py. And af­ter that, we had kind of small mol­e­cules and bi­o­log­ics. And now we have cell ther­a­py, gene ther­a­py, gene edit­ing. There’s IPOs all the time for com­pa­nies in RNAi, and de­liv­er­ing RNA, in fact, can­cer vac­cines. So, I do think the world is go­ing to go in 2030 to­wards a world of com­bi­na­tions. If I think about some of the big in­no­va­tions in can­cer, Franz Humer’s pre­vi­ous com­pa­ny Roche, what did we do with NHL, right? We start­ed off with CHOP chemother­a­py, which it­self is a com­bi­na­tion of four chemother­a­pies.

Arie Bellde­grun, Franz Humer, Susie Jun, Wen­dell Lim, Michael Yee, Zi­ad Bakri

And the big in­no­va­tion there was the add Rit­ux­an on­to that to fur­ther boost the cure rate. The same thing was done with HER2 breast can­cer, right? With adding things on to boost the cure rate.

With the im­proved depth and speed of se­quenc­ing and an­a­lyz­ing pop­u­la­tions, and ba­si­cal­ly re­defin­ing sub­pop­u­la­tions of dis­ease, and be­ing able to say, hey, breast can­cer is ac­tu­al­ly kind of hun­dreds of dif­fer­ent dis­eases, we’re able to come up with more tar­get­ed ap­proach­es. And for those, we need the tools. There are many more tools in that world. There will con­tin­ue to be more tools. And part­ner­ing be­tween com­pa­nies is go­ing to be very im­por­tant. You see a lot of the big phar­ma com­pa­nies do that, and you saw for ex­am­ple with Kite. Kite had mul­ti­ple part­ner­ships. So, I think in gen­er­al one com­pa­ny is not go­ing to have all of the tools, but I think part­ner­ships are go­ing to en­able that. And that’s ul­ti­mate­ly go­ing to lead to ef­fec­tive com­bi­na­tion ther­a­pies.

John Car­roll: So Susie, there’s been some dis­cus­sion on the com­bi­na­tion ther­a­pies to come. The com­plex­i­ty of the field in terms of putting these dif­fer­ent things to­geth­er and mov­ing them from a pre­clin­i­cal out in­to the Phase I area. So, when you look at the kind of com­plex­i­ty, mak­ing these choic­es is go­ing to be crit­i­cal to long term suc­cess. So how do you go about do­ing that? What is the process? What are the con­sid­er­a­tions that you use for that? And how do you take that in­to the clin­ic?

Susie Jun: Yes, I’ve been lis­ten­ing to the com­ments, and to Arie’s point, if we think back and try to see how that would ap­ply to the fu­ture. I do think the con­ver­sa­tion will start chang­ing. As our un­der­stand­ing of trans­lat­ing the tech­nol­o­gy, trans­lat­ing some of the in­for­mat­ics, just try­ing to un­der­stand the com­plex­i­ties, we be­come more so­phis­ti­cat­ed in the way we char­ac­ter­ize prod­ucts. We will fo­cus more on trans­for­ma­tion­al dif­fer­ences as op­posed to in­cre­men­tal dif­fer­ences. We’ll al­so trans­late that in­to speed. We talk about the cost of drug de­vel­op­ment and how long it took. Eight years, I know you guys were proud of that [at Kite]. But I think as we be­come bet­ter at ap­ply­ing our un­der­stand­ing of can­cer im­munother­a­py as well as the tech­nol­o­gy, that speed will in­crease. It will get faster.

John Car­roll, Franz Humer, Susie Jun, Wen­dell Lim

As it gets faster, we’ll be­come much more ef­fi­cient, so we’re not go­ing to be look­ing at one in 10 drugs get­ting ap­proved or hav­ing fail­ures in Phase III. I think we’ll be bet­ter at pick­ing drugs ear­li­er. And be­ing more ef­fi­cient in our drug de­vel­op­ment. It will go faster. It will cost less. These trans­la­tions of some of the tech­nol­o­gy and some of the emerg­ing bi­ol­o­gy will al­so lead us to con­ver­sa­tions more about pick­ing the right drug or the right com­bi­na­tions for each pa­tient. So we won’t be talk­ing about 20% or a 40% or even 50% com­plete re­sponse rates. We’ll be talk­ing more about which drugs will al­ways work for every pa­tient. And we won’t be talk­ing about pro­por­tions of re­sponse. We’ll be talk­ing about which com­bi­na­tions will lead to a re­sponse ear­ly, and then try­ing to ap­ply some of our un­der­stand­ing of tech­nol­o­gy to fig­ure that out, so we don’t have to wait three months be­fore we know that.

John Car­roll: It would be a rev­o­lu­tion if a larg­er com­pa­ny were able to in­crease their suc­cess rate of Phase I through Phase III, from 10% to 20%.

Susie Jun: Ex­act­ly.

John Car­roll: It’s one of Hal Bar­ron’s fa­vorite com­ments right now. Af­ter he took over the R&D group at Glax­o­SmithK­line. If I can have a 20% suc­cess rate, and on­ly 80% fail­ure rate, then I’ll be a ge­nius.

Susie Jun: Ex­act­ly.

John Car­roll: And I think that a lot of peo­ple are think­ing about that in terms of how they po­si­tion their own com­pa­ny, and how they go about it. I am cu­ri­ous about the big phar­ma per­spec­tive be­cause Roche had an op­por­tu­ni­ty to mess every­thing up when they took over Genen­tech. And this was a lot about in­no­va­tion and in terms of whether or not you can do that and do it suc­cess­ful­ly. You’re now look­ing at drugs like Hem­li­bra, Ocre­vus, Tecen­triq, drugs like that, that are mak­ing an enor­mous dif­fer­ence. And have legs, it’s like fran­chis­es. They’re just in­cred­i­ble. So I am cu­ri­ous when you look at this kind of fast-paced change, tra­di­tion­al­ly big phar­ma doesn’t do well with fast-paced change. Do you think that this can be al­tered? Be­cause they in­tend to.

Franz Humer: Not every big phar­ma com­pa­ny be­haves the same way. Amer­i­can com­pa­nies, Amer­i­can big phar­ma, with very few ex­cep­tions have the ten­den­cy to cen­tral­ize every­thing and to try and con­trol every­thing around the world.

Franz Humer

I think my per­son­al feel­ing is and con­vic­tion is, if you want to be suc­cess­ful in R&D, you’ve got to de­cen­tral­ize. And that was re­al­ly the guid­ing prin­ci­ple be­hind how to man­age Genen­tech. To give you a stu­pid ex­am­ple. I said no­body is al­lowed to trav­el to South San Fran­cis­co with­out my ap­proval, be­cause every­body want­ed to go to South San Fran­cis­co be­cause first of all, it’s great. I trav­el to Cal­i­for­nia, which means I’m out of the of­fice for a week. Won­der­ful. I like the cli­mate in San Fran­cis­co. I like the food. And then I have great con­ver­sa­tions with the peo­ple there. And I come from head­quar­ters, and I can tell you what to do. Which is ex­act­ly the wrong way to op­er­ate, not on­ly by the way in the US, but al­so in Japan.

So, the suc­cess of Genen­tech was re­al­ly built on main­tain­ing its in­de­pen­dence and hav­ing 100% con­fi­dence in the re­search group. Art Levin­son and his team. I sat on the board for 10 years, and I took the neg­a­tivism from my col­leagues in Basel once a week. And once a month. And at every bud­get dis­cus­sion. We could save hun­dreds of mil­lions if we would just not al­low Genen­tech to do X, Y or Z. And I said, Art, you do what you want. And Art spent 87% of his sales in R&D. And I said, I have con­fi­dence in the guy. I think he and his team will make it.

Turn around, go 10 years for­ward. We bought 60% of Chugai. As Japan­ese a com­pa­ny as can be cul­tur­al­ly. Hard­ly any­one spoke Eng­lish. I liked the head of R&D. He was a great guy. And I said, we are not in­te­grat­ing Chugai re­search. We leave it as is. To­day, the Chugai re­search cen­ter out­side of Tokyo is as pro­duc­tive as Genen­tech. And it has some­thing to do with the way you cre­ate and sus­tain a cul­ture in an or­ga­ni­za­tion. You cre­ate what David [Chang] and Arie are do­ing now at Al­lo­gene, the pride in achieve­ment of a group of peo­ple who can look in­to each oth­er’s eyes and say, yes we did it. And yes, we will be re­ward­ed for it. Be­ing re­ward­ed is not the first thing.

Sor­ry. I need to be care­ful be­cause oth­er­wise you will quote me. What are the things that you could

As soon as you say, I need to re­ward my re­searchers in San Fran­cis­co or in Los An­ge­les the same way as I re­ward them in Basel, it doesn’t work, be­cause the cul­ture in Ger­many, Switzer­land, Aus­tria, the UK, the US.  Even in the US, it is dif­fer­ent than it is on the East coast or on the West coast. And if you think you need to uni­fy, you de­stroy in the process of uni­fi­ca­tion. That’s why I be­lieve the suc­cess that will be in the fu­ture, very suc­cess­ful large phar­ma com­pa­nies, they will op­er­ate like a net­work around the world, in terms of re­search, and in terms of de­vel­op­ment un­til the end of phase two or proof of con­cept. When it comes to run­ning glob­al­ly, es­pe­cial­ly in the non-on­col­o­gy ar­eas, glob­al phase three, phase four pro­grams, no­body does that bet­ter than large phar­ma. Com­mer­cial­iza­tion, large phar­ma isn’t too bad ei­ther.

John Car­roll: So in terms of large phar­ma, of course, ob­vi­ous­ly the ini­tial group, your pi­o­neer group here at the com­pa­ny came from Pfiz­er. And you put that to­geth­er. And Pfiz­er, to their cred­it, un­der­stood that this was go­ing to go faster in a dif­fer­ent sort of a sit­u­a­tion, it seems to me. So that’s a dif­fer­ent kind of a mod­el in terms of how Pfiz­er, how a large phar­ma com­pa­ny can op­er­ate. Do you think that cul­tur­al­ly, those small­er com­pa­nies are more nim­ble, faster? Are they bet­ter by na­ture?

Arie Bellde­grun: Yes, small com­pa­nies are more ef­fi­cient than the large phar­ma, but they are learn­ing from their own mis­takes and chang­ing. See the case of Pfiz­er. While work­ing with the up­per man­age­ment of Pfiz­er, specif­i­cal­ly with John DeY­oung and his team at the on­col­o­gy busi­ness de­vel­op­ment, David and I saw a ma­jor change and re­ver­sal of their orig­i­nal in­tent for al­lo­gene­ic CAR-Ts. Pfiz­er re­al­ized that form­ing a fo­cused, nim­ble, and ded­i­cat­ed com­pa­ny, com­pris­ing of ex­perts in the field – will be more pro­duc­tive and ben­e­fi­cial to all.

Arie Bellde­grun

So some­times even the largest com­pa­ny in the world can pos­i­tive­ly change and gen­er­ate a win-win sit­u­a­tion that ben­e­fits pa­tients, share­hold­ers, and the in­ter­nal em­ploy­ees at the com­pa­ny that were very pas­sion­ate about bring­ing an al­lo­gene­ic prod­uct to mar­ket.

Our ne­go­ti­a­tion with Pfiz­er was very con­struc­tive and gen­er­at­ed sig­nif­i­cant en­thu­si­asm on both sides. We ear­ly on re­al­ized that Pfiz­er in­tends to be­come a part­ner in our ef­forts of bring­ing al­lo­gene­ic drugs to the mar­ket, rather than just a sell­er of ex­ist­ing in­ter­nal tech­nol­o­gy. They were com­mit­ted to see us build­ing a fo­cused and ded­i­cat­ed com­pa­ny, us­ing their core em­ploy­ees as the seed for the new com­pa­ny. As ne­go­ti­a­tion ad­vanced we were en­cour­aged by Pfiz­er re­quest­ing two board seats in the com­pa­ny, and agree­ing to in­vest and buy in­to the com­pa­ny. I be­lieve that the man­age­ment of Pfiz­er is cur­rent­ly pleased with the out­come of those months of ne­go­ti­a­tions. Of note is that they have re­cent­ly ex­pand­ed that mod­el to at least one or two oth­er ar­eas of spin­out ., I be­lieve that this is a for­ward-think­ing mod­el of how PHAR­MA can work with oth­er ex­perts in the field for the ben­e­fit of both sides. The fact that we have an open com­mu­ni­ca­tion line to Pfiz­er and know that our in­ter­ests in cell ther­a­py are aligned is very en­cour­ag­ing and help­ful. The team at Al­lo­gene is very pleased with the out­come and with all the sup­port it has re­ceived from Pfiz­er.

Franz Humer: You know, if I may…

John Car­roll: No, ab­solute­ly.

Franz Humer: Add to this a lit­tle bit. You just need to sit in a board meet­ing of a large phar­ma com­pa­ny and in the board meet­ing of Al­lo­gene. In Al­lo­gene, we have de­tailed pre­sen­ta­tions about man­u­fac­tur­ing, de­tailed pre­sen­ta­tions about each de­vel­op­ment pro­gram of each drug. Each re­search project is be­ing dis­cussed and pre­sent­ed. In large phar­ma, you spend your time on the re­mu­ner­a­tion com­mit­tee, the au­dit com­mit­tee, the risk com­mit­tee, the gov­er­nance com­mit­tee, the nom­i­na­tion com­mit­tee and what­ev­er else there is, as a com­mit­tee. But you don’t have time to think. To think and dis­cuss what is at the heart of this busi­ness and that is in­no­va­tion

John Car­roll: I was talk­ing to Nor­bert Bischof­berg­er when he left Gilead and went over to be a part of the start-up Kro­nos Bio, and he said he was tired of hav­ing a job that was most­ly about HR, and just about hir­ing and the whole area of staffing and how to go about do­ing that. So I am kind of cu­ri­ous, I mean from a Wall Street per­spec­tive, how you go about try­ing to de­ter­mine who’s good. And I got to tell you the first time I saw this guy in ac­tion, was a few years ago in New York.

Arie Bellde­grun: You were not nice to us.

John Car­roll: I was…

John Car­roll, Arie Bellde­grun

Arie Bellde­grun: You were not nice to us.

John Car­roll: No, what’s fun­ny is, that was my nice side.

Arie Bellde­grun: Ah!

John Car­roll: So.

Arie Bellde­grun: David [Chang] re­mem­bers that.

John Car­roll: Yes, the first time was —

Arie Bellde­grun: I won’t even look.

John Car­roll: The first time, was at an R&D day that you guys did in Man­hat­tan, and every­body was just like you said it was — this is man­u­fac­tur­ing, this is R&D, this is how we break it down. And every­body knew ex­act­ly where they were, and this is part of the whole rev­o­lu­tion­ary ap­proach to biotech. Where you start a com­pa­ny and you don’t say, well, we’ll get to man­u­fac­tur­ing lat­er on. You start think­ing about man­u­fac­tur­ing, which is ab­solute­ly crit­i­cal to every new area that you go in­to. It’s go­ing to be crit­i­cal in gene ther­a­py, crit­i­cal in cell ther­a­py, crit­i­cal in stem cells. It’s go­ing to be so im­por­tant. And those com­pa­nies that are do­ing it right ear­ly on have the lead and have an ad­van­tage over every­body else.

John Car­roll: So, when you look at these com­pa­nies from a Wall Street per­spec­tive, is it a more of a holis­tic ap­proach?

Michael Yee: I think that there are two com­po­nents that we pay par­tic­u­lar at­ten­tion to. One is the peo­ple, right so you have 10 dif­fer­ent cell ther­a­py com­pa­nies, you have 10 dif­fer­ent gene ther­a­py com­pa­nies or more. It’s cer­tain­ly more than 10, and I think that a lot of these in­vest­ments ear­ly on, par­tic­u­lar­ly when there’s no da­ta, not a lot to go on, it comes back to the peo­ple. Whether that’s Arie and team, or whether that’s oth­ers that have done it, been there and know that it’s about A to Z, not just you know, the ear­ly parts. That’s one huge com­po­nent of it and I’m sure you would agree that man­age­ment is a key com­po­nent, par­tic­u­lar­ly when it’s a small com­pa­ny.

The sec­ond part is re­sources and ob­vi­ous­ly they’re a bit in­ter­re­lat­ed, but those who have the most re­sources, those — I’m talk­ing about cap­i­tal — and those who have done it, those are the teams that typ­i­cal­ly peo­ple are go­ing to be plac­ing their bets on.

John Car­roll, Arie Bellde­grun, Franz Humer, Susie Jun, Wen­dell Lim, Michael Yee

Arie Bellde­grun: On the re­sources is­sue… I would like to bring up the great im­por­tance that the board of di­rec­tors in a small com­pa­ny with lim­it­ed re­sources,  like Kite or Al­lo­gene, plays in the over­all progress of the com­pa­ny.

At Kite, one of the most dif­fi­cult de­ci­sions the board had to make was a 2014 de­ci­sion of build­ing our own man­u­fac­tur­ing plant. Af­ter lis­ten­ing to the rec­om­men­da­tions made by man­age­ment the board agreed to al­lo­cate fund­ing, from the IPO pro­ceeds, to build a first of its kind man­u­fac­tur­ing plant, at a time the com­pa­ny was still in very ear­ly clin­i­cal de­vel­op­ment. The board trust­ed its head of R&D, David Chang,  in say­ing that the clin­i­cal da­ta is en­cour­ag­ing, and in or­der to stay ahead of the com­pe­ti­tion we should build our own plant.  That bold de­ci­sion, and the pace it all hap­pened played an im­por­tant role in the over­all suc­cess of Kite. I be­lieve that such a de­ci­sion in a big PHAR­MA would have tak­en much longer, with many more com­mit­tees in­volved, many more ques­tions asked about the prop­er tim­ing for such a buildup and a com­plete­ly un­known out­come. That why a savvy and ex­pe­ri­enced board in small­biotech com­pa­nies can make a great dif­fer­ence in the out­come.

John Car­roll: I’ve spent a lot of time try­ing to fol­low what peo­ple are in­ter­est­ed in and it used to be mon­ey. It used to be that $100 mil­lion was like a mag­ic fig­ure. It got a lot of at­ten­tion. What gets at­ten­tion right now is peo­ple. Every time you get right down to it, it’s like when you go in­to some­place like Chugai and you say, “I like the R&D di­rec­tor, I’m go­ing to trust the R&D di­rec­tor, that this per­son’s go­ing to do the right thing and be suc­cess­ful the way I think that they are.” And to me, that’s just in­cred­i­bly im­por­tant. You’ve got to un­der­stand who the peo­ple are and who is go­ing to be able to per­form and who was not go­ing to be able to per­form.

If you were a younger per­son get­ting in­to this in­dus­try at this point, which I think is a crit­i­cal point be­cause on­ly 10 years from now you’re go­ing to see a whole rev­o­lu­tion in terms of who’s run­ning these com­pa­nies, and they’re go­ing to be a much younger set. So, if you are com­ing in­to any kind of a com­pa­ny in this sit­u­a­tion as a staffer, how would you ap­proach things then? And what are peo­ple look­ing for? And, and what is the best way for some­body just get­ting in the in­dus­try for the first time?

Susie Jun: Well, I ap­pre­ci­ate the com­ment that I’m on the younger gen­er­a­tion.

John Car­roll: You got me beat.

Susie Jun: I think the things are sim­i­lar to what we’re talk­ing about is what you guys are look­ing for, right? I mean, I think young peo­ple, and I’m go­ing to speak for the Al­lo­gene work­ers and you guys can ar­gue with me, but they re­al­ly are look­ing for lead­ers who have vi­sion and who have com­mit­ment. And you know, cer­tain­ly work­ing in big phar­ma, there are lots of lead­ers who may have vi­sion, but you nev­er re­al­ly feel like they’re su­per com­mit­ted be­cause they’re so dis­persed and they do a lot of dif­fer­ent things. And I think when you’re look­ing at a small com­pa­ny, you un­der­stand

there’s a lot of risk. You could be out of a job in a year and you’re young. So you might have fam­i­ly, you might have a house, you might have a car or a pet. But, you re­al­ly want some­one who’s go­ing to show you that they have a vi­sion. So it needs to be a big vi­sion, it’s not a small vi­sion and that they’re com­mit­ted. They’re go­ing to put in the ef­fort, do what it takes and re­al­ly think care­ful­ly be­fore they com­mit your time and your life to their vi­sion.

And, I think that’s what young peo­ple are look­ing for. I’m go­ing to look around the room, you guys can ar­gue. No one seems to be rais­ing their hand. Okay, good.

John Car­roll: I mean, what about from your own per­spec­tive? What are your thoughts as it re­lates to the gen­er­a­tional change that we’re ex­pe­ri­enc­ing?

Wen­dell Lim: The kinds of tech­nolo­gies that we’re talk­ing about, gene edit­ing and so forth, it’s much like with dig­i­tal na­tives — the younger gen­er­a­tion are much more com­fort­able with those sorts of ideas and can think with­out some of the cul­tur­al bag­gage about that. Kids in high school and mid­dle school are learn­ing about these sorts of things. I think they’re go­ing to be in many ways bet­ter pre­pared to lead the next wave of in­no­va­tion. But I think as you guys have all said, this is a hard busi­ness and you need ex­pe­ri­enced and ded­i­cat­ed peo­ple, peo­ple who build a cul­ture that can work and there’s not just one so­lu­tion, but they do have this com­mon thread of ded­i­ca­tion and re­al thought go­ing in­to what de­ci­sions are made.

John Car­roll: So the first part of this con­ver­sa­tion was about sci­ence and tech­nol­o­gy and the things that are im­por­tant in terms of grow­ing a com­pa­ny and point­ing your­self to­wards 2030. Which is all pret­ty pos­i­tive, right? The news flow in the in­dus­try has gone from this to here over the past 10 years. It’s just re­al­ly ex­tra­or­di­nary. I’m sure you guys have all seen that from your own var­i­ous per­spec­tives. Things are much more ac­tive. On the oth­er side of that, nev­er has the phar­ma in­dus­try had a worse rep­u­ta­tion than it does right now.

Gallup just did this poll where they saw the phar­ma in­dus­try is ac­tu­al­ly low­er than the fed­er­al gov­ern­ment, in terms of peo­ple’s neg­a­tive feel­ings It was ab­solute­ly rock bot­tom. You’re go­ing in­to an elec­tion year in which every can­di­date who’s got a shot at this thing is tak­ing a shot at phar­ma. They’re tak­ing a shot at the in­dus­try. They’re tak­ing a shot at drug prices, which has got every­body go­ing. You have an opi­oid cri­sis which is be­ing ap­plied to every­body in the field — like every­body’s in­volved, rip­ping peo­ple off, do­ing what­ev­er they can, and it’s an in­cred­i­bly neg­a­tive en­vi­ron­ment. As far as the pub­lic is con­cerned. From Wall Street’s per­spec­tive, it would seem like things have to change.

Are we head­ed for a re­al kind of a re­al cross­roads as it re­lates to pric­ing and the pub­lic en­vi­ron­ment for the in­dus­try?

Michael Yee: So, I think I’m the most hat­ed guy here be­cause I work on Wall Street, so every­body hat­ed Wall Street peo­ple in 2009 af­ter the fi­nan­cial cri­sis and our work in biotech, which is like a phar­ma, which is the most hat­ed group ever. So, I get to get that award, but I’m a lit­tle more op­ti­mistic and I would say that those of us who have seen the cy­cle and go back to 2008 and 9 when it was pret­ty tough when we thought that there was go­ing to be a rev­o­lu­tion of so­cial­ized med­i­cine or at least the ear­ly parts of it with Oba­macare and I do think that we’re, re­liv­ing in that cy­cle too, in a greater de­gree now, where we are the tar­gets, again.

Arie Bellde­grun, Franz Humer, Susie Jun, Wen­dell Lim, Michael Yi, Zi­ad Bakri

I’m more op­ti­mistic be­cause num­ber one I do be­lieve that, and I’m sure most of us be­lieve here that a lot of it is rhetoric, a lot of it is po­lit­i­cal. What­ev­er hot top­ic is to­day, what­ev­er can get votes. I think that is what­ev­er they want to talk about, and I’m op­ti­mistic that some of this will pass. So that’s part one. Part two, is I’m op­ti­mistic be­cause I think that those of us sit­ting here know about the types of trans­for­ma­tive, in­no­v­a­tive med­i­cines that make a true dif­fer­ence, not in­cre­men­tal dif­fer­ence. Gene ther­a­py, cell ther­a­py, et cetera, and there­fore, that there is clear­ly a phar­ma­co-eco­nom­ic for­mu­la to pay for things that save your life and are not in­cre­men­tal. So, while I think that the sys­tem on how to pay for that, whether that’s re­bat­ing, pay­ing for our per­for­mance, what­ev­er that mod­el is, I think will evolve.

I’m op­ti­mistic that if you are com­ing up with drugs and make a dif­fer­ence, there will be a sys­tem that pays for that, par­tic­u­lar­ly in the Unit­ed States.

John Car­roll: Do you see this as evo­lu­tion­ary or rev­o­lu­tion­ary?

Michael Yee: I see it as evo­lu­tion­ary, and I be­lieve that there prob­a­bly will be some form of a leg­is­la­tion passed to say that they got some­thing done, but I don’t think that it’s go­ing to change the sys­tem. And for those com­ing up with trans­for­ma­tive drugs, there will be a sys­tem to be paid for that.

Zi­ad Bakri: I agree. I think it’s evo­lu­tion­ary. I think if you fol­lowed a lot of these cy­cles, elec­tion cy­cles, this is al­ways a hot top­ic. It is def­i­nite­ly more of a top­ic now. And a big part of that is that maybe start­ing about eight to 10 years ago there just be­came this very kind of lib­er­al price in­crease en­vi­ron­ment. Right? The prob­lem has been that a lot of these drugs have been around a long time and maybe they’re near the end of their patent life. The ef­fect of com­pound­ing prices sev­en, eight, nine per­cent a year, by the time you get to 10, 12, 14 years out, it is pret­ty dra­mat­ic. And the one thing is that the re­al­ly in­no­v­a­tive drugs and the new break­throughs, maybe with the ex­cep­tion of the he­pati­tis C drugs, that’s the on­ly ex­cep­tion I can think of, have all com­mand­ed very good prices.

Arie Bellde­grun, John Car­roll, Franz Humer, Susie Jun, Wen­dell Lim, Michael Yee, Zi­ad Bakri

The sys­tem’s kind of been will­ing to re­ward re­al in­no­va­tions, es­pe­cial­ly when it’s the on­ly in­no­va­tion of its kind when it’s the on­ly drug in this class, when it serves a big un­met need when the dis­ease is se­vere or fa­tal and there were no oth­er op­tions for pa­tients. So, that’s kind of al­ways been the case. What hap­pens to the in­cre­men­tal drugs and whether their prices are re­duced or con­trolled. I don’t know. In the ar­eas that we’re talk­ing about, where Al­lo­gene and sim­i­lar com­pa­nies are op­er­at­ing in, you know there’s al­ways go­ing to be good re­wards in the sys­tem.

John Car­roll: How do you ad­just for the fu­ture as it re­lates to where we are now in this dis­cus­sion?

Arie Bellde­grun: I per­son­al­ly don’t ad­just for pric­ing. I think of in­no­va­tion, sci­en­tif­ic progress, and bring­ing dis­rup­tive prod­ucts to pa­tients.

John Car­roll: I al­ways love talk­ing to ex­ec­u­tives about pric­ing.

Arie Bellde­grun: I can clear­ly see that some things nev­er change. Dis­cus­sions about drug pric­ing around elec­tion time is one of them. What I am more con­cerned about these days is los­ing our com­pet­i­tive edge to Chi­na. At this time the biggest sci­en­tif­ic in­no­va­tions in the world are hap­pen­ing in life sci­ences and in the Unit­ed States. Hav­ing close­ly fol­lowed the progress of sci­ence and biotech in Chi­na in the past 5 years I wor­ry that the gaps are rapid­ly clos­ing and as a con­se­quence, we may lose the com­pe­ti­tion. Cut­ting R&D in or­der to jus­ti­fy cost-cut­ting and low­er drug pric­ing is the wrong so­lu­tion.

John Car­roll, Arie Bellde­grun, Franz Humer, Susie Jun

Five years ago was my first vis­it to the cF­DA — the Chi­nese FDA. We were in­vit­ed to spend about six hours with them, help­ing them to un­der­stand CAR T and cell ther­a­py. To­day there are over 280 clin­i­cal tri­als of cell ther­a­py in Chi­na, ver­sus 180 in the US. That is the pace of change in Chi­na, and it is just go­ing to grow. Build­ing Fo­s­un- Kite PHAR­MA in Shang­hai taught us a lot about the Chi­nese com­mit­ment to ex­cel­lence in the Life Sci­ence. We could wit­ness their progress and ea­ger­ness to ex­cel at every board meet­ing.

So, that is the re­al com­pe­ti­tion we are fac­ing to­day  It is a whole new world and that is what keeps me wor­ried most – los­ing the sci­en­tif­ic edge and the glob­al com­pe­ti­tion in the space.

Michael Yee: So you’ wor­ried that in­no­va­tion could de­cel­er­ate and oth­ers could pass us up?

Arie Bellde­grun: Oh, ab­solute­ly.

Michael Yee: Right, right. And I would, and I would ar­gue, since we’re on a biotech 2030 pan­el, maybe you’ll ask for pre­dic­tions, but, I guar­an­tee that by 2030 there will be an ex­plo­sion of Chi­nese com­pa­nies and when the gov­ern­ment-

Franz Humer: It will take an­oth­er 10 years, but there will be Chi­nese com­pa­nies with in­no­v­a­tive med­i­cines hit­ting the glob­al mar­ket.

John Car­roll: Right now the main threat, it seems to be more com­modi­ti­za­tion.

Michael Yee: Sure.

John Car­roll, Arie Bellde­grun, Franz Humer, Susie Jun, Wen­dell Lim, Michael Yee, Zi­ad Bakri

Franz Humer: Every cou­ple of years, the in­dus­try is go­ing to dis­ap­pear be­cause of pric­ing reg­u­la­tions and changes in the reg­u­la­tions. I’m rea­son­ably wor­ried by it. If this in­dus­try con­tin­ues to pro­duce in­no­va­tion that treats dis­eases which we are not treat­ing, treats it in a bet­ter way, or gives peo­ple a bet­ter qual­i­ty of life, we will be able to charge pre­mi­um prices, will con­tin­ue to be suc­cess­ful, be­cause this is an in­dus­try with un­lim­it­ed de­mand and with un­lim­it­ed po­ten­tial to pro­duce in­no­va­tion.

We are just scratch­ing the sur­face. We’re prob­a­bly two or three per­cent of dis­eases which we’re cur­ing, the rest, we’re just treat­ing along. Now, imag­ine the po­ten­tial we can cre­ate. My wife died in ’99 of breast can­cer. She was on­ly treat­ed with med­i­cines that were avail­able since the 1940s. If you look back to­day, we’d say in the ‘90s they were the Mid­dle Ages. In 2030 to 2035 they will say about to­day, these guys were ig­no­rant. That they were treat­ing dis­eases like in the Mid­dle Ages and that’s what this pace of in­no­va­tion is. That’s why I’m enor­mous­ly op­ti­mistic.

John Car­roll: Are you op­ti­mistic?

Susie Jun: Yes. I’m very op­ti­mistic. I agree with all of them. I think that in 10 years we’ll look back and we’ll just say, wow, they were, they were so naive. They didn’t re­al­ly know that the con­ver­sa­tions were so sim­ple and not as so­phis­ti­cat­ed and cer­tain­ly with­out the re­fin­ing de­f­i­n­i­tions that we un­der­stand 10 years from now.

John Car­roll: Cool. Well, I got the high sign, which says that we’re out of time. It’s been a great pan­el. I’d like to thank every­body here had a lot of con­ver­sa­tion and a very in­ter­est­ing di­a­logue. Thank you very much.

Pho­tog­ra­phy of Al­lo­gene HQ Open House (be­low) by Jeff Ru­mans, End­points News