Can you cut $600M in R&D costs with­out slash-and-burn tac­tics? Andy Plump aims to show us how

Big bio­phar­ma merg­ers have been out of fa­vor in the in­dus­try for close to a decade now, soured by the large scale de­struc­tion that at­tend­ed deals like the 2009 Wyeth buy­out by Pfiz­er, which was fol­lowed by slash and burn tac­tics that played hav­oc with re­search teams.

Now, years af­ter the bolt-on ac­qui­si­tion be­came a stan­dard fea­ture at the largest bio­phar­mas, which large­ly swore off ma­jor merg­ers, Take­da’s ex­ec­u­tive team has set a goal for it­self to see if a 237-year-old bio­phar­ma com­pa­ny based in Japan can in­te­grate two large re­search groups in­to a sin­gle glob­al net­work fo­cused heav­i­ly in the Cam­bridge/Boston hub — and use the big­ger op­er­a­tion to cat­a­pult them in­to the league of glob­al heavy­weights.

Slash-and-burn is not on the ta­ble in R&D, says re­search chief Andy Plump.

“We wouldn’t have done this if we didn’t tru­ly be­lieve this would be a trans­for­ma­tive act for us,” Plump tells me on Tues­day. “We be­lieve it’s high­ly strate­gic for us.” Lat­er in our con­ver­sa­tion he not­ed that “it’s very ex­cit­ing for us. We’re not do­ing this be­cause we need to do, we’re do­ing re­al­ly well,” and the buy­out is in­tend­ed to ac­cel­er­ate their progress.

Plump and his crew face some ex­tra­or­di­nar­i­ly deep skep­ti­cism from an­a­lysts and in­vestors fret­ting over the debt and as­pects of the com­pa­ny they’re buy­ing. And even with a care­ful ap­proach, there will be some big changes need­ed to make it hap­pen.

Take­da’s $62 bil­lion Shire buy­out deal — if com­plet­ed — will de­liv­er an R&D group that’s been in tran­si­tion for sev­er­al years. Soon af­ter Flem­ming Orn­skov took over as CEO, he be­gan to con­cen­trate Shire’s re­search forces pri­mar­i­ly in Lex­ing­ton, MA, then vault­ing in­to Cam­bridge af­ter the $32 bil­lion buy­out of Bax­al­ta, which had grabbed a big chunk of space for it­self in the heart of one of the biggest bio­hubs on the plan­et.

Take­da spent about $2.85 bil­lion on re­search in the past year, while Shire racked up $1.7 bil­lion in costs dur­ing 2017. To­geth­er, Plump will be hand­ed a group with col­lec­tive costs of a lit­tle more than $4.5 bil­lion, with a goal to cut that by about $600 mil­lion. Based on their lay­off plans out­lined to­day, that will cost rough­ly 1,000 jobs. (All of these num­bers are based on the re­lease from Take­da this morn­ing and pub­lic records. Plump did not out­line any spe­cif­ic num­bers in our dis­cus­sion.) Even af­ter the cuts, at close to $4 bil­lion in an­nu­al spend­ing, the new­ly ex­pand­ed Take­da would cat­a­pult up from the bot­tom of our top 15 list to about the 12th or 13th spot, just ahead of Gilead and per­haps be­hind Ab­b­Vie.

But that’s not hap­pen­ing overnight. The deal it­self won’t close un­til next year, and there’s time to start con­sid­er­ing how to man­age the process.

Plump has al­ready un­der­tak­en an over­haul of R&D at Take­da, where they scaled back and be­gan to en­gage in more of the ex­ter­nal­iza­tion strat­e­gy that has be­come com­mon in the in­dus­try. Right now Plump es­ti­mates that the R&D spend is split 60/40 be­tween ex­ter­nal and in­ter­nal.

They’re most ex­cit­ed about adding Shire’s rare dis­ease drugs to the pipeline.

“We still want to stay fo­cused,” says Plump, who’s been lasered on on­col­o­gy, CNS and GI, “es­sen­tial­ly add rare dis­eases.”

Where Take­da has been fo­cused on small mol­e­cules, Shire has been adding new drug tech­nolo­gies that di­ver­si­fy their work, adding to the com­ple­men­tary as­pects of the deal. Plump loves the ear­ly-stage gene ther­a­py work he’s been see­ing at Shire. And he’s quick to cite lanadelum­ab, Shire’s top late-stage as­set now un­der FDA re­view, with an­a­lysts look­ing for block­buster re­turns.

It be­comes a nat­ur­al fol­low to look at ar­eas that lie in­side their strate­gic in­ter­est and what lies out­side their strate­gic in­ter­est — think oph­thal­mol­o­gy here — where Take­da can see what it wants to keep and what it needs to move out.

Again, that doesn’t mean slash and burn. Plump’s group has es­tab­lished 10 dif­fer­ent spin­out com­pa­nies, in ad­di­tion to a string of out­li­cens­ing pacts, that can keep any­thing of val­ue mov­ing for­ward.

And the same ap­proach works in ge­og­ra­phy. Adding Shire great­ly ex­pands their pres­ence in Boston/Cam­bridge, which Plump sees as a big ben­e­fit, with op­er­a­tions in Japan and a biotech group in San Diego. Any­thing that Shire has out­side of those ar­eas, he says, are al­so go­ing to get the clos­est scruti­ny to see if they should re­main.

“We will treat peo­ple with deep re­spect,” em­pha­sizes Plump, who’s arranged deals in Japan that trans­ferred re­searchers to CROs the com­pa­ny is aligned with, rather than sim­ply cut jobs. 

The ex­pand­ed Take­da wont have to strain around prof­it mar­gins, the R&D chief adds. Yes, it will take a few years to bring debt down, but he doesn’t be­lieve that will take long with the mar­gins they have. The deal “gives us a lot of op­tion­al­i­ty in in­vest­ing in pipeline part­ner­ships,” he says. And while they’d be plan­ning to slow down on the deal side in any case, “our fo­cus will al­ways be in look­ing at op­por­tu­ni­ties.”

Fangliang Zhang, AP Images

UP­DAT­ED: Leg­end fetch­es $424 mil­lion, emerges as biggest win­ner yet in pan­dem­ic IPO boom as shares soar

Amid a flurry of splashy pandemic IPOs, a J&J-partnered Chinese biotech has emerged with one of the largest public raises in biotech history.

Legend Biotech, the Nanjing-based CAR-T developer, has raised $424 million on NASDAQ. The biotech had originally filed for a still-hefty $350 million, based on a range of $18-$20, but managed to fetch $23 per share, allowing them to well-eclipse the massive raises from companies like Allogene, Juno, Galapagos, though they’ll still fall a few dollars short of Moderna’s record-setting $600 million raise from 2018.

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As it hap­pened: A bid­ding war for an an­tibi­ot­ic mak­er in a mar­ket that has rav­aged its peers

In a bewildering twist to the long-suffering market for antibiotics — there has actually been a bidding war for an antibiotic company: Tetraphase.

It all started back in March, when the maker of Xerava (an FDA approved therapy for complicated intra-abdominal infections) said it had received an offer from AcelRx for an all-stock deal valued at $14.4 million.

The offer was well-timed. Xerava was approved in 2018, four years after Tetraphase posted its first batch of pivotal trial data, and sales were nowhere near where they needed to be in order for the company to keep its head above water.

Drug man­u­fac­tur­ing gi­ant Lon­za taps Roche/phar­ma ‘rein­ven­tion’ vet as its new CEO

Lonza chairman Albert Baehny took his time headhunting a new CEO for the company, making it absolutely clear he wanted a Big Pharma or biotech CEO with a good long track record in the business for the top spot. In the end, he went with the gold standard, turning to Roche’s ranks to recruit Pierre-Alain Ruffieux for the job.

Ruffieux, a member of the pharma leadership team at Roche, spent close to 5 years at the company. But like a small army of manufacturing execs, he gained much of his experience at the other Big Pharma in Basel, remaining at Novartis for 12 years before expanding his horizons.

Is a pow­er­house Mer­ck team prepar­ing to leap past Roche — and leave Gilead and Bris­tol My­ers be­hind — in the race to TIG­IT dom­i­na­tion?

Roche caused quite a stir at ASCO with its first look at some positive — but not so impressive — data for their combination of Tecentriq with their anti-TIGIT drug tiragolumab. But some analysts believe that Merck is positioned to make a bid — soon — for the lead in the race to a second-wave combo immuno-oncology approach with its own ambitious early-stage program tied to a dominant Keytruda.

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Bris­tol My­ers is clean­ing up the post-Cel­gene merg­er pipeline, and they’re sweep­ing out an ex­per­i­men­tal check­point in the process

Back during the lead up to the $74 billion buyout of Celgene, the big biotech’s leadership did a little housecleaning with a major pact it had forged with Jounce. Out went the $2.6 billion deal and a collaboration on ICOS and PD-1.

Celgene, though, also added a $530 million deal — $50 million up front — to get the worldwide rights to JTX-8064, a drug that targets the LILRB2 receptor on macrophages.

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Leen Kawas, Athira CEO (Athira)

Can a small biotech suc­cess­ful­ly tack­le an Ever­est climb like Alzheimer’s? Athi­ra has $85M and some in­flu­en­tial back­ers ready to give it a shot

There haven’t been a lot of big venture rounds for biotech companies looking to run a Phase II study in Alzheimer’s.

The field has been a disaster over the past decade. Amyloid didn’t pan out as a target — going down in a litany of Phase III failures — and is now making its last stand at Biogen. Tau is a comer, but when you look around and all you see is destruction, the idea of backing a startup trying to find complex cocktails to swing the course of this devilishly complicated memory-wasting disease would daunt the pluckiest investors.

GSK presents case to ex­pand use of its lu­pus drug in pa­tients with kid­ney dis­ease, but the field is evolv­ing. How long will the mo­nop­oly last?

In 2011, GlaxoSmithKline’s Benlysta became the first biologic to win approval for lupus patients. Nine years on, the British drugmaker has unveiled detailed positive results from a study testing the drug in lupus patients with associated kidney disease — a post-marketing requirement from the initial FDA approval.

Lupus is a drug developer’s nightmare. In the last six decades, there has been just one FDA approval (Benlysta), with the field resembling a graveyard in recent years with a string of failures including UCB and Biogen’s late-stage flop, as well as defeats in Xencor and Sanofi’s programs. One of the main reasons the success has eluded researchers is because lupus, akin to cancer, is not just one disease — it really is a disease of many diseases, noted Al Roy, executive director of Lupus Clinical Investigators Network, an initiative of New York-based Lupus Research Alliance that claims it is the world’s leading private funder of lupus research, in an interview.

David Meline (file photo)

Mod­er­na’s new CFO took a cut in salary to jump to the mR­NA rev­o­lu­tion­ary. But then there’s the rest of the com­pen­sa­tion pack­age

David Meline took a little off the top of his salary when he jumped from the CFO post at giant Amgen to become the numbers czar at the upstart vaccines revolutionary Moderna. But the SEC filing that goes with a major hire also illustrates how it puts him in line for a fortune — provided the biotech player makes good as a promising game changer.

To be sure, there’s nothing wrong with the base salary: $600,000. Or the up-to 50% annual cash bonus — an industry standard — that comes with it. True, the 62-year-old earned $999,000 at Amgen in 2019, but it’s the stock options that really count in the current market bliss for all things biopharma. And there Meline did well.

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Covid-19 roundup: Ab­b­Vie jumps in­to Covid-19 an­ti­body hunt; As­traZeneca shoots for 2B dos­es of Ox­ford vac­cine — with $750M from CEPI, Gavi

Another Big Pharma is entering the Covid-19 antibody hunt.

AbbVie has announced a collaboration with the Netherlands’ Utrecht University and Erasmus Medical Center and the Chinese-Dutch biotech Harbour Biomed to develop a neutralizing antibody that can treat Covid-19. The antibody, called 47D11, was discovered by AbbVie’s three partners, and AbbVie will support early preclinical work, while preparing for later preclinical and clinical development. Researchers described the antibody in Nature Communications last month.