The Zer­houni rule: “Every com­pa­ny that ac­quires a plat­form com­pa­ny kills it.”

Why Medi­va­tion makes the per­fect biotech takeover tar­get for Sanofi


John Car­roll, Ed­i­tor

Last Jan­u­ary at the J.P. Mor­gan con­fab, I had a chance to sit down with Sanofi R&D chief Dr. Elias Zer­houni. He made it clear up front he’s been fol­low­ing my writ­ing for some years. He even seemed to have en­joyed some of it — ex­cept for the parts in which I rou­tine­ly point­ed to Sanofi’s lack of in­ter­nal in­no­va­tion and a heavy re­liance on its de­vel­op­ment part­ners (es­pe­cial­ly Re­gen­eron) to ad­vance ma­jor new drugs.

(Feb 7, 2007: Pres­i­dent George W. Bush and NIH Di­rec­tor Dr. Elias Zer­houni en­joy an ex­change. Cour­tesy NIH)

The for­mer head of the NIH took ex­cep­tion to what he sees as a reg­u­lar theme of mine: that Sanofi “just buys” in­no­va­tion at part­ner com­pa­nies. And that set the stage for a con­ver­sa­tion on his track record at the French phar­ma gi­ant since ex-CEO Chris Viehbach­er re­cruit­ed him in 2009, set­ting him on a mis­sion to cre­ate the kind of R&D struc­ture at a glob­al op­er­a­tion that can be man­aged ef­fi­cient­ly and gen­er­ate im­por­tant new ther­a­pies.

There wasn’t a hint in that ex­change that Sanofi had its eyes on Medi­va­tion, a com­pa­ny that had played a break­through role in treat­ing prostate can­cer and fol­lowed that up with a ma­jor league PARP in­hibitor deal as it jock­eyed for po­si­tion against some big ri­vals. But look­ing back, you can see all the in­tel­lec­tu­al build­ing blocks that de­fine what makes Medi­va­tion — or a sim­i­lar biotech — the per­fect takeover tar­get for the French phar­ma gi­ant and its new CEO, Olivi­er Brandi­court.

Zer­houni, who had re­cent­ly dropped an op­tion to buy Warp Dri­ve Bio in fa­vor of a long­time col­lab­o­ra­tion, be­lieves that any phar­ma com­pa­ny that wants to buy a plat­form biotech–build­ing a pipeline out of its own dis­cov­ery en­gine–is on a fool’s mis­sion.

“Every com­pa­ny that ac­quires a plat­form com­pa­ny kills it,” he told me blunt­ly. So a few years ago when the board at Sanofi start­ed ask­ing about buy­ing Re­gen­eron, a close part­ner which Sanofi al­ready owns a big stake in, he wasn’t in­ter­est­ed.

Zer­houni’s re­sponse: “That would be the stu­pid­est thing you could do.”

At that point I not­ed that Viehbach­er—who al­so told me in a re­cent in­ter­view that he didn’t be­lieve any Big Phar­ma op­er­a­tion could be tru­ly in­no­v­a­tive — had once men­tioned in an in­ter­view that if Sanofi had bought Re­gen­eron, they would prob­a­bly just screw it up.

“I told Chris that,” re­spond­ed Zer­houni em­phat­i­cal­ly.

I was re­mind­ed of that con­ver­sa­tion as I was read­ing over Medi­va­tion’s caus­tic kick­back against Sanofi’s $9.3 bil­lion buy­out of­fer. Medi­va­tion is any­thing but a plat­form com­pa­ny. It was go­ing af­ter prostate can­cer at the same time it was mak­ing a failed bet that a Russ­ian an­ti­his­t­a­mine could be the per­fect new drug for Alzheimer’s. (Wrong.) But they scored block­buster gold with Xtan­di, a drug that came out of the UCLA lab of Charles Sawyers, one of the lead­ing lights in an­dro­gen re­cep­tor drug tech now at Memo­r­i­al Sloan-Ket­ter­ing. Pick­ing up their com­ple­men­tary late-stage PARP in­hibitor, ta­la­zoparib,  last year from Bio­Marin was a pure play add-on deal.

There wasn’t any­thing in­no­v­a­tive about it. But it was smart. And Medi­va­tion CEO David Hung is a very smart deal­mak­er. One of the best.

If the PARP drug works, it will be be­cause the drug is ef­fec­tive, rel­a­tive­ly safe and the de­vel­op­ment team didn’t screw it up. Xtan­di is al­ready a known, ap­proved prod­uct. Medi­va­tion’s jab at Sanofi’s failed Bi­Par deal won’t fly. If Big Phar­ma is good at any­thing, it’s as­sem­bling deeply pro­fes­sion­al de­vel­op­ment teams and spend­ing big on con­vinc­ing Phase III da­ta. Sanofi, with its $6 bil­lion an­nu­al R&D bud­get, is every bit as good at that as any of its Big Phar­ma brethren.

It’s not in­no­v­a­tive.

If the drug doesn’t work, that will be on the Medi­va­tion team that bought it — as much as Sanofi for tak­ing a gam­ble on it. It’s as low risk as it gets in R&D.

Over­all, Zer­houni es­sen­tial­ly gives him­self a sol­id though not spec­tac­u­lar grade on new prod­uct de­vel­op­ment, to date. Start­ing with “noth­ing in the pipeline,” he’s scored 18 prod­uct launch­es, a record he de­scribes as “good, not great,” in­clud­ing some drugs that he read­i­ly of­fers weren’t all that in­no­v­a­tive to be­gin with. And he’s done it while re­struc­tur­ing R&D, cut­ting the head­count 37%, from 14,000 to about 8,000 (“I closed 22 sites”), and switch­ing a pri­ma­ry fo­cus on small mol­e­cules to one that is now 75% bi­o­log­ics, which can cut de­vel­op­ment times from 7 to 4 years.

For what it’s worth, I agreed with Zer­houni that I have rou­tine­ly not­ed Sanofi’s lack of in­ter­nal in­no­va­tion. That seems more than ob­vi­ous, though per­haps Zer­houni is right and Sanofi can one day re­form its in-house R&D im­age. But Re­gen­eron has proved re­peat­ed­ly that it has one of the best de­vel­op­ment ef­forts in the in­dus­try. And far from sug­gest­ing that Sanofi “just buys” in­no­va­tion, I’d say that af­ter watch­ing a slew of Big Phar­mas waste bil­lions of dol­lars chas­ing sci­en­tif­ic shad­ows, I give high marks to any­one that can strike the right kind of part­ner­ships and push them in the right di­rec­tion.

Sanofi has de­vot­ed con­sid­er­able ef­fort and cash to make the Re­gen­eron deal work, as it is do­ing with Al­ny­lam and a host of oth­er com­pa­nies. If you want to know how Zer­houni thinks of it in chart for­mat, here’s the schemat­ic he drew up:


In Zer­houni’s world, he sits in the mid­dle of a host of re­la­tion­ships with big and small com­pa­nies that have plen­ty of in­no­v­a­tive plat­form work go­ing on. He doesn’t want to buy and kill any of it. He does want to fos­ter it and prof­it from the work.

In Medi­va­tion, Sanofi has a per­fect mix of late-stage and com­mer­cial­ized prod­ucts. There’s no plat­form to kill. And it speaks to the phar­ma com­pa­ny’s in­tent when its ex­ec­u­tive crew say they’re de­ter­mined to com­plete the merg­er. Medi­va­tion, or a com­pa­ny just like it, fits neat­ly in­to Zer­houni’s view of the bio­phar­ma food chain.

Part club, part guide, part land­lord: Arie Bellde­grun is blue­print­ing a string of be­spoke biotech com­plex­es in glob­al boom­towns — start­ing with Boston

The biotech industry is getting a landlord, unlike anything it’s ever known before.

Inspired by his recent experiences scrounging for space in Boston and the Bay Area, master biotech builder, investor, and global dealmaker Arie Belldegrun has organized a new venture to build a new, 250,000 square foot biopharma building in Boston’s Seaport district — home to Vertex and a number of up-and-coming biotech players.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

Novotech CRO Ex­pands Chi­na Team as Biotech De­mand for Clin­i­cal Tri­als In­creas­es up to 79%

An increase in demand of up to 79% for clinical trials in China has prompted Novotech the Asia-Pacific CRO to rapidly expand the China team, appointing expert local clinical executives to their Shanghai and Hong Kong offices. The company is planning to expand their team by 30% over the next quarter.

Novotech China has seen considerable demand recently which is borne out by research from GlobalData:
A global migration of clinical research is occurring from high-income countries to low and middle-income countries with emerging economies. Over the period 2017 to 2018, for example, the number of clinical trial sites opened by biotech companies in Asia-Pacific increased by 35% compared to 8% in the rest of the world, with growth as high as 79% in China.
Novotech CEO Dr John Moller said China offers the largest population in the world, rapid economic growth, and an increasing willingness by government to invest in research and development.
Novotech’s 23 years of experience working in the region means we are the ideal CRO partner for USA biotechs wanting to tap the research expertise and opportunities that China offers.
There are over 22,000 active investigators in Greater China, with about 5,000 investigators with experience on at least 3 studies (source GlobalData).

UP­DAT­ED: With loom­ing ‘apoc­a­lypse of drug re­sis­tance,’ Mer­ck’s com­bi­na­tion an­tibi­ot­ic scores FDA ap­proval on two fronts

Merck — one of the last large biopharmaceuticals companies in the beleaguered field of antibiotic drug development — on Wednesday said the FDA had sanctioned the approval of its combination antibacterial for the treatment of complicated urinary tract and intra-abdominal infections.

To curb the rise of drug-resistant bacteria and maintain the efficacy of the therapy, Recarbrio (and other antibacterials) — the drug must be used to treat or prevent infections that are proven or strongly suspected to be caused by susceptible gram-negative bacteria, Merck $MRK said.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

John McHutchison in 2012. Getty Images

The $1.1M good­bye: Gilead CSO John McHutchi­son is out as Daniel O’Day shakes up the se­nior team

Just a little more than a year after John McHutchison grabbed a promotion to become CSO at Gilead in the wake of Norbert Bischofberger’s exit, he’s out amid a shakeup of the senior team that is also triggering the departure of two other top execs.

Gilead stated that McHutchison “has decided to step down” from the job as of August 2nd. And their SEC filing notes that he’ll be getting a $1.1 million check to settle up on his contract.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

Thomas Gajewski, David Steinberg. (CRI, Pyxis)

Bay­er, Long­wood back star re­searcher's deep dive in­to the tu­mor mi­croen­vi­ron­ment for new I/O tar­gets

From PD-1 targeting to the RAS pathway to the STING complex, Thomas Gajewski has spent the past two decades of his career decoding the various ways the immune system can be unleashed to defend against cancer. So when the University of Chicago professor comes around to putting all his findings into a new platform for finding new targets, VCs and pharma groups alike pay attention.

“He’s been studying T cells for 20 years, plus he’s one of the world’s leaders if not the world leader in the space,” David Steinberg, partner at Longwood Fund, said. “Furthermore, let me add he did a lot of the foundational research and also some of the seminal clinical trials in the existing set of I/O agents. He understands the space really well, he understands the current strengths, and I think he understood really well what was missing, so he knew where to look.”

Kamala Harris speaking yesterday at the Des Moines Register Iowa Presidential Candidate Forum [via Getty]

Who’s the tough­est on drug prices? A game of po­lit­i­cal one-up­man­ship is dri­ving the pol­i­cy de­bate in Wash­ing­ton

Earlier this week we got a look at Senator Kamala Harris’ position on drug prices. She’s proposing that HHS take an average price from single-payer systems like the UK, Germany and Canada — which leverage market access for lower prices — and use that to set the US price. Anything drug companies collect above that would be taxed at a rate of 100%.

And the rhetoric is scathing:
While families struggle to make it to the end of the month, pharmaceutical companies are turning record profits. They’re spending nearly as much on advertising as R&D. They’re manipulating their market power to hike prices on lifesaving generic drugs. They’re making twice the profit of the average industry in America and still increased drug prices by 10.5% over the past six months alone. Meanwhile, they are charging dramatically higher prices to American consumers.
That’s an escalation on Joe Biden’s plan, which includes drug importation from those cheaper markets as well as allowing Medicare to negotiate prices — something that virtually all Dems agree on now.

SJ Lee [File photo]

Go­ing in­side cells, Sung Joo Lee has sketched some big goals for his small — but glob­al — team of drug hunters

For a small biotech based in South Korea with a research arm in Cambridge, MA, Orum Therapeutics has sketched out some big goals aimed at developing antibodies for intracellular targets. And now they have a new $30 million round to push the work forward, aiming at a slate of currently undruggable quests.

Orum has been working on a platform tech out of Ajou University that relies on endocytosis to smuggle antibodies and their cargo inside a cell. They’ve published work in Nature that illustrates its preclinical potential in RAS mutations, and KRAS is on their list of targets. 

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

Astel­las buys in­to Fre­quen­cy's re­gen­er­a­tive med strat­e­gy with a $625M al­liance on hear­ing loss

The executive team at Frequency Therapeutics never oversold the results of their maiden Phase I/II study for a new drug to rectify hearing loss. It was, they said back in April, primarily about safety and tolerability, where their drug FX-322 performed as they had hoped. 

That early glimpse of efficacy everyone searches for in their first try on humans? 

(I)mprovements in hearing function, including audiometry and word scores, were observed in multiple FX-322 treated patients.

We don’t know exactly what that means. But whatever the details, Astellas found enough in the data to jump in with a sizable collaboration deal.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

H1 analy­sis: The high-stakes ta­ble in the biotech deals casi­no is pay­ing out some record-set­ting win­nings

For years the big trend among dealmakers at the major players has been centered on ratcheting down upfront payments in favor of bigger milestones. Better known as biobucks for some. But with the top 15 companies competing for the kind of “transformative” pacts that can whip up some excitement on Wall Street, with some big biotechs like Regeneron now weighing in as well, cash is king at the high stakes table.

We asked Chris Dokomajilar, the head of DealForma, to crunch the numbers for us, looking over the top 20 deals for the past decade and breaking it all down into the top alliances already created in 2019. Gilead has clearly tipped the scales in terms of the coin of the bio-realm, with its record-setting $5 billion upfront to tie up to Galapagos’ entire pipeline.

Dokomajilar notes:

We’re going to need a ‘three comma club’ for the deals with over $1 billion in total upfront cash and equity. The $100 million-plus club is getting crowded at 164 deals in the last decade with new deals being added towards the top of the chart. 2019 already has 14 deals with at least $100 million in upfront cash and equity for a total year-to-date of over $9 billion. That beats last year’s $8 billion and sets a record.

Add upfronts and equity payments and you get $11.5 billion for the year, just shy of last year’s record-setting $11.8 billion.

Endpoints Premium

Premium subscription required

Unlock this article along with other benefits by subscribing to one of our paid plans.