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.

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In just 8 days, from December 6 to December 14, the stock jumped from $7.88 to $12.70 — just under the initial $13 bid. There was no hard news about the company that would explain a rise like that tracking closely to the bid offer, raising the obvious question of whether insider info has leaked out to traders.

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Stephen Hahn, AP

The FDA has de­val­ued the gold stan­dard on R&D. And that threat­ens every­one in drug de­vel­op­ment

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Neatly summarized, that standard requires the agency to sign off on clinical data — usually from two, well-controlled human studies — that prove a drug’s benefit outweighs any risks.

Over the last few years, biopharma has enjoyed an unprecedented loosening over just what it takes to clear that bar. Regulators are more willing to drop the second trial requirement ahead of an accelerated approval — particularly if they have an unmet medical need where patients are clamoring for a therapy.

That confirmatory trial the FDA demands can wait a few years. And most everyone in biopharma would tell you that’s the right thing for patients. They know its a tonic for everyone in the industry faced with pushing a drug through clinical development. And it’s helped inspire a global biotech boom.

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And they breathlessly reported every moment of the early morning dash.

In shuttering the city, triggering an exodus of masked residents who caught wind of the quarantine ahead of time, China signaled that they were prepared to take extreme actions to stop the spread of a virus that has claimed 17 lives, sickened many more and panicked people around the globe.

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