I Want KaNDy, plus Sputnik V & M&A amid COVID-19: a BioCentury podcast
Bayer’s deal with KaNDy could be a sign that companies are finally paying attention to Women’s health, a field in which biotechs have long struggled to raise venture money. On the latest edition of the BioCentury This Week podcast, BioCentury’s editors check in on the state of investing in and building Women’s health companies, and discuss the uproar over the speedy approval of Russia’s COVID-19 vaccine as well as dealmaking trends in biopharma.
Editor in Chief Simone Fishburn analyzes the dynamics behind the optimism of KaNDy Therapeutics Ltd. CEO Mary Kerr, who told BioCentury’s Elizabeth Eaton last week that she is encouraged that pharma companies are increasingly seeing opportunities in Women’s health (see “Single-Asset KaNDy Finds $425M Exit”).
Jeff Cranmer, executive editor, notes that Bayer believes KaNDy’s menopause therapy could see sales of more than $1 billion, raising the question why venture firms have avoided the field, which serves half the world population.
Fishburn and Executive Editor Selina Koch set aside the controversy over Russia’s Sputnik V vaccine to separate the politics of the program from its merits. BioCentury Assistant Editor Sandi Wong outlined the program in detail in an Aug. 11 report (see “Russia Readies Phase III study of COVID-19 Vaccine”).
Fishburn and Koch also assess expectations for dealmaking in the immediate future, weighing the chances for megamergers to continue at the current pace of about one a year and recapping the key takeaways from a BioCentury-PJT Partners webinar on the topic.
Fishburn zeroes in on comments from Stelios Papadopoulos, the chairman of Biogen Inc. (NASDAQ:BIIB), who noted that the current low interest environment and importance of acquisitions for growth work together to favor M&A.
“When you’re a large company, with $100-150 billion market cap and many billions of sales, and you see a company with $1 or $2 billion in sales and explosive growth ahead, the temptation is way too great. And in the time when capital is cheap and growth is king, you will pay up significantly to the point that a smaller company cannot resist” Papadopoulos told the panel (see “Industry Executives See M&A Opportunities”).
A transcript of the episode follows.
[00:00:00]Jeff Cranmer: Last week, Bayer did its third deal of the year in women's health. That's a market that's long been underserved despite representing half of the world's population. And it's one where young biotechs have long struggled to raise venture money. Is Bayer's deal with KaNDy a sign that companies and investors are finally paying attention to the field? Welcome to BioCentury This Week. I'm Jeff Cranmer, Executive Editor, and I'm joined by my colleagues
[00:00:28]Simone Fishburn: Simone Fishburn, Editor in Chief,
[00:00:30]Selina Koch: Selina Koch, Executive Editor.
[00:00:32]Jeff Cranmer: On this week's podcast, we'll look at financing and building women's health companies; plus Russia's entry into the vaccine race and we'll look back at our recent survey on M&A opportunities during COVID-19.
[00:00:48]KaNDy, a single-asset menopause company found at least a $425 million exit as Bayer continues to build its women's health portfolio. CEO Mary Kerr told BioCentury's Elizabeth Eaton for her story last week, that the company's experience is "very encouraging." Are you encouraged, Simone?
[00:01:12]Simone Fishburn: Well yeah, I am. I think this is pretty cool. I think there's two sides of this coin. So on the one hand, this was a deal that was actually led by two women -- Mary Kerr, the CEO and Marianne De Backer at Bayer. And Marianne was particularly pleased that it's been led by two women and it's really an important area.
[00:01:32] Another aspect of this is we had a commentary in BioCentury last year from Stacey Seltzer at Aisling really talking about the fact that women's health is still such an underserved market with untapped potential. There is a part of me that also wishes it wasn't only women waving the flag on this. It would be nice to see that actually -- you know, there's two sides of that coin. On the one hand, I'm really glad that women are driving this and that they're getting recognition for it and that they're being successful. But on the other hand, we really want everybody waving the flag on this. And so yes, I do think it's an important deal and I think it's important to note that there needs to be more investment.
[00:02:12] Jeff Cranmer: Yes definitely, Simone. Given the size of the potential patient population, what are the main focuses of these women health companies?
[00:02:20] Simone Fishburn: That's a really good point, Jeff, because actually women's health covers a range of diseases. In some cases you can include breast cancer in women's health, which obviously falls into the cancer category and there's a huge amount of activity in breast cancer and a lot of progress. But more traditionally people think of it as things like menopause treatment, certainly contraception falls in there, fibroids is one of the big areas, polycystic ovary syndrome, endometriosis is a very important one which is obviously related to uterine fibroids.
[00:02:51] So mechanistically, there's actually a lot of diverse things going on behind diseases that we call women's health. And so biologically you do want to address them in different ways. And so it is a fair point to say that you might have companies that are pursuing specific indications, but don't necessarily have a women's health division or categorize it that way. That said a lot of these areas including endometriosis and so on, are vastly underserved.
[00:03:20] Jeff Cranmer: Well, Bayer believes that the therapy that they're getting from KaNDy could generate sales of a billion euros globally each year. The deal is expected to close in September.
[00:03:32] What I'm curious about is one of the things that Mary Kerr flagged to us when she spoke with us is just the massive struggle for startups to get through the valley of death. They need VCs for that -- I know Advent, which backed the company and held a 20% stake at the time of the takeout, has focused on investing in women's health for a while now. Are there other VCs to look out for?
[00:04:00]Simone Fishburn: Jeff, let's call it like it is -- right. The reality is that the VC world is a largely male world. And there is a huge unmet need here, but it's not one that is front of mind for them. And there's also -- if you ask me -- a lemming mentality. People go after things that are known. So there are some other VCs that are in this space but on the whole, yeah people have struggled. And I think that as we see maybe more women become VCs, we might see more attention paid to this.
[00:04:29]Jeff Cranmer: Sounds good. Well, let's turn now to a story that surprised me as being one of the biggest stories of last week or if not the biggest, one of the most talked about. Russia announced that Sputnik has been approved and this is their new vaccine. It generated a lot of controversy among biopharma pundits and researchers. None other than Derek Lowe said "I think it's the ridiculous publicity stunt."
[00:04:59] Simone, Selena, is there a there there or is this just a stunt? Or is this vaccine one that we should actually be watching?
[00:05:06] Selina Koch: I mean as far as I know it was approved on immunogenicity data, right? So, we should be watching it like we're watching any other vaccine that has promising immunogenicity data. At some point, you need to know how that translates into protection or we need from other vaccines to get a handle on what is an actual correlate of protection. And then back apply that to all the interesting vaccines.
[00:05:31]Simone Fishburn: I agree with Selina. I mean look, let's just refer to Derek's point here -- he's right, this is not the way drug development should be done. This was -- as far as I understand -- they've basically done two non-randomized open-label Phase I/II studies with 38 patients each. They are planning to do a 2000 patient Phase III trial -- I think that was slated to start on August 12th. But I don't even know if that's powered sufficiently to see efficacy. Remember the other trials that we're looking at -- the JNJ one and so on -- are looking at 30,000 patients each.
[00:06:05] But this is not how to do drug development, but that said -- like Selina points out -- it's a vaccine. Frankly, the biological basis of the vaccine -- what we know about it -- is similar to many others, right Selina?
[00:06:19] Selina Koch: That's right, it delivers the spike protein. And I think it's using a viral effector -- correct me if I'm wrong here Jeff -- that others are using, Adenovirus five.
[00:06:28] Simone Fishburn: It's Ad5 and Ad26 and both of those are in other vaccines, right Selina?
[00:06:32] Selina Koch: Yeah.
[00:06:32] Simone Fishburn: So you know, scientifically what you're saying is that this could work?
[00:06:36] Selina Koch: It could, it's just it's very unproven at this point.
[00:06:39] Simone Fishburn: I think it's really more of a -- Derek's right, it's a publicity stunt [and] it's really more of a statement about this is not how drug development [or] vaccine development should be done. But it's really not an indictment of the molecule itself -- it could work.
[00:06:53]Selina Koch: Time will tell.
[00:06:54] Jeff Cranmer: Time will tell. Yeah but I was over at a friend's house yesterday and the 10 year old boy was talking to his 90 year old grandfather about this vaccine and wondering why it can't be given to everyone in the world.
[00:07:07] Simone Fishburn: I think you might want to note that Putin said that he gave it to his own daughter, but he didn't say that he took it himself so I don't know what to read into that.
[00:07:16] Jeff Cranmer: All right well last week we hosted a webinar in partnership with investment bank PJT partners, to discuss the result of a survey that we conducted on what the industry expects from dealmaking in the immediate future. Simone, I know one point that came up was consolidation. What sort of consolidation should we expect to see among large companies and small companies?
[00:07:39]Simone Fishburn: Yes, so this is something that came up on the panel and then also with a couple of conversations I had before the panel with the panelists and there's sort of two areas we're thinking about. On the one hand, we've seen these very big mega cap consolidations. What is it Selina, like one a year for the last three years?
[00:07:57] Selina Koch: Yeah, one to two.
[00:07:59] Simone Fishburn: Yeah. AbbVie, Allergan and then Celgene. And so there's sort of a feeling that yeah, those are going to carry on maybe at that same rate -- one to two a year. And some people have told me that they just don't think that there's enough space to have 15 to 20 to 25 huge mega caps in biopharma -- that's what some sort of folks have told me. And you know, there was a sort of feeling that that would continue as it is.
[00:08:27] But there's also another part of it, which is this growth of small companies and consolidation of those. And Stelios Papadopoulos, who is often sort of thought of as one of the grandfathers of biotech and he is the chairman at Biogen . He really feels that the low interest environment and the importance of acquisitions for growth are going to favor M&A. So you know he points to -- if you've got like a hundred to $150 billion market cap and you're one of the huge companies and you've got loads of sales and there's a company with a $1 or $2 billion in sales and a lot of growth ahead, so there's a lot of temptation there. His quote I think was "In the time when capital is cheap and growth is king, you will pay up significantly to the point that a smaller company cannot resist."
[00:09:16]But Selina, there's another angle on this. Among the small companies you know, we see so many let's say Car T companies, each of which sort of has a different nuance, right? A different kind of -- one might have a switch or a different kind of technology. Do you think that there's a place for big companies to go like creating a suite of those?
[00:09:37]Selina Koch: One thing that's Stelios said that was really interesting was that he doesn't think these larger biotechs that are trying to go independent to become the next Biogen are going to be able to do it. So I mean that's sort of a controversial topic -- I mean, people feel differently about that. There's certainly a whole class of independent biotechs, who are trying to retain commercialization rights and they're making a go for it. What do you think about that, Simone? Jeff?
[00:10:05] Simone Fishburn: He did say that and it is an interesting thing because on the one hand you've got companies like Alnylam right, which has now got product on the market and they could go across multiple therapeutic areas. They might be well poised to be this next class -- Regeneron maybe is already there. So I think that there's certainly companies with that technology or with that recipe -- let's say -- but I think Stelios' point is that it's just too tempting -- that you end up with hurdles along the way and it's just too tempting. When the money's good and you get offered that, you're gonna take it and go. So I don't know that I come down one way or another on that.
[00:10:42] Selina Koch: Yeah, but it'd be really interesting to see what happens as this -- like you said -- low interest environment continues for awhile. Are we going to see some of these larger companies snapped up?
[00:10:51]Jeff Cranmer: Now, a major finding of this survey -- one that really surprised me but I guess it completely makes sense as we're in the age of COVID-19 -- infectious disease has surpassed cancer as the therapeutic area most ripe for deals. Is that here to stay or is this just a function of the pandemic moment that we're in?
[00:11:12] Simone Fishburn: Well Ryan Richardson, who's chief strategy officer at BioNTech, he actually thinks that this isn't a flash in the pan. Now BioNTech has partnered with Pfizer and they've got one of the -- would you call it front runner vaccines Selina?
[00:11:26]Selina Koch: Absolutely.
[00:11:27]Simone Fishburn: But he says that they started out in cancer, but they'd already pivoted to infectious diseases he says. And so you know, I think that there are some technologies out there that we're seeing now for the pandemic and we are talking to a bunch of people -- especially for our Back to School issue -- and there's really a strong feeling that this time might be different. That we need to be prepared for the next pandemic and that they could be a sustained interest in infectious disease.
[00:11:56] Jeff Cranmer: Simone, on one of our earliest podcasts I think Jay Bradner made a point here. What was it again -- remind me.
[00:12:03] Simone Fishburn: Yeah, this is something I come back to over and over because it really stuck with me as well. And what Jay said was that what we now know about the virus -- about SARS-CoV-2 and its active site -- is it's so overlapping with the structure of SARS-CoV-1 -- the virus that caused the 2003 epidemic -- that if we'd carried on then with drug development against that virus, we would probably have something in hand today that could be active.
[00:12:32] And so you know, we have a gazillion -- and Selina knows the actual number -- of molecules in BioCentury's portal. What exactly is that, gazillion? Give me a ballpark there Selina.
[00:12:44] Selina Koch: Over 730.
[00:12:45] Simone Fishburn: And like a bunch of those are pre-clinical new molecules directed against this virus, right?
[00:12:51]Selina Koch: Yes.
[00:12:52] Simone Fishburn: So the question is what's going to happen to those? And a bunch of people really feel like there's a space for some of these consortia to keep activity going on those -- bring them to a certain point in development. Let's say maybe get them through safety in Phase I, so that they could be a reservoir -- they could be used if there is another pandemic because we know that Coronaviruses can make pandemics.
[00:13:17] Selina Koch: Yeah, we've now had three jump from animals to humans and cause big problems so I suppose we should be ready for the fourth. But I mean, the other thing to think about here is sure, it's easy to say right now that interest in infectious diseases will continue and maybe some of these new modalities are an avenue to do things you couldn't do in infectious diseases before. On the other hand, the business model for infectious disease is still fundamentally broken. So until you can create a market -- you know, I'm thinking broader in terms of like antimicrobial resistance and new antibiotics -- I'm not sure you fix the sustained interest in anti-infectives and that's how you fix the business model.
[00:13:57]Simone Fishburn: Right or maybe there's some sort of grand scale public-private partnership kind of approach that really needs to think about this.
[00:14:05]Jeff Cranmer: Yeah. We have been writing about this a lot we'll continue to write about this until it's fixed. You can find all of our coverage at biocentury.com. Our coronavirus coverage is available in front of the paywall at biocentury.com/coronavirus. That's where you'll find our COVID-19 resource center. We have a clinical trials tracker and all of those more than 700 compounds and vaccines that are in development -- you'll be able to find stuff on them there. You'll also be able to find our podcast there or go to Spotify, Stitcher, Apple or Google.
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