Pharma's New R&D Models

invivo.pharmaintelligence.informa.com JUNE 2018

Invol. 36 ❚ no. 06 Vivopharma intelligence ❚ informa

PHARMA’S NEW R&D MODELS: Federating Innovation BY MELANIE SENIOR

World In Motion: The Shape Of Bayer’s Brunn Reveals Exploring How Electronic Health The New Health Care Technology The European Big Pharma’s Records Will Improve Treatments Ecosystem In 2022 US Playbook And Outcomes PAGE LEFT BLANK INTENTIONALLY invivo.pharmaintelligence.informa.com STRATEGIC INSIGHTS FOR LIFE SCIENCES DECISION-MAKERS CONTENTS ❚

In Vivo Pharma intelligence | June 2018

8 COVER ❚ Pharma’s New R&D Models: Federating Innovation

Melanie Senior Experiments are underway to solve pharma’s well- documented R&D productivity crisis. The industry is no longer focused only on buying new drugs via M&A, or on outsourcing discovery. Companies are also building new channels through which to access innovation, setting up new kinds of partnerships, and using new kinds of data. The shift involves re-thinking pharma’s place in health care.

14 18 30 World In Motion: How The EHR And New Data Paying For Gene Therapy: The Shape Of The New Health Streams Are Influencing Clinical Will Pharma Be First In Line? Care Technology Ecosystem Practice JENNIFER TEDALDI AND In 2022 MARK RATNER ADRIEL KOSCHITZKY ASHLEY YEO A plethora of clinical studies are showing With 15 new gene and cell-based therapies The health products industry, methods that new types of data, often captured in in late-stage testing, the time is now to of care delivery and even the public's the EHR, can help improve the correlation consider a critical strategic question: is expectations for improved tools to between treatments and outcomes and there a pricing model for these budget- prevent, monitor and treat disease have favorably affect patient care as well as busting treatments that works in both transformed dramatically in the past five enhance drug development. safeguarding returns to innovators and years. The changes anticipated over a providing access to patients at a price similar period ahead are potentially even society is willing to pay? An analysis by ZS more marked, with business continuity Associates looks at the options for impacts for medtech and pharma biopharma going forward. concerns, according to Deloitte LLP experts who were on the circuit at health 38 care industry events in Germany and the UK this spring. Meeting Growth Challenges Roundtable Panel Part 3: 24 PURSUING GROWTH Bayer’s US Playbook: The Smart WITHOUT OVERREACHING Way To Top-Line Growth SPONSORED BY: WILLIAM LOONEY FREYEUR & TROGUE, IMPACTIV The hotly contested US market is central BIOCONSULT, AND rbb COMMUNICATIONS to Bayer’s aspirations to become a global innovation player in pharmaceuticals, A panel of biotech executives and especially in key growth segments like venture investors discuss how to oncology. A little more than one year in, meet the challenges of building a Bayer Pharmaceuticals Americas sustainable business from day one. President Dr. Carsten Brunn reflects on his unit’s progress.

DEPARTMENTS ❚ From The Editor AROUND THE INDUSTRY This month In Vivo puts the spotlight on new drug 4 The Value Of Being Decisive On development models being tried and tested by big Strategic Needs – Through One pharma. Melanie Senior explores novel mecha- Pharma CEO's Lens nisms for greater R&D productivity and access to ASHLEY YEO innovation that are being trialed by Johnson & Johnson, Roche, Bayer and Novartis. Comparing 6 Brits Lead Charge In Global the different approaches taken by top drug devel- Battle Against Antimicrobial opment players reveals winners and losers, and Resistant Superbugs also exposes where gaps still remain for pharma to MIKE WARD experiment with new discovery and development strategies. 42 ON THE MOVE Also in this month’s issue, In Vivo’s Ashley Yeo LUCIE ELLIS Recent executive appointments delves into a Deloitte report outlining predictions in the life sciences industry for the health care sector over the next five years, drawing out six theories that REGINA PALESKI can, or are starting to, have an impact on the medtech sector. Global health care expenditure is expected to reach $8.7 trillion by 2020, according to Deloitte fore- 46 DEAL-MAKING casts. Looking out over the coming years, the medtech global market is predicted Deals Shaping The Medical Industry, to reach a value of more than $525 billion in 2022. May 2018 THE STRATEGIC TRANSACTIONS TEAM For the health care sector to grow and reach the sky-high market value expected by Deloitte in a few short years, several emerging trends will need to gain more traction. Toward the top of the list: artificial intelligence, real-world evidence and innovative medical devices. Already the adoption of technology has in- EXCLUSIVE ONLINE CONTENT creased, one example highlighted is the recent deluge of health apps. In 2016, for example, more than 260,000 apps were made available by publishers. invivo.pharmaintelligence.informa.com Coming up for In Vivo as we enter the second half of 2018: a combined summer ❚ Diversification May Be At issue for July and August, a deep dive into drug delivery changes and challenges Play As Big Pharma Deals in September, and later in the year we focus on market access issues in the No- With Challenges vember edition. AMANDA MICKLUS As the newly appointed editor for In Vivo, I would love to receive feedback from our readers: what do you like/dislike, how do you use the publication and what ❚ Deals In Depth, April 2018 do you want to see more of? Get in touch at [email protected]. AMANDA MICKLUS

❚ Device/Diagnostics Deal-Making Statistics, Q1 2018 AMANDA MICKLUS AND In Vivo: Always Online First MAUREEN RIORDAN Relevant and exclusive online-only Don’t have an online user account? content at your fingertips 24/7. Quickly and easily create one by clicking on the “Create your Full access to our 35-year archive. account” link at the top of the page. Access your subscription by visiting: Contact: invivo.pharmaintelligence.informa. [email protected] com and log in. or call: (888) 670-8900 or +1 (908) 748-1221 for additional information.

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❚ Up-Front SNAPSHOTS FROM JUNE'S CONTENT

“We’ll continue to do development, commercial and manufacturing. But we’ll pivot to a new model for sourcing innovation, collaborating with those who are good Six predictions are explored for the at it. We federate,” said Bayer’s health care sector, looking out to Kemal Malik about the future of 2022. Deloitte experts discuss the big pharma R&D. industrialization of medtech and pharma innovation processes and Page 8 how new entrants such as Amazon are disrupting the market. Page 8

With 15 gene and cell therapies in late-stage development and the first wave of products already coming to market, questions are emerging about the future of specialty pharma’s pricing models. Page 30

Outlining an efficient Plan B: Steve Harris, CEO of London-listed Digging into the future use and untapped capability of electronic health records: Circassia, talks about moving data used to be an aspect of science and on after clinical failure. now, data science is its own fledgling domain and needs its own structure. Page 4 Page 18

The Value Of Being Decisive On Strategic Needs – Through One Pharma CEO's Lens

Steve Harris has probably told this story more times than is good for his health: about PARTNERSHIP OVERTURES the day in June 2016 when he had to go to the market and announce the kind of decision AstraZeneca and Circassia had no previ- that all CEOs dread. LSE-listed Circassia Pharmaceuticals PLC had been pressing ahead ous partnership arrangements, although nicely with the beginnings of a platform of allergy products, had good data and posi- Circassia had begun talking to the com- tive anecdotal feedback. But Phase III study results of the initial product, a cat allergy pany before its cat results came out, with immunotherapy, unexpectedly showed very marked placebo results. The study did not a view to looking for product candidates reach its primary endpoint, and investors had to be told. to bulk out its business. With Circassia on its radar, AstraZen- The other part of Circassia's business, expertise and the right structures to be in eca would have been tracking its progress developing the proprietary NIOX POC FeNo place, Harris explained. "Few companies and would have immediately been aware platform for asthma monitoring, was of our size have a respiratory platform, but of the restructuring decision it made progressing well, but the allergy failure our position is that we offer an outlet for on June 20, 2016, a decision that Harris meant the company immediately had to products with revenues in the £50 million now calls essentially both an easy and find a Plan B: one built less around its own to £300 million range." Circassia's task was horrendous one to make. All Circassia's pharma R&D and more around commercial to promote the products, and AstraZeneca processes had been built around allergy, candidates. It also meant that Circassia to complete the development work, includ- so the repercussions included making was suddenly no longer an allergy coming the ASCENT study to extend Tudorza's specialist teams redundant, stopping pro- pany. (Also see "Mite Trial Failure 'The label; and the Phase III Duaklir study ahead grams and halting expenditure generally. Final Straw' As Circassia Ends Anti-Allergy of a US NDA submission. On June 1, Circas- It also had to keep the board and wider Investing" - Scrip, April 18, 2017.) "We sia and AstraZeneca announced that a new company onside. But the process worked. immediately changed the shape of our drug application (NDA) had been filed for Harris said, "What I'm really proud of is pipeline to focus on respiratory assets," Duaklir in chronic obstructive pulmonary the rapid decisions we took and the sup- Harris explained as Circassia released disease (COPD), as well as a supplemental port from the employees, the board and 2017 results showing sales of £46.3 mil- NDA for Tudoza to include clinical data shareholders to make the changes." Being lion ($63.4 million), including an 18% rise demonstrating cardiovascular safety and upfront is always of benefit in shareholder in NIOX revenues. reduction of COPD exacerbation in the dealings, because you can’t build trust product's prescribing information. by "only talking about the good stuff," he LEVERAGING THE COMMERCIAL AstraZeneca is heading the regulatory added. "Telling a shareholder that a trial PLATFORM filings for these products in the US, but has failed is not a trivial thing to do, how- The company decided to bring on some this is a resource-heavy task for Circassia ever much they are aware of the risks." respiratory candidates from internal de- too, requiring partnership and the know- So, the business that Harris set up in velopment, but crucially it identified the how to sell the products. And this is the 2006 has very quickly transformed from short-term need to put more products platform that Circassia intends to layer being almost exclusively R&D to almost through its commercial platform. (Also see other products onto. exclusively commercial. "That's a difficult "Circassia Puts Aside R&D, Aims To Grow So far, Plan B has worked well. Circas- transition to make, but often a Phase III Commercial Platform" - Scrip, April 24, sia stabilized US prescriptions for Tudorza failure is the beginning of the end for a 2018.) That decision set in motion the pro- and netted £19 million in profit share lot of companies." Circassia, though, had cess that led to the US profit share com- revenues for the nine months of 2017 a credible plan and made a decent job mercial partnership with AstraZeneca PLC that it was in the company's portfolio. working through it. That, at any rate, was in April 2017, centered around two COPD AstraZeneca took a 14.2% stake in Circas- the market's perception. products: the already-launched Tudorza sia when the deal was signed, and a year LAMA (aclinidium), and the development later (April 2018) the big pharma agreed to US FIRST, THEN CHINA product Duaklir, based on Tudorza plus up the stake to up to 19.9%, via an equity Circassia has rights for the AstraZen- rapid-onset LABA (formoterol). investment. For Harris, this signified that eca products only in the US, which is the While not blockbuster-size therapies, AstraZeneca had confidence in Circassia company's largest regional business. But they nevertheless required specialist and viewed it as a strategic partner. it also sees good growth potential from

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other portfolio products outside the US. is positioning itself as an outlet for respi- A target market is China, where the local ❚ UPFRONT IS THE ratory products that are perhaps too small team has built up NIOX sales rapidly, BEST POLICY for the major pharmas. "We're optimistic increasing them by 44% to £3.5 million we'll get one or two" to sit alongside the to the local importer in 2017. Circassia is The cat allergy trial results came late products from AstraZeneca, Harris said. adding up to 90 staff in China, where it has on a Friday night in June 2016, and the At the same time, the company is a wholly-owned foreign entity. company had to tell the market what looking to license some of its portfolio to The rationale is to have a presence it was doing on the following Monday partners so it can focus on driving sales in the two main global pharma markets. morning. "The feedback I got was that of its top three products. "We've made a play for China to give we handled it extremely well," Harris At the end of 2017 Tudorza had a ourselves another unique aspect to our said. As it turns out, the decision to 2.4% share of the US LAMA-containing platform," he said, noting that not many go for clarity and not look to delay the prescription market. The pharmaceutical companies of Circassia's size have a lo- bad results or let matters drift earned treatment market is valued at over $5 bil- cal team that can play into the Chinese the company plaudits. lion in the US alone. The LAMA-containing market with "quality contributions." market is probably about half of that. Circassia also flagged that it was Market share growth of just one percent- looking at other opportunities and NIOX OFFERS BUSINESS age point would handsomely increase the would update the market in Sep- CONSISTENCY company's revenues. Harris says the com- tember 2016. Nine months after the Happily for Circassia, its asthma manage- pany has data to show Tudorza is superior cat results, AstraZeneca came in, ment device, NIOX has been growing well, to Boehringer Ingelheim GMBH’s Spiriva somewhat cautiously at first. But almost matching its Chinese progress in (tiotropium), the leader in this market Circassia's focus on the strength of the US, where clinical revenues for the space. Moreover, the Tudorza's German- its commercial platform proved to PHC Holdings Corporation-manufactured designed dose counter delivery device, the big pharma, after due diligence, device rose by 34% in 2017. Key accounts Pressair, is simple to use, with an aural that the company had invested well teams have done well, but so have the click. Circassia can also go a long way in the necessary structures. In the US, medical affairs and payer teams. Getting with Tudorza and Duaklir, Harris believes, this included 100 commercial reps FeNo (fractional exhaled nitric oxide) into especially if it can supplement revenues on the road and teams for regional guidelines has taken time, but in February with some in-licensing and partnering. market access, payer issues, medical 2018, the company scored a major success Circassia's aims are to rapidly grow affairs, commercial operations and when its NIOX VERO evolution won a multi- sales while keeping costs under control, marketing. At the time of the allergy year contract from Vizient Inc., the largest and getting profitability as soon as pos- platform, Circassia's US-based sales US member-owned healthcare company. sible. The underlying loss for the year force totaled approximately 50. It now NIOX, which came in the company via 2017 was marginally higher at £36.9 mil- has a 250-strong US commercial team a Swedish acquisition, evaluates airway lion. Analysts talk about 2019-2020 as in a worldwide staff of some 400. inflammation in patients with underlying being the break-even year, and of sales asthma by measuring the concentration approaching £60 million in 2018. of FeNO: patients with Th2 or type 2 driven The market for spirometry is about Those results will be based on what airway inflammation (the major underlying $2bn worldwide, but FeNo should be Harris calls a unique commercial platform cause of asthma) generally have higher used alongside spirometry every time, as of three differentiated, best-in-class prod- than normal levels of NO2 in their exhaled it helps gives the full picture of the state ucts. Circassia has shown it can make the breath. It aids diagnosis, guides treatment of a person's lungs, Harris maintains. In right decisions quickly, and has a culture and reduces exacerbations, and the com- the UK, NICE guidance issued in November of being very straightforward. But "deci- pany also sees it potentially positioned as 2017 were supportive of FeNo. New sup- sive" doesn’t mean shutting out differing a biologics companion diagnostic. portive guidelines have since emerged in views. Staff at all levels can have a say at A new evolution of NIOX VERO will be Germany, and there has been a favorable Circassia, in bid to get everyone onboard. launched in the EU in 2019, and reimburse- report from the US AHRQ. "No one person has all the answers, and ment will be sought in Germany, among we like to tell the news how it is – inter- other regions. Currently, two user con- NEXT STEPS – LICENSING FOR FOCUS nally and externally." figurations are being market tested, and Circassia now aims to grow its three key The CEO added, "I'm not saying it's the company is digitally enhancing and products, because it believes it is just easy, because you've got to fight every developing an app for the device. Harris scratching the surface of their potential. step of the way. And we've got to get our sees the rationale for NIOX as very clear: This wisdom here is that a commercial payer strategy and the marketing right." clinicians generally focus on measuring strategy would give Circassia a more imme- Nevertheless, if all Plan Bs were this constriction, not inflammation, but clini- diate return than an R&D investment plan, sound, there'd be no need for a Plan A. cal data from many studies have showed which might take ten years pay off. It also IV004984 a reduction in asthma exacerbations by means the company is investing less of its ASHLEY YEO 50% if NIOX is used. own money in the R&D pipeline. Circassia [email protected]

Brits Lead Charge In Global Battle Against Antimicrobial Resistant Superbugs

Tackling an unmet need is a common focus for pharmaceutical companies when choos- and the National Institute of Allergy and ing the therapeutic areas they will concentrate on – but it is often not enough. Pharma Infectious Diseases (NIAID). CARB-X is business executives have also got to be able to see a clear route to returns on their funded by BARDA and the Wellcome Trust, investments. While no one doubts the huge medical challenge antimicrobial resistance a global charitable foundation based in (AMR) poses, how to incentivize companies to work on solutions is proving to be more London, UK. difficult. During BIO 2018, held in Boston, June 4–7, researchers from the UK discussed Even though hundreds of millions of what efforts were being made to devise incentivization models. dollars are being invested in vehicles such as CARB-X, this may not be enough. “For The numbers verge on the apocalyp- including the Alderley Park-based AMR one successful new antibiotic, we need tic. Currently, more than 50,000 people Research & Development Centre, a joint at least 64 new projects in discovery and a year in the EU and US die from an private-public initiative, which was es- five entering clinical trials. From discovery antimicrobial resistant infection, often tablished in 2016 as a key component of to commercialization will typically take 14 contracted when at the hospital for an the UK’s response to AMR; the Alderley years. Taking into account the cost of fail- unrelated and potentially trivial interven- Park-based Medicines Discovery Catapult ures, it will cost $600 million to develop tion. Extrapolated worldwide the number Centre; the Liverpool-based Centre of one new drug … and we need more than expands to 700,000 AMR-related deaths Excellence in Infectious Disease Research one new therapy,” warned Jackson. per year. More concerning is the forecast, (CEIDR); and the Liverpool-based Centre While acknowledging the important from the 2016 O’Neill report on AMR, that for Antimicrobial Pharmacodynamics. role of funding vehicles such as CARB-X without action, there could be more than “The north of England has world-class to develop much needed new chemical 10 million deaths from AMR by 2050, public and private infrastructure for the entities to tackle AMR infections, Dr. Evan which will also see $100 trillion lost from development of AMR drugs and is home Loh, president, chief operating officer the world economy by that time. (Also see to more than 50% of all UK industrial R&D and chief medical officer of Boston, MA- "O'Neill Warns Pharma Risks Backlash employees focusing on AMR, while small- based antibiotic-focused Paratek Phar- If Doesn't Engage In World AMR Pact" - to medium-sized enterprises based in maceuticals Inc., reminded delegates at Scrip, November 29, 2016.) the region are responsible for 35% of the BIO of the tough task industry faces. “If While the economic impact projec- UK’s AMR drug pipeline,” noted AMR R&D you look at the top 50 pharma companies tions certainly caught the attention of Centre executive director Peter Jackson. by sales, only six of them are saying that governments across the globe, World The AMR R&D Centre has already they are working in the antibiotic space. Health Organization surveillance data unveiled its first three programs: a co- More than 80% of companies in the space already highlight how acute the problem development agreement with Boston, are similar to Paratek – single product- is. In Egypt, resistance rates associated MA-based Microbiotix, supported by focused biotechs that depend on external with Klebsiella pneumoniae infections CARB-X, targeting highly resistant strains resources to fund their activities. There of 35-95% have been seen in blood and of Pseudomonas aeruginosa, the lead- are questions whether this model is sus- urine samples. ing cause of deaths from pneumonia; tainable – if investors can’t see how they The O’Neill review proposed a number a licence and commercialization agree- will get a return then they are not going of initiatives to tackle AMR, including: ment with Medivir AB targeting “critical to get anywhere,” Loh said. • public awareness and understanding priority” pathogens containing genetic In recent years, US companies have • public health surveillance mutations that result in resistance to benefited from initiatives underpinned • antibiotic stewardship most common antibiotics; and a co- by the US GAIN Act, a bipartisan bill that • better diagnostics development agreement with Sandwich, was passed in 2012, which delivered two • reducing the infection burden, includ- UK-based Eligochem, supported by CARB- major provisions: expedited review at the ing development and use of vaccines X, working on antimicrobial peptides FDA providing certainty around time and • developing capability and capacity targeting highly resistant strains of Aci- a regulatory path to getting approval, • developing new antibiotics, which netobacter baumannii, a rising cause of while adding five more years of market will need to be backed by new fund- hospital-acquired infections worldwide. exclusivity on the back of Hatch-Waxman. ing models CARB-X, the Combating Antibiotic This means that the aggregate time from The UK, which has had a pivotal role Resistant Bacteria Biopharmaceutical Ac- approval to the end of market exclusivity in putting AMR on the global political celerator, was launched by the US Depart- for a new antibiotic is about 10 years. agenda, remains at the forefront on many ment of Health and Human Services (HHS) By the end of 2017, the US GAIN Act fronts. Interestingly, much of the British and its Biomedical Advanced Research spawned 147 qualified infectious disease effort is based in the north of England and Development Authority (BARDA) product (QIDP) designations for 74 novel

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drugs and 12 new approved antibiotics. modest data around pharmacokinetics It is projected that US biotechs will have and pharmacodynamics, and that trials some 180 programs in the pipeline by are often non-inferiority ones and that 2028. “With an anticipated one to two poses challenges,” he noted. Additional QIDP approvals per year, this does not issues NICE and other stakeholders have mean there will be a flood of products in had to address are around forecasting us- the marketplace,” noted Loh. age and how quickly resistance emerges The major challenge is being able to after a new antibiotic has entered the demonstrate to payers the true value for market. “We know after this work that what are potentially life-saving medi- novel reimbursement schemes have sig- cines. While numbers as high as $1 billion nificant challenges and HTA methodology were highlighted in the O’Neill review as may need to change to support these,” market entry rewards for new antibiotics, he added. READ MORE ONLINE Loh believes that biotechs such as his As part of this work, NICE and the would be able to prosper on a fraction DHSC commissioned the Economic of that. “What do I need as the leader of Evidence Policy Research Unit at the Uni- Key Challenges To Valuing a small biotech company? I need some versity of York to explore further some of AMR Drugs help in the first couple of years to get me the key challenges. This work included: View detailed data at: to cashflow breakeven – and that could reviewing HTA literature; defining the be as small as covering my salesforce of costs, benefits and opportunity costs invivo.pharmaintelligence.informa.com 80-85 reps – about $50 million or $25 relevant to assessing value; forecasting million a year. And I would be happy to usage and resistance; considering mod- pay that back after we get to profitabil- els of delinked payment; using stylized quantify,” explained Sculpher. ity,” he added. cases to test the methodology; as well as Another major stumbling block when identifying future research topics. assessing antibiotic value is the chal- VALUING NOVEL ANTIBIOTICS Commenting on the research, which is lenge around the use of comparators, The need to establish a global system of expected to be published in the summer which are commonly used in HTA as- market entry rewards to reinvigorate the of 2018, Dr. Mark Sculpher, professor sessments for other drug classes. “Us- antibiotic pipeline, as proposed by the of health economics at the University of ing comparators from regulatory trials is O’Neill report, has gained traction with the York, revealed that the key objectives of rarely sufficient when trying to establish UK government. As part of its response, his team’s work included the develop- real world value and that is likely to be the UK government has invested £265 ment of a framework that captured the even more extreme in the context of new million in the Fleming Fund and £50 mil- expected value of new antimicrobials, antimicrobials as the standard of care, lion to kickstart a global AMR innovation and assessment of the implications of an which also may vary across geographies, fund. Moreover, the UK Department of insurance-based – delinked – approach will not be in the control group. We will Health & Social Care has been working to reimbursement, illustrated with case have to be quite clever in selection and alongside the UK pharma industry to look studies and suggestions for any changes use of comparators,” he added. at antibiotic reimbursement. that might be required to current NICE In its recommendations to NICE, Scul- “A department and industry subgroup preferred methods. pher’s team noted that cost effectiveness with representation from NICE was Although NICE has been conducting models for antimicrobials will need to established to look at methodology, cost effectiveness assessments for more be able to predict both the prevalence reimbursement models and information than 20 years, Sculpher believes that of infections over time and the nature sharing. Specifically, NICE was asked to antimicrobials have created a number of of resistance patterns. “This will require explore whether current health technol- unique challenges. “Antimicrobials are long-term models that look at how dis- ogy assessment methodology was fit for likely to be licensed for a range of indica- eases and resistance change over time,” purpose when assessing the value of tions and the value of the drug will vary he told delegates. This will require better new antibiotics and if a new methodol- depending on indication. This compli- surveillance data. ogy could feed into a potential delinked cates HTA as we need to look at value by In his concluding remarks, Sculpher reimbursement system and provide an indication, and in some sense aggregate told delegates that decisions about the incentive for new antimicrobials,” Dr. up to assess an overall value,” he noted. funding of new antibiotics would need Colm Leonard, consultant clinical adviser The size of the population that stands to reflect anticipated uncertainties: they at the National Institute for Health & Care to benefit from antibiotic use is similarly must be flexible over time, take on board Excellence (NICE), told delegates. not a simple assessment for the target new research, and be aligned with evolv- “It was clear that we will need to look patients as the benefits of antibiotics go ing knowledge and information. beyond the basic cost of care when doing beyond drug recipients. “Because of the IV005356 a cost effectiveness analysis and take on effects of resistance over time there is a MIKE WARD board that regulators often need quite wider population effect that we need to [email protected]

Pharma’s New R&D Models: Federating Innovation BY MELANIE SENIOR Shutterstock: Copyright Info Copyright Shutterstock:

Big pharma’s R&D productivity challenge Pharma groups are all changing, but So what? The shifts within big pharma is forcing a re-think in how to access and they’re not doing so in the same way or R&D are part of wider-ranging changes nurture innovation. New technologies are at the same speed. In Vivo explores the to pharma’s products, business models altering the kinds of partners and skills approaches taken by J&J, Bayer, Roche and its role in health care delivery more that pharma firms need. and Novartis. broadly.

8 | In Vivo | June 2018 pharmamedtechbi.com invivo.pharmaintelligence.informa.com PHARMA R&D MODELS ❚

EXPERIMENTS ARE UNDERWAY TO SOLVE PHARMA’S WELL-DOCUMENTED R&D PRODUCTIVITY CRISIS. THE INDUSTRY IS NO LONGER FOCUSED ONLY ON BUYING NEW DRUGS VIA M&A, OR ON OUTSOURCING DISCOVERY. COMPANIES ARE ALSO BUILDING NEW CHANNELS THROUGH WHICH TO ACCESS INNOVATION, SETTING UP NEW KINDS OF PARTNERSHIPS, AND USING NEW KINDS OF DATA. THE SHIFT INVOLVES RE-THINKING PHARMA’S PLACE IN HEALTHCARE.

hatever numbers covering drugs (though there are wrong share of external versus internal science, you use, big phar- ways: see sidebar When Structures Speak though. Instead, “the strength is the flex- ma’s return on its Louder Than Science). These transforma- ibility of the system,” explains Stoffels. R&D investments tions are intertwined with rapid advances There’s no single way, or time, to access is declining fast. in digital technologies, data sources and external innovation. A molecule could New drug approv- data analytics tools. be taken on earlier, or later, by partner- als are increasing, but they are coming ship, investment, or acquisition, he said. fromW smaller companies: the FDA’s 51 Johnson & Johnson: Or it could be developed in-house. What novel drug approvals in 2017 were spread Multi-Channel Externalization matters is not who invented it, but “who across 42 sponsors. Innovation is scattered Big pharma has long been licensing brought the best solution forward.” The around. Biotechs, smaller biopharma, and acquiring R&D assets from outside. reward structures reflect that: there is and, increasingly, technology and digital Dollar for dollar, smaller biotechs, with no difference in compensation, whether health start-ups are eating big pharma’s new technologies and creative, focused something is internal or external. lunch. “We face an existential challenge,” approaches (sometimes forced by limited Therapy area heads, like Peter Lebowitz says Bayer AG board member Kemal Ma- funding), have proven better at discover- in oncology, are charged with getting lik, a 27-year pharma industry veteran. ing new drugs than large pharma. transformative products to patients, fast, Until recently, few senior executives Johnson & Johnson’s R&D, under the wherever they come from. Sometimes, would talk openly about the problem. For stewardship of EVP and Chief Scientific Of- that still means buying a bit of pipeline: good reason: most companies were still ficer Paul Stoffels, is held up by some in the in May 2018, Lebowitz’s group bought living richly off the spoils from when big industry as the most radically externalized. BeneVir Biopharm Inc., with its clutch pharma R&D did work, and beautifully Stoffels has set up a series of channels for of preclinical oncolytic virus candidates. well. Today, many of those executives who accessing outside science: JLABS biotech The therapy area heads are behaving have not jumped ship to biotechs or venture incubators, in nine cities across North a bit like venture capitalists, in other capital funds are up-front about the issue, America, China and Europe, and idea- words – making capital allocation deci- and what they’re doing about it. “The data hunting, modality-agnostic Innovation sions across a portfolio of programs, tell us, consistently, that we have to do Centers in San Francisco, Boston, London whether internal or external (or a bit something different,” says Malik, who is and Shanghai. These sit alongside more of both). Meanwhile, JLABS mirror also in charge of innovation at Bayer. traditional corporate venture investments high-end technology transfer set-ups: Big pharma is changing but each firm and partnerships. “We’re organized to be Johnson & Johnson provides state-of- is evolving differently, reflecting their able to embrace great innovation wherever the-art equipment and infrastructure respective leadership styles, therapy area it arises,” sums up Richard Mason, head of for selected “strategically-relevant” priorities, culture and expertise. There is the London Innovation Center. start-ups, thereby reducing the capital not a single right way to get better at dis- The strength of the J&J model is not the required to achieve proof of concept.

“We’re creating a community where it’s Bayer: Federating Innovation easy for young scientists to start-up,” ❚ WHEN STRUCTURES Bayer is another long-established com- says Stoffels, who co-founded his own SPEAK LOUDER THAN pany at the start of a big experiment. biotech, Tibotec Group NV, in 1997 with- WORDS Unlike J&J, letting innovation seep into its out such support. Tibotec was acquired organization through increasingly porous by J&J in 2002. GlaxoSmithKline’s decade-long boundaries, 150-year-old Bayer has ring- It is not philanthropy, however, as for experiment with differently-sized fenced its experiment outside company each dollar that J&J pays into the vari- innovation teams failed to gener- walls. The Bayer Leaps program is invest- ous JLABS, someone else – the start-up’s ate the expected results. One key ing heavily to build separate companies backers – pays $4. Yet “in our internal reason, according to those involved, around transformative technologies, shop, we pay dollar for dollar,” says Stof- was that structures and systems such as cell-based therapies, gene editing fels. In other words, JLABS is a highly- appeared to take precedence over and RNA activation. These breakthrough leveraged external innovation engine, people. Organizational structures technologies are “almost orthogonal to providing a second leg to the group’s can only go so far in fostering the what Bayer does” inside, mostly focused overall activity, according to Stoffels. creative, responsible-risk-takin-g on small molecule chemistry, says Malik. If J&J can make each of its R&D dol- mind-set that’s required. In 2017, Why keep it all separate? Because these lars go five times further outside than CEO Emma Walmsley announced an new approaches could be a competitive inside, it could forget the in-house part, R&D re-vamp, and has since brought threat to an R&D model that many em- and become an innovation portfolio in Hal Barron, previously at Alphabet- ployees have built decades-long careers manager. Yet that would be to overlook funded Calico, and Roche. around – and that most see little need to the value of experience. “Pharmaceutical tamper with. “In a company like Bayer, development know-how is built over a that has survived for as long as it has, the very long time. We fail much more than need for change is less apparent,” con- we succeed by experimenting. Having cedes Malik. That in turn means there’s that knowledge in an organization is very vice offered to him from his mentor, Paul less appetite for change. “Change chal- important to improve success rates,” says Janssen, founder of what would become lenges people, their role, their careers.” Stoffels. You need experts to judge what Janssen Pharmaceutica in 1956. “Janssen Bayer Leaps – investing equity, not R&D is good, in other words. told me: first get the people, then build dollars that would hit the P&L – looks Stoffels would not specify how many the organization around the people.” And rather like corporate VC. It’s not, Malik in-house experts are required for suc- when you’ve built it, make it work by fol- insists, because the sums are larger, the in- cess. “You can’t do the maths on that,” lowing the principle that “you take the risk vestments are fewer, and the time-frames he says. Besides, ‘internal’ versus ‘ex- and I take the blame.” Companies must are longer. Bayer Leaps is a handful of ternal’ is no longer binary; it is unclear, give people freedom to operate. huge, long-term investments, free of the even to Stoffels, how many of J&J’s Pharmas must also be on top of what internal rate of return constraints and approximately 10,000 R&D employees everyone else is doing in a given field in fixed-term cycles associated with most are working on internal versus external order to succeed, and have an efficient VCs. They are joint ventures with other projects, given the number and nature development and approval process for investors, however: stem-cell focused of collaborations across all areas, from rapid market access. J&J’s Accelerando BlueRock Therapeutics was created in toxicology to pharmacokinetics. Discov- program is designed to accelerate cer- late 2016 with Versant Ventures; the part- ering drugs, these days, is about having tain life-saving drugs from development ners are providing $225 million over four the right mixture of expertise: few drugs through to the market, by expediting data years. Casebia Therapeutics is a joint are found by a single team or organiza- collection, analysis, report-writing and venture with gene-editing firmCRISPR tion; most are target-oriented, requiring regulatory submissions. Therapeutics AG, created in mid-2016 a range of platform technologies. But is J&J’s outreach model working? with $300 million from Bayer, and $35 J&J today is structured around half a There are promising signs. Among its million from CRISPR, over five years. A dozen disease areas [cardiovascular & peers, it is third-best at getting products third company, applying synthetic biol- metabolism; immunology; infectious from Phase I to on-market success, ac- ogy tools to the plant microbiome for diseases & vaccines; neuroscience; oncol- cording to IDEA Pharma’s Pharmaceutical agricultural applications, received $100 ogy and pulmonary arterial hypertension] Innovation Index, which ranks big phar- million in September 2017 from Bayer, each with considerable autonomy in ma according to clinical, commercial and Ginkgo BioWorks and Viking Global managing their portfolio, but with access regulatory metrics. The group’s shares Investors. “These are some of the largest to company-wide platform technologies have risen by over 30% since early 2013. series A investments ever,” says Malik. (e.g. antibodies, or small molecule chem- Yet JLABs and the Innovation Centers are The idea is for Bayer Leaps companies istry) and downstream resources across only five years old. J&J is over 130 years to become best-in category, with the best regulatory, access and commercial. But old. This is a big experiment,” cautions programs and, critically, exclusive and Stoffels talks less about structure than Stoffels. “Results are measured at the robust intellectual property. Cambridge, about people and culture. He repeats ad- end, not at the beginning.” MA-based Casebia will have IP exclusiv-

10 | In Vivo | June 2018 pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com PHARMA R&D MODELS ❚

ity on CRISPR-related research programs Roche: Data Curator covering cardiology, ophthalmology and Roche is collaborating and amalgamat- hematology, according to Malik. These ing, too – around data. Through acquisi- are Bayer’s traditional areas of focus, tions and partnerships – most notably, and will provide a foundation for future the $1.9 billion purchase of Flatiron partnerships, in which Bayer will share The shifts in how big Health Inc. in April 2018 – Roche is some of its own IP and know-how. Mean- transforming its R&D by turning into a while, Vertex Pharmaceuticals has rights pharma and other data curator. It’s accessing and analyz- to CRISPR-based therapies in certain ing vast volumes of data that are key to blood disorders. “We’re federating IP,” investors access and developing and delivering new, effective sums up Malik. (Also see “Giant LEAPS therapies. Indeed, “over the next five For Mankind: Bayer’s Malik On Breaking nurture innovations years, we’ll have three major legs to the The Mold In R&D” - In Vivo, April 2018.) company: pharmaceuticals, diagnostics Rather than putting all of Bayer’s inno- are mirrored by and data/data analytics,” says pharma vation eggs in just a few baskets (the sums CEO Daniel O’Day. involved are a fraction of the €4.5 billion changes in pharma’s O’Day claims that Flatiron data – elec- Bayer AG spent on R&D in 2017), Bayer tronic health records for over a million Leaps envisions a future where “pharma role in health care patients across 250 oncology practices – can act as glue, bringing together mul- has already helped at least one medicine tiple activities and technologies around delivery. Large gain approval in 20 countries over a year a particular disease,” says Malik. For ex- faster than it would otherwise. Alecensa ample, CRISPR Therapeutics and Casebia pharma firms are no (alectinib) targets ALK-mutated cancers have already bought access to CureVac that occur in about 40% of lung cancer AG’s messenger RNA technology for their longer just selling patients. Flatiron’s database included liver disease programs. enough patient data, of sufficiently high Although Bayer Leaps companies are drugs (or even digital quality, to make up a control group using deliberately sealed off – financially, standards of care (SOC) regimens ap- physically, and operationally – from pharmaceuticals) to propriate to local payers and regulators. Bayer, the hope is that some of the “The Flatiron database provides us with modus operandi of these start-ups will payers and other data that gives regulators and payers eventually percolate into the mother- what they need….to accelerate the drug” ship. Joerg Moeller, head of a combined intermediaries. Some onto the market, says O’Day. It helps solve discovery and development operation developers’ challenge of running clinical at Bayer Pharma since January 2018 firms are quietly trials to cover all of the growing number (following the departure of discovery of SOC regimens used in cancer. chief Andreas Busch) sits on the board testing the waters as O’Day hopes that in future, Flatiron’s of Bayer Leaps, along with Bayer Leaps structured, high-quality data may chief Axel Bouchon. So, the person co-providers of care substitute for SOC arms in prospective responsible for traditional R&D can see clinical trials. “We looked at data from close-up how small companies progress the chemotherapy SOC arm in a trial of – typically more rapidly, with fewer [bladder and lung cancer drug] Tecentriq people. “It will be a bit of a wake-up call. (atezolizumab), and compared that with These are strong subliminal messages Flatiron data from patients on the same going into the organization. They won’t SOC regimen. The curves overlapped,” he always be welcome ones,” warns Malik. says. Tapping into a ready-made source Bayer R&D, shaken already by Busch’s of control arm data could significantly departure, may be facing further job reduce both the time and costs of getting cuts, according to recent reports in the a drug to market. “Real world data is now German media. mimicking randomized control trial data. Malik is optimistic about pharma’s This is game-changing,” says O’Day. continued survival. But the business The Flatiron data is just one (big) piece model will be “fundamentally different”, of the puzzle (see Exhibit 1). Roche’s he says. “We’ll continue to do develop- majority stake in Foundation Medicine ment, commercial and manufacturing. Inc., which collects genomic sequencing But we’ll pivot to a new model for sourc- data from cancer patients, is another. ing innovation, collaborating with those Combining both sources to create a full, who are good at it. We federate.” genotypic-phenotypic picture of patients’

cancer over time will be the Holy Grail, Exhibit 1 according to O’Day. He expects that the Roche’s Data-Heavy Deals overlap between the two sources, currently about 30,000 to 40-000 patients, will rapidly expand into the 100,000s, June diabetes management uncovering rare cancer-causing muta- technology, data collection tions and consequently ready-validated mySugr targets for new therapies. acquisition Flatiron and Foundation Medicine are January June both free to pursue relationships with other pharmaceutical firms, as well as Flatiron GNS providers, practices and patients. But the data and analytics skills Roche is acquisition partnership acquiring cannot sit outside the main oncology clinical causal machine organisation, Genentech-style; they need records learning, AI to merge with traditional R&D to accelerate and inform all stages of the process. January 8 July And they are, according to O’Day. Syapse Foundation “We’re systematically bringing a new Medicine discipline into the organization,” he partnership expanded credit says. But the challenge is not firing up soware and analytics facility* genomics data researchers to believe in the transforma- for clinical decision- making, trial recruitment *Roche has held majority tive power of data. Nor is it marrying stake since 2015 a technology company with a pharma company; even though the groups do SOURCE: In Vivo; Strategic Transactions things differently, “we’re both focused on patients’ needs.” The challenge is organizing and harnessing all the vari- Operation Center in Basel (portrayed in toughest. Sure, some of the technologies ous types of data, analytics and related some media outlets as a Star-Trek-style are complex. The data volumes are un- technology platforms. “It takes a great Mission Control) certainly appears to take imaginable. But embracing and trusting deal of my time,” says O’Day. Novartis firmly into the digital era. But new kinds of experts, flatter, more porous Luca Finelli, head of predictive analyt- organizational structures, multiple kinds Novartis: Digital Development ics, strikes a note of caution. “We must of partnerships and data systems, and Novartis AG’s C-suite has also spent a be wary of claiming benefits too early,” calling into question all the traditional lot of time on data and analytics, believ- he says. When it comes to capturing, ana- R&D processes in place for decades: that ing this to be key to transforming R&D lyzing and using all the data now more will be more difficult. “The technology -it efficiency. CEO Vas Narasimhan, during readily available, “we’re just scratching self is usually the simplest part. Figuring his previous role as chief medical officer, the surface,” he says. out what to do with the technology, en- started to digitalize the company’s vast But Finelli highlights another benefit suring people feel supported in using it, clinical development operations – by far from the digital revolution, beyond efficien- and working out how to actually deliver the biggest R&D line item. Last autumn, cy: transparency. Having integrated data solutions is the hard part,” says Craig the company rolled out its advanced ana- systems that are designed to be accessible Lipset, Head of Clinical Innovation at lytics platform, Nerve Live, which gathers means that everyone, from the senior di- Pfizer Inc. “That’s our biggest challenge vast volumes of data from past and cur- rector to the assistant laboratory scientist, as an industry.” rent trials, linking it into multiple daily sees the same data picture. So “instead of C-suite compensation is another chal- systems used in development. It closely spending energy telling each other stories lenge facing big pharma in its transfor- monitors the progress of the hundreds about the pieces of data one does have ac- mation. Individual leaders’ appetite for of trials ongoing at any one time across cess too, everyone can combine forces to change is evident, but the right incen- the globe, and provides predictions and address the strategic questions that emerge tives are needed. Senior executive pay insights based on trial objectives. One from a full, shared perspective. It’s a power- should be linked less to sales or even goal is “to predict failures before they ful change,” he says. profits (since these can, and often do, happen,” says Head, Global Development It is also likely to be a disruptive arise from innovation-free price rises) Operations, Badhri Srinivasan. Others change. It challenges not only work meth- and more to innovative and accessible include designing and implementing tri- ods and processes, but also existing hi- products, priced to reflect their outcomes, als more efficiently. The company expects erarchies, power-systems and mind-sets. not what the market will bear. “There is Nerve Live to help reduce patient enroll- The cultural side of pharma’s tech- a climate for change. But to effect it, you ment time by 15%. The Nerve Live Study driven R&D revolution may be the need to address compensation, and tell

12 | In Vivo | June 2018 pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com PHARMA R&D MODELS ❚

investors why you’re doing that,” says Jer- ma’s role in health care delivery. Large emy Levin, CEO of rare disease-focused ❚ AGGREGATING IDEAS pharma firms are no longer just selling Ovid Therapeutics Inc., and formerly drugs (or even digital pharmaceuticals) CEO of Teva Pharmaceutical Industries Publicly-listed Arix Biosciences is to payers and other intermediaries. Ltd. and SVP, Strategy and Alliances at what CEO Joe Anderson calls an “ag- Some firms are quietly testing the waters Bristol-Myers Squibb Co. gregator of ideas” – akin to the feder- as co-providers of care. Witness Roche’s Meanwhile, biotech investors are ated IP approach at J&J and Bayer. It deal with GE Healthcare, providing making hay. They are benefiting from is part VC-style investor, getting its clinical decision support software for the experience of a growing number hands dirty in supporting early-stage oncologists. Or AstraZeneca PLC’s pilot of ex-big pharma executives who have companies, tapping into a network deal in the UK with online doctor and jumped across to where most of the of partnerships with academic in- nurse appointment-provider Babylon innovation is happening. Their port- stitutions and accelerators. But Arix Health, in part to “see what NHS thinks” folio companies are benefiting from also invests in later-stage and listed about drug manufacturers getting into big pharma’s increasingly well-funded companies, too, like a fund manager. the game. Or any of the sponsors of outreach formulae. They are attracting Except that Arix is not a fund – it has diabetes management support systems, new backers as scientific innovations permanent capital to invest (includ- such as the virtual clinic launched by continue to hit the mainstream press ing returns from portfolio companies, the Sanofi-Verily Life Sciences LLC – and as technologies make their way which are re-invested rather than joint venture Onduo, and multiple other into regulated health care. And they are paid out as dividends). That capital (mostly local or regional) schemes. also testing new investment models of comes from strategic investors in- This potentially much broader role for their own – not only funds devoted to, cluding Takeda and UCB, as well as drug firms opens up further opportunities for instance, later-stage companies that traditional investment funds, wealth to innovate and partner – and calls even are not typically within a venture capital managers and individuals who have more loudly for the kinds of open, flexible company’s firing line, but also more flex- bought Arix shares. “It’s hard to know structures and attitudes that many are ible, open-ended financing approaches, how to get your arms around the trying to embrace. “Those [companies including alongside big and mid-sized explosion in scientific activity,” says that will] survive will be those most pharma (see sidebar Aggregating Ideas). Anderson. His message applies to willing to adapt,” says Bayer’s Malik. The shifts in how big pharma and big pharma as much as to individual IV005353 other investors access and nurture inno- investors. Comments: vations are mirrored by changes in phar- Email the editor: [email protected]

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The health products industry, methods of care delivery and even the public’s expectations for improved tools to prevent, monitor and treat disease have transformed dramatically in the past five years. The changes anticipated over a similar period ahead are potentially even more marked, with business continuity impacts for medtech and pharma concerns, according to Deloitte LLP experts.

BY ASHLEY YEO uch to the routine consternation of the medical technology industry, health care has been famously slow at reinventing itself and leveraging Health care and life sciences are becoming the digital technology revolution of the 21st century. A lot of health care re- industrialized on a global scale, now that mains rooted in the last century, as other, albeit largely privately financed eyes are finally opening to the advantages industry sectors, have sailed past it in terms of embracing innovation. offered by adopting digital techniques and But matters are now changing in health care too, which, although behind the game, factoring in AI and machine learning in the M is now making promises about the radically different shape of health care to come in the delivery of care. decade to 2030. Philips Healthcare, one of the standard-bearers of IT-assisted health care, has leveraged its Intensive Ambulatory Care (IAC) telehealth program, built upon Medtechs and pharma players must a population management software platform, to care for patients with complex condi- either embrace these system changes or opt to focus on their own best-in-class tions at home, which reduces hospital admissions. The group believes that digitally technologies. But either way, newly enabled health systems will by the end of the next decade be making full use of virtual empowered patients will increasingly reality and AI, offering networked care and prioritizing patient experience quality. demand modern standards of care, and Individuals, in turn, will have adopted proactive approaches to updating their data. better speed and affordability. At the other end of the medtech scale, UK orthopedic company Corin Orthopaedics Holdings Ltd., which has recently undergone a change of ownership, has developed So what? New attitudes, new business its own value-based business model centered around IT-assisted personalized delivery models and new entrants will take health of hips and knee implants. Recently acquired by Permira, its strategy as explained care to the next level: it makes for a daunting recently to In Vivo is to meet the competition head on by focusing on information prospect for medtechs and other commercial about the patient to enable personalized surgery and/or rehab, for better outcomes players. But do they really have a choice? and decreased costs.

14 | In Vivo | June 2018 invivo.pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com MEDTECH MARKET CHALLENGES ❚

Philips and Corin are just two examples Europe’s largest IVD market, Germany, of how the tide is finally turning, even if spending by the sickness funds on lab the changes are largely led by industry. services and diagnostics was 2.91% of Nonetheless, governments and policy- total spending in 2016, its lowest for six makers are making efforts to catch up. years, the German Diagnostics Industry Last month, UK prime minister Theresa Association (VDGH) said last month. May issued several future-oriented “grand And while the sickness fund spend has challenges” to the wider national indus- increased by 71% over that period, spend- trial ecosystem, two of which were health ing on IVDs alone has risen by just 61%. and well-being-related: transforming the That is surely the wrong path. In fact, prevention, early diagnosis and treatment diagnostic medicine is one of the two of cancer, diabetes, heart disease and de- principal domains for the future of health mentia by 2030, using data, AI and innova- technologies (along with digital), accord- tion; and ensuring an extra five healthy, ing to Sir John Bell GBE, Regius Chair independent years of life by 2035, in the of Medicine at the University of Oxford healthy ageing grand challenge. Cynics (UK) and author of the UK’s report, Life might say that if Brexit-beset Britain is on Sciences Industrial Strategy. There will be the case, then the health care world must Global health care huge opportunities is that space because finally be in motion. if a diagnostic isn’t targeted and precise, But more proof of this comes from De- expenditure is the therapy won’t work, he believes. The loitte LLP, which released a report, The market for precision medicine is expected Future Awakens – Life Science and Health expected to reach to reach $87 billion by 2023, says Deloitte. Care Predictions to 2022, in late 2017. The messages and predictions contained in $8.7 trillion by 2020 Six Of The Best For 2022 the report, outlined below, have recently Moving forward to 2022, Deloitte’s pre- been gaining air time at medtech industry dictions from 2017 are having effects on fora in Europe, including, most recently, health care delivery in the following ways: Europe Medtec (Stuttgart, Germany) and Individuals are more in control of Medtech Innovation (Coventry, UK). managing their own health in 2022. This Some statements and predictions in is largely down to expanded knowledge the report might sound overly confident, generally and to genetic profiling in Deloitte acknowledges, but the trends particular by the “genome generation,” will nonetheless be seen regionally at which is, by now, very involved in its own least, or maybe even down at individual health care. People visiting physicians hospital level. That was the rider given in 2022 are more aware of their condi- by Mark Steedman, a manager at De- tions and more active in preventing and loitte’s Center for Health Solutions, as managing them, ready to spend time and he addressed Europe Medtec attendees money to stay healthy. They interact bet- in Stuttgart last month. ter with health care practitioners (HCPs), Karen Taylor, Deloitte’s Center for but they are also more demanding, keen Health Solutions research director and to be proactive and preemptive. Moni- the report’s author, echoed the sentiment toring alone is often not enough for the a week later. Detailing the report’s six life age 4.2% rise per year in global health category of patients that Deloitte calls the science and health care trend predictions care expenditure, which will reach $8.7 “quantified self.” for MedTech Innovation delegates, Taylor trillion by 2020. Pharma spending alone Evidence of this is seen in the prolifera- issued the proviso that they represented will rise by 5% per year in the five years tion of self-care and monitoring apps, like an optimistic view and perhaps not all to 2022 – twice the rate of the previous OurPath with its initial focus on weight of the initiatives would be fully realized five years. loss and diabetes prevention. (Also see within the five years. “But the evidence “Test Beds, Digital Hubs And Innovation today does inspire confidence, because Diagnostic And Digital Tech Tariffs Top Medtech News At UK’s NHS things are happening, and not just in little To The Fore Expo” - Medtech Insight, September 15, silos,” she tells In Vivo. “It’s not too far As for medtech, the global market is 2017.) Providing scientific evidence to away in the imagination,” she contends. primed to reach $529 billion in 2022, with coach people through a weight loss pro- So the direction of travel is set, and sales of in vitro diagnostics set to total gram, including advising on sleep pat- the journey speed is increasing, in spite over $67 billion by 2020. Funding for IVDs terns and eating habits, is delivered over of the fact that the cost of health care remains behind the curve, in spite of its a six-week program. The app originator funding is still not matching the aver- central role in treatment decisions. In struck partnerships with large pharma

companies and National Health Service and AI to coordinate internal clinical and other conditions with the help of (NHS) England based on its ability to workflows, allowing nursing and other customized questions and ability to make reduce the progression from prediabetes staff more time to provide care. treatment decisions. to clinical disease. Saving money is one “That is the goal that we are hoping for Medtech and pharma innovation of its main goals. 2022,” says Steedman. The importance processes are becoming industrialized. Biosensing wearables have become of robotics and AI was not identified Automated processes have accelerated fairly commonplace in 2022, and indi- so acutely in Deloitte’s 2014 “Future pathways for regulatory compliance, viduals are being encouraged to use the Awakens” report, which predicted the reimbursement and supply chain activi- data derived to further improve preven- scenario in 2020. There has been a major ties, which means a certain redeployment tion. Older people have become better shift there. of staff in pre-automation manual roles. adopters of connected devices and virtual Back-office functions and supply chain Market access is quicker and more pre- assistants, meaning this demographic is activities are increasingly automated in dictable, in what Steedman calls the now monitored and better cared for at 2022, and clinical decision-making is fourth industrial revolution, which has home. Similarly, the growing confidence being enabled by centralized digital com- unfolded as advanced cognitive technolo- in telemedicine in 2022 has meant that mand centers. This is certainly happen- gies have improved core processes. patients are opting for it even for an initial ing in pockets of activity. One example is Product launch preparations have been consultation. People in remote areas are the Mercy Virtual Care Center in Missouri standardized and predicative analytics benefiting from programs such as SEN- (Also see “Digital And Connected Care is being used for market research, to Doc, a multinational northern European Are Pushing On An Open Door – But Is improve the consistency and impact of initiative to evaluate the use of wearable Medtech Ready?” - In Vivo, March 2018). product launches. Standardization and sensor systems to support independent It opened in 2015, covering some 40 hos- consolidation are the core of the first of living in rural, ageing communities. pitals in seven neighboring states. It has three phases in the industrialization of Incentives are being offered for good no beds, and no inpatients, but has 300 health care, says Deloitte. The next stage health care behavior, via gamification staff onsite and another 300 offsite who is automation, leading to high-frequency and other initiatives. The system is ben- monitor patients virtually by telehealth. output based on quality and structured efiting from policymakers’ more active In 2017, the center was able to treat some data, and the third is utilizing machine roles in ensuring the ecosystem is ready. 1,300 ICU patients in their own homes, learning and AI to increase the pace and In May 2018, Scotland issued a new na- saving $50 million. Average patient stay productivity of these processes further. tional Digital Health and Care Strategy length in the satellite hospitals has been Companies are operating more like to better seize the opportunities offered cut by one third. software organizations, focused on by digital and ensure that data science Steedman believes that we will see a managing and analyzing data to create becomes mainstream in health and so- lot more telehealth and these types of value. The industrialization process also cial care. This measure aims to reshape monitoring technologies, proving that factors in with new technologies such as and equip services for the future, while patient don’t necessarily need to be in a blockchain, to enable safe data linkages. further empowering users. hospital to be treated. Steedman comments that the goal of Such actions are welcomed, for al- Patients are increasingly taking digi- embedding privacy and security in tech- though individuals have taken on a lot tal control of their data. Patients Know nologies is solution agnostic, so whether more responsibility to make the system Best is a reference system that allows blockchain is the answer is still up for work, led by go-ahead countries such as patients to control all of their data. They debate. But the expectations around se- the Netherlands, there has been a discon- can see their full medical record and curity of data have risen exponentially, in nect in that health care systems have not share it with health care professionals the wake of high-profile stories about the helped as much as they should in terms wherever and whenever needed. They wrongful use of personally identifiable of funding, Steedman tells In Vivo. can also add their own data, and are information. National blockchain con- On a macro level, environmental plan- currently able to transfer data from over tracts are emerging (Dubai and Estonia), ners are routinely incorporating health 100 wearables and devices. A number of but it may be in this instance a case of into all planning and development ideas different devices and wearables can also waiting to see the evidence of outcomes leading to “smart cities.” link into the record. before it takes off. Digital technologies are delivering The rise of the electronic health/ A key benefit of industrialization is the patient-centric care. Digital technolo- medical record (EHR/EMR) has fueled the reduced time needed to set up contracts, gies have transformed the culture in notion of the paperless hospital, which with improved transparency, simplified health care, and “smart health care” is has caused quite a stir but also some processes and enhanced stakeholder col- delivering more patient-centric, effective over-heightened expectations, includ- laboration cutting the time needed from care. Clinical roles are being optimized ing in the UK, Steedman observes. That, up to eight weeks to between one and 10 and staff are using cognitive technologies plus the use of smartphones and tablets days, making the “contract in a day” an to deliver seamless integrated care de- by nursing staff, will make a huge differ- attainable goal. signed around patient needs. The vision ence, in time, in terms of accurate and AI and RWE are really unlocking the is for robotic process automation (RPA) early diagnosis of obesity and depression value of data. Data are set to “be the new

16 | In Vivo | June 2018 invivo.pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com MEDTECH MARKET CHALLENGES ❚

health care currency.” In the past, systems Berkshire Hathaway combination was generated a lot of data without necessarily one of the year’s biggest talking points, capturing the information well. The next and yet few people still know what this challenge is to utilize the captured data, combination is going to do. “But they and that is what Deloitte wants to see hap- have the potential, the power and the pen in the coming years to 2022. expertise to apply what they do in their The pace and adoption of technology own industries and apply them to health has increased markedly during the past to really disrupt what’s going on now,” three years alone, as witness the deluge of says Steedman. health apps (260,000 were made available We are seeing all the big tech giants by publishers in 2016) and pharma moving getting involved in health, whether toward a patient-centric approach. conservatively or broader scale, but Turning real-world evidence into real- Amazon’s Alexa and Apple’s Siri, and the world data and using that data to make like, are laying the ground for a revolu- impactful changes to the health care tion in health care by 2022. Health-centric and life science industries will be re- devices such as the Apple Watch, and that ally transformative. As the cost of health group’s ResearchKit, which is already care is rising, the challenge is to utilize ‘Medtech is quite producing medical insights and discover- data and the IoT to reduce cost – deploy ies; and its personal care service (CareKit) automation more, speed up processes critical in delivering are proof that the disruptors are putting and use data in ways that haven’t been a lot of investment into what they think instituted before. The Google subsidiary value-based care, will take health care to the next level. DeepMind is trying to create ways to make patient data safe. It has conducted much but there will be Global Trends work on AI and is trialing NHS projects. It Across all the six predictions, Deloitte is now aiming to develop world-leading winners and losers’ sees three key enablers that will make the standards on encryption. vision of 2022 become a reality. Firstly, the Another example given by Steedman – Karen Taylor, adoption of new technologies – AI, the is the Broad Institute of Massachusetts use of real-world evidence, innovative Institute of Technology and Harvard Deloitte medical devices – will change how the University, which is utilizing data to un- life sciences sector functions. derstand individuals’ genetic makeup, Secondly, there is a need for new talent and using the knowledge to target spe- and the appropriate skills to maximize cific diseases, understand individual the value of the new technologies and susceptibilities and be able to address ensure nurses and other professionals them both in the future. are trained to use them; and thirdly, Evidence of future possibilities is al- there needs to be a slight rethink in how ready emerging. Exponential advances regulators work with industry. in life-extending and precision therapies The risk-averse attitudes that are the are already improving outcomes. The foundation stone of regulation will need past year has seen the launch of CAR-T to be reappraised selectively to ensure cell therapies. They are in their infancy, that initiatives like the FDA’s Digital but will be transformative, with CAR-T is to address conditions like dementia, Innovation Plan can become less the technologies likely to play in a market which affects 50 million people glob- exception and more the norm. of $10 billion in the next 10 to 15 years. ally, but which has been without a drug Taylor concludes that the role of Whether this technology can be extended breakthrough in 15 years – that was when medtech in this heath ecosystem is to solid tumors or other types of cancer the US FDA last approved one. “That’s changing, influenced by connectivity is another matter, but in terms of where going to be a big push. Whether pharma and improvements in the way data are we were a year ago, it’s pretty exciting, can create a dementia drug will be the exchanged. Medtechs need to take a says Steedman. proof of whether the future of health care look at themselves and be prepared to The US, again, has proved that it is comes true or not,” Steedman contends. take risks. “Medtech is quite critical in ready to put programs around these New entrants in health care. These are delivering value-based care, but there developing technologies. The 21st Cen- disrupting health care and the blurring will be winners and losers.” tury Cures Act set aside funding for the boundaries between the different IV005350 cancer, brain, precision and regenerative stakeholders in the health care and life medicine, and provided for regulatory sciences industries. This is already hap- Comments: change too. The aim of such programs pening. In 2018, the Amazon-JP Morgan- Email the author: [email protected]

A plethora of clinical studies are showing that new types of data, often captured in the EHR, can help improve the correlation between treatments and outcomes and favorably affect patient care as well as enhance 100100011001 drug development. 100100011001

BY MARK RATNER n many ways, the electronic health record (EHR) remains the central tool for capturing the plethora of new streams of data bubbling through health care. With the addition of new data streams, Phenotype measures, patient-reported outcomes (often acquired using digital the EHR is becoming a deeper reservoir technology), information on habits and environment, baseline genomic data, holding more detailed longitudinal data. claims data and other information increasingly funneled into the EHR are add- Iing to a more complete picture of the patient. The ability to mine EHRs for new details Pharma and hi-tech companies are taking notice: witness recent events such as on phenotype, habits, environment and Apple’s announced intention to make health records portable via its AppleWatch and the like is turning on its head the notion Roche’s blockbuster $1.9 billion acquisition of Flatiron Health Inc., which extracts that small sample sizes are unreliable; a oncology data from the EHR and provides specialized oncology-focused EHR systems. potential boost to rare disease R&D. Much of this innovation is aimed at making randomized, prospective clinical trials more efficient – or even replacing them altogether for supplemental indications and So what? As the new data streams, other filings for expanding access. The success of these endeavors ultimately will be largely funneled through the EHR, increasingly influence clinical practice measured by the ability of data science generally to favorably influence clinical care. as well as trials, data science is taking This is happening already, at a rapidly accelerating pace and with growing enthusiasm. on a new operational and cultural role Many of the new data streams are analyzed using computational methods and they within pharma. frequently substitute for data from prospective clinical trials. Because of the resource limitations of conducting full-blown trials, it would be almost impossible to keep up with the pace of discovery without retrospectively focused data science, says Nicholas Tatonetti, PhD, of Columbia University School of Medicine. Tatonetti’s group of computational biologists has tapped into the FDA’s Adverse Effect Reporting System (FAERS), and combining that with their institution’s EHRs of nearly 400,000 patients, last year identified a drug-drug interaction that can prolong the QT interval when taken together (see Exhibit 1 on page 20). As early as 2011, his group was mining FAERS to show that

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use of the drugs pravastatin and parox- one would also want to purchase certain etine in combination was associated with other things. But to make these tools ap- hyperglycemia. plicable to health care, a different level “Mostly, we are trying to re-extract of rigor is necessary to make the results data that has been entered by different meaningful because the implications practitioners and providers,” he says, ‘We think customer for generating a wrong result are much using natural language processing, text higher than when an advertiser attempts processing, and experimenting with auto relationship to target buyers of consumer products encoders and the like to mine these notes based on their profiles. for the variables they want to capture. management tools Another use for large amounts of data Tatonetti says that with more infor- is to draw insights based on an overlay mation of various types available, data will be a critical way of patients in many different regions: an scientists can now analyze smaller sam- employer wanting to understand how plings of patients and show a clinical ef- to hardwire patient to best spend their health care dollars fect. That “completely turns around” the to keep their employees healthy, for usual view of data science, he says. “We engagement’ example. Methodologies like machine have taught the public some easy tricks learning can suggest other communities to evaluate scientific results, including where they could roll out the same types being skeptical of small sample sizes and – Jonathan Slotkin of solutions – the same methodologies as small amounts of data. That guideline is Facebook and LinkedIn use to study their no longer true.” One benefit of a small networks of members. sample size is that it forces focus on effect Historically, in many ways health care size rather than statistical significance. providers are less aware of their patients’ The new data streams also enable a experiences than other verticals like tighter focus on small contextual sub- retail or even financial services and cer- groups, which in turn allows for more up, Perakslis explains, hoping to find tainly hospitality, says Jonathan Slotkin, precise predictions tied to things like similarities – perhaps from low muscle MD, of the division of applied research family background or geographic location. tone or weight loss combined with several and clinical informatics at Geisinger (Just last month, the Tatonetti lab showed other factors – that will link the patients. Health System. “We think CRM (customer how researchers could use familial con- “You are seeing an extensive amount of relationship management) tools will be a tact information from patient emergency experimentation, especially at the higher critical way to hardwire patient engage- contact forms housed in EHRs to compute end academic medical centers, across a ment,” he believes. “We and others are disease heritability estimates for hundreds spectrum of diseases,” he says. good at hardwiring quality, but patient of disease phenotypes.) “Highly focused Tapping into patient-reported out- engagement is where we are going to see studies will be very effective,” Tatonetti comes (PROs) is another important the CRM become the digital transforma- says, for example to find a place for a failed strategy for being able to make sense of tive tool,” he says. Phase III drug in the small percentage of small sample sizes. In some cases that Following this line of reasoning, the patients who respond. can improve the odds of succeeding in EHR begins to look more like a legacy In some ways, small data is “pointing a clinical trial. A patient may make it system, or table stakes, says Slotkin, es- us back to big data,” adds Eric Perakslis, through an Alzheimer’s disease trial, for pecially as one goal of care is to move it PhD, CSO of Datavant and a former Chief example, because a caregiver assures out of the hospital setting where possible. Information Officer and Chief Scientist at they make their visits and take their “We think about data streams outside the the FDA as well as SVP of Bioinformatics medicine. “You can argue that the best hospital, all the bread crumbs that don’t at Takeda Pharmaceutical Co. Ltd. In indicator of success is the support net- mean much in the EHR but do mean so studying rare diseases, for example, “we work around that person,” Perakslis says. much: from the grocery store, clergy, are learning that they are boundary con- In essence, that’s a phenotype. “There social workers, insurance companies ditions to larger disease populations,” he are hundreds of thousands of data points not affiliated with our system,” he says. says, “like when you do a jigsaw puzzle about us that are not medical,” he says. “That sounds more like the work done and you start with the flat edges first.” Marketing companies do this all the time, by a CRM tool – a CRM re-imagined for For currently undiagnosed diseases, he points out. “They profile us like crazy.” health care where we really want to know the goal may be to find a second patient Netflix and Amazon, for example, our patients and have a 360 degree view and correlate that patent’s phenotype will use machine learning (the process of them.” with the first such patient identified. To of using data to ascertain relationships Consider the EHR to be a timeline – an do this, clinical researchers play with between objects) to predict whether episodic account of a patient. “The more the first patient’s info, using what’s liking a certain set of movies predicts you can add to that timeline, the more known about their phenotype and so- whether one would like another film, or you can assess what’s going on from an ciology. They put the whole phenotype if buying something on Amazon suggests outcomes perspective [by identifying]

Exhibit 1 Mining EHR Data: Selected Publications

PUBLICATION TITLE JOURNAL (DATE) SIGNIFICANCE Disease Heritability Inferred from Cell (2018) Mining next-of-kin information collected via patient emergency Familial Relationships Reported in contact forms housed in EHRs at three academic medical centers Medical Records enabled the computation of heritability estimates for 500 disease phenotypes, validating the use of EHRs for genetics and disease research.

Large Electronic-Health-Record-Based Nature Genetics A genome-wide association study of 94,674 ancestrally Genome-Wide Study of Serum Lipids (2018) diverse Kaiser Permanente members using almost half a million longitudinal EHR-derived measurements identified a host of serum lipid level-linked SNPs, highlighting the value of longitudinal EHRs for identifying new genetic features of cholesterol and lipoprotein metabolism with implications for lipid treatment and risk of coronary heart disease.

Use of Health Care Databases to JAMA Internal Real-world data analyses of patients receiving routine care Support Supplemental Indications of Medicine (2018) provided findings similar to those found in the randomized Approved Medications clinical trial that established a supplemental indication for telmisartan, an angiotensin receptor blocker.

Estimation of Tumour Regression Lancet Oncology The application of mathematical models to existing clinical and Growth Rates During Treatment (2017) data allowed estimation of rates of growth and regression that in Patients with Advanced Prostate provided new insights in metastatic castration-resistant prostate Cancer: A Retrospective Analysis cancer. Distribution and Clinical Impact Science Linking genomic data to EHR-derived clinical phenotypes of Functional Variants in 50,726 (2016) identified clinical associations supporting therapeutic targets, Whole-Exome Sequences from the including genes encoding drug targets for lipid lowering, and DiscovEHR Study identified previously unidentified rare alleles associated with lipid levels and other blood level traits.

Coupling Data Mining and Laboratory JACC Tapping into the FDA’s Adverse Effect Reporting System (FAERS), Experiments to Discover Drug (2016) and combining that with their institution’s EMRs of nearly Interactions Causing QT Prolongation 400,000 patients identified a drug-drug interaction that when taken together can prolong the QT interval.

Effectiveness of Fluticasone Furoate– NEJM One of the first pragmatic clinical trials, in which the study is Vilanterol for COPD in Clinical Practice (2016) happening within routine care and data being collected in the electronic health record. It showed that in patients with COPD and a history of exacerbations, a once-daily treatment regimen of combined fluticasone furoate and vilanterol was associated with a lower rate of exacerbations than usual care, without a greater risk of serious adverse events.

Identification of Type 2 Diabetes Science Translational Three distinct subgroups of type 2 diabetes were identified by Subgroups through Topological Medicine combining a topology-based analysis technique on EMR-derived Analysis of Patient Similarity (2015) clinical data.

Phenomapping for Novel Circulation Going back into the EMR and phenotype mapping heart failure Classification of Heart Failure with (2014) patients identified three distinct subgroups with different Preserved Ejection Fraction disease trajectories.

Effectiveness of a Clinical Decision Circulation: Using information from patients’ EHRs, a computerized clinical Support System for Reducing the Cardiovascular Quality decision support system reduced the risk of QTc interval Risk of QT Interval Prolongation in and Outcomes prolongation in hospitalized patients with torsades de pointes Hospitalized Patients (2014) risk factors.

SOURCE: Peer-reviewed publications

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socio-economic trends that may get the now presumably Flatiron, are expected patient into trouble, such as whether they to continue to thrive as independent ❚ CONNECTIVITY RULES are taking their meds,” says Greg Strevig, companies and not merely captives for vice president, enterprise analytics at its parents’ drug development. Apple is betting that combining the Geisinger. “If you add in those data points Much of Flatiron’s work centers on a deeper longitudinal information of and look across chronic conditions, you manual extraction of unstructured data the evolving EHR with the connec- can stack those data points on top of from EHRs. “There’s a lot of useful data in tivity of its mobile health app will one another and you start to see trends the EHR but you need domain expertise deliver a truly portable health record based on outcomes and bend the curve.” to extract it,” says David Shaywitz, MD, into patients’ hands. The EHR itself Thus, the EHR may be a cornerstone but PhD, senior partner at Takeda Ventures. is still largely impenetrable. “what we are not [yet] seeing are the “It’s inelegant to have people do it, but other events on the timeline that need to that’s what they had to do.” Then it’s With Apple’s Healthcare kit, enabling be added,” he says. “It will become the possible to apply tech expertise to en- FHIR interfaces (the Fast Health- mechanism for the integrated delivery of hance how you display the data, share it, care Interoperability Resources care.” Less in terms of adding multiple dashboard it and use it. “Once you have developed by the HL7 international databases or layers of data and more by a really good dataset, well characterized standards for transferring clinical bringing together data in one place in a and well labeled, it can be the basis for and administrative data) for the merged environment to create a longitu- AI going forward,” he says. EHR, and growing numbers of people dinal record. “We find data outside the Flatiron uses EHR data to simulate writing apps that are allowing novel system, like claims data or PROs, feed it contemporary control arms in clinical and new measurements to go into back in so the provider has it at time of trials for pharma partners. “We have the EHR, “we are starting to see the service. Then use the big data platform examples of Flatiron data and electronic ability to take data from a wearable for managing their care and reaching out health record data being able to replicate device like an Apple Watch, put it to the patient proactively.” and mimic clinical trial control arms right into your smart device then through Contrast that to the core piece of data now,” says SVP & CMO, Amy Abernethy, the FHIR interfaces upload into the in a clinical trial management system MD, PhD. That allows drug developers to EHR,” says John Cady, Chief Data Of- – the case report form. That is usually understand how patients who would be ficer and CTO at Geisinger. Then, for more useful for data science because it is allocated to a control arm in a prospec- example, correlate with other events connected with a protocol, and so creates tive trial would perform. “We can now like exercise rate and overall calorie an expectation and gauge for numbers of perhaps imagine a world where you don’t expenditure, which could help direct doses, numbers of visits, etc. As the EHR need a control arm or only under certain the daily activities of a diabetic or is built out more, it approaches having scenarios or specifications,” she says. obese individual. that kind of value to trialists. In discussing the deal with investors during a quarterly sales update soon after Flatiron As Exemplar the deal was announced, Roche CEO Dan- data set should look like and which data The hefty purchase price Roche paid iel O’Day told how Flatiron data helped points will have very high confidence for Flatiron is recognition of the value Roche accelerate worldwide access to its and which should be collected in differ- of a deeply integrated dataset – ex- US-approved Alecensa (alectinib, for ALK- ent ways. tracted from the EHR – that captures positive advanced non-small cell lung Another place where data technology the intricacies of the patient journey cancer) by more than a year-and-a-half in is making an impact in drug develop- and approaches clinical research grade some countries by showing regulators in ment is the use of data technology to information. It parallels Roche’s valuing different countries how a control arm of allow for pragmatic clinical trials. Where of Foundation Medicine Inc.’s tumor a trial would perform, given the standard the study is happening within routine profiling capabilities: the pharma spent of care regimen in those countries. “You care and data are being collected in the more than $1 billion for a majority stake can’t possibly, in a Phase III clinical trial, EHR. Indeed, although still early days, a in that company in 2015. have every different treatment regimen that plethora of clinical studies are showing Both Flatiron and Foundation Medi- might be appropriate for a reimbursement that it is possible to draw clinical conclu- cine partner with multiple drug compa- authority around the world,” he explained. sions from data housed in the EHR, which nies in addition to running commercial (Also see “‘Watch This Space’ Roche Execs can help improve the correlation between businesses. Having strong academic clin- Say, Outlining RWE Rationale For Flatiron treatments and outcomes and favorably ical relationships and access to a wider Buy” - Scrip, April 26, 2018.) affect patient care as well as enhance swath of data than from a single pharma Flatiron also takes advantage of the drug development. (Several of the stud- is critical to their models. And unlike availability of new kinds of data to advise ies listed in Exhibit 1. also highlight the other genomics-based molecular diag- on how to improve study design plan- methodologies in place for aligning and nostics acquisitions, including Novartis ning, assess the impact of eligibility cri- integrating data from different sources.) AG’s $440 million purchase of Genoptix teria, and get smarter about sample size Initiatives centered on using data Inc. in 2011, Foundation Medicine, and by trying to think through what a final science to make trials more efficient are

also springing up. In the US, the NIH he says. OptumLabs and its parent Unit- the value of it. But the commercial side Health Care Systems Research Collabora- edHealthGroup possess millions of data doesn’t have the analysts and the clinical tory is creating a new infrastructure for points from chart data as well as the understanding to know how to truly derive collaborative research with healthcare decisions that were made, which they are value from the data sets. So they need to systems and is supporting the design and using to create a labeled data set that can have access to people on the medical side, rapid execution of pragmatic clinical trial then be used to train a model for making who traditionally neither shared money demonstration projects. administrative decisions. And if those nor talked much. It can be a Catch-22. decisions were automated, for 80-90% Moreover, there is a reason those The OptumLabs Experience of them the trained professional could groups don’t talk to each other: walls By taking existing data and applying a focus on exception management, complex have been introduced between them variety of statistical techniques, clinical cases, and places where they are working because of requirements from the FDA. researchers can identify a control and a more at the top of their license, more so So the challenge is to figure out how to matched treated group in such a way as than routine work, he says. make these conversations happen while to reproduce the appearance of a clinical making sure that commercial targeting trial and demonstrate effect sizes that are Changing Culture is not the goal of using these data sets. more or less overlapping with the clini- Data used to be an aspect of science and That said, the observed value, includ- cal trial and also adverse event profiles. now, data science is its own fledgling ing the value of the internal stakeholders It’s a different approach than to use data domain and needs its own structure, says who know how to work with the data, as a control arm for identifying patients Datavant’s Perakslis. Statistics, technol- is starting to change in understanding, and randomizing them and following ogy, and linguistics are all part of that. Abernethy says. The data scientists who them with real-world evidence (RWE), (Alexa McRae, who did clinicaltrials. loved the data sets first championed this as Flatiron does. gov, is a linguist and not a biologist, he work. But they didn’t have the access to These data can replicate clinical trials, points out. “Interesting that the people funding nor had power, she says. It took to show FDA that substitutes for prospec- at the National Library of Medicine de- the involvement of more senior people to tive studies are possible in some cases. cided clinicaltrials.gov was a linguistic lead the commercial work. For example, the OptumLabs subsidiary problem,” he says.) “We found that in order for companies of UnitedHealthGroup’s Optum Inc. is Within companies, the commercial to start to think about how to use the data working with pharma partners to create a teams have the budgets for buying large, and technology Flatiron had to offer, they framework that can reproducibly identify expensive data sets. Medical teams have had to be organized differently and make the structure of RWE studies using infor- history and experience and the statisti- decisions differently than they do now,” mation already captured in their databas- cians and analysts who are used to work- Abernethy says, because the lower-level es. Along with the multiregional clinical ing with data sets, but historically they champions don’t have that power to reorga- trials center at Brigham and Women’s have smaller budgets. So for the medical nize decision-making in a company. There Hospital, OptumLabs has also initiated a teams to have access to the fruits of data is shifting recognition of the roles of these program called OPERAND (observational science, the commercial side has to see various folks within these companies and patient evidence for regulatory science in some quarters, a call for redesign, from and understanding disease) to show product development through to market how real world data could substitute for access, to enable pharmas to more read- clinical trials in a number of settings: for ily translate ongoing digital and analytics label extensions, in special populations experimentation into bottom-line impact. and other areas where you have a drug (Also see “Doubling Pharma Value With being used off label and often the cost of Data Science” - In Vivo, March 2018.) a pivotal clinical trial in that off label use Flatiron did not get deal-making trac- is not offset by the value. “If possible to READ MORE ONLINE tion until it changed the sales process put together observational research and so that the people who were making the Which Path Forward For RWE in a way acceptable to FDA, we can decisions about whether or not to buy Foundation Medicine? have another pathway to getting that Flatiron data and use Flatiron technology label extension or other approval,” says Buying Flatiron Health offers in a pharma company were at the more OptumLabs CEO Paul Bleicher, MD, PhD. research-quality electronic senior, heads-of-department organiza- Bleicher also emphasizes the impor- medical records data which will tional levels, Abernethy says. “We set up tance of improving the administrative help gain access to patients and strategic alignment committees so there aspects of care using deep learning and help in the drug development would be conversations across many data analytics. Take prior authorizations and reimbursement process, sides of the organizations that histori- or approvals of transfers of hospital pa- Roche exes say. cally don’t make decisions together.” tients. “You have trained professionals IV005348 spending a lot of time reviewing charts https://bit.ly/2sCMRlE Comments: and coming up with a yes/no answer,” Email the editor: [email protected]

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The hotly contested US market is central to Bayer’s aspirations to become a global innovation player in pharmaceuticals, especially in key growth segments like oncology. A little more than one year in, Bayer Pharmaceuticals Americas President Dr. Carsten Brunn reflects on his unit’s progress.

CARSTEN BRUNN, BAYER PHARMACEUTICALS AMERICAS PRESIDENT

BY WILLIAM LOONEY ong associated with that earliest staple of the consumer medicine chest – Aspirin – Bayer AG’s pharmaceutical unit is today seeking leadership of a Establishing a fresh stake in IO platform different type: as a stand-out performer in shortening the time line to the therapies, building additional indications best drug innovations of the future. Pursuit of this objective depends heav- in the four oncology products already ily on raising its therapeutic profile in the US market, the world’s largest, on the US market, and exploring new but where the company’s sales remains mired in the mid-20’s ranks. Navigating what specialization opportunities in CVD and L Bayer calls a “path to parity,” is Bayer Pharmaceuticals Americas President Carsten women’s health form the centerpiece of Bayer’s US revenue growth plan. Brunn, who took the US helm a little more than a year ago after achieving a similar The company also views technology – upside revenue-growth strategy for the drugs business in Japan. including novel front-line applications In the following conversation with In Vivo, Brunn outlines plans for building the around behavioral economics – as a all-important oncology franchise beyond the four products already on the US market game changer in extending customer and while pursuing a more customized approach to the company’s established cardiovas- market reach. cular disease and women’s health franchises, which remain integral to the business. He also tackles the always sensitive issue of transforming the work culture, which So what? The long-term challenge: will Brunn is pursuing in single-minded fashion through initiatives as varied as seeking a new US management team focused out non-traditional stakeholders in academia – the business insights to be had from on novel, mostly externally sourced behavioral economics is a favored topic – to changing the colleague seating plan at science and data-rich, customer- the company’s sprawling headquarters in Whippany, NJ. centric marketing be enough to lift the company’s US revenue base from the In Vivo: A distinguishing characteristic of your career to date has been leading middling 20’s to the top 10? And will the commercial operations for Bayer in the world’s top three biopharmaceutical mar- US pharma business have the investment kets – China, Japan and now the US. What have you learned from your exposure capital to spare despite a history of to this intensely competitive set – any general themes that you see as particularly internal parent company distractions? relevant to industry success today?

24 | In Vivo | June 2018 invivo.pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com BIG PHARMA LEADERSHIP ❚

What drew you to join Bayer with your first assignment in Carsten Brunn: What I draw from these three assignments is far-off China? the sheer excitement of being center stage during an extraordi- nary period of progress in our understanding of the biological While I am German-born and was educated in my home origins of disease. China, Japan and the US are destined to country, I have chosen a career that is international in scope. play a critical role in leveraging the fruits of this revolution My first job was atEli Lilly & Co., where I spent nearly 10 years in science because each, in its own way, will set the terms for in the US on a mix of assignments in science development and our industry’s biggest long-term challenge: to demonstrate the commercial businesses. After that, I joined Novartis AG to the value of our medicines to payers, patients and society. In get some launch experience and had the opportunity to lead China, value is linked closely to the question of affordability the introduction of the blockbuster drug Lucentis (ranibizumab) for a large aspiring middle-class with the discretionary income in markets outside North America for indications involving to spend on health improvement. In Japan, we have a rapidly diseases of the eye. This in turn led to realization of a dream aging population – 29% of the population is already over age of mine to work in private equity investment in Asia, when the 65 – where the expectation is for value that helps the elderly investment banking firm Warburg-Pincus acquired the ailing eye maintain a high quality of life while making a smaller work- care company Bausch & Lomb in 2007, and subsequently hired ing age population healthier and more productive. And here me to run its Asia-Pacific operations. in the US, the center of global medicines innovation, we must After I developed and executed a strategy to help that busi- continue to convince the public that the classic self-funding ness, I began thinking about local opportunities in a large model of innovation – risky up-front investments, selective pharma business with a work culture that was as global in rewards, followed by low-priced generics – is a social contract orientation as I was. I talked to several senior executives at worth preserving. Bayer. I was impressed by the company’s efforts to break with It’s also important to stress that success in these geogra- traditional German work culture and put a more global stamp on phies demands an inclusive, globally aware management the company’s mission and mandate. What sealed the deal for mind-set. There are no boundaries on information, which in me was then-Bayer CEO Marijn Dekker’s global growth strategy turn requires us to make the future state the default position to relocate various business segments from HQ in Germany to in decision-making: the vast majority of the data in our hands regions where these businesses had the greatest revenue poten- today has been generated in the past two years. The best long- tial. He moved two units to China – consumer health, which at term solution to health challenges is always going to be more the time was a €5 billion business; and materials science, where and better innovation, advanced by healthy market competi- the polycarbonates business was transferred to a global office tion. And I now see these as universal truths relevant not just in Shanghai. I was offered the global head of primary care post, to the three countries where I have served, but to the entire and I orchestrated the move of the management team from Berlin biopharma ecosystem. to Shanghai. It was a bold step and it proved difficult for some, especially back in Germany – you can imagine the challenges of The Japanese drug market is historically anemic. How did having an iconic brand like Bayer Aspirin managed from China. you achieve double-digit sales growth for Bayer in Japan? But I enjoyed the opportunity because it addressed so many I assumed leadership of the pharma portfolio in early 2013 cultural touchpoints. It is when I understood that companies and remained in Japan through 2016. It was an opportune time do have cultures; it’s a tangible thing and can work for you if because I oversaw the launch of two key products: Xarelto you embrace it. (rivaroxaban), a global blockbuster therapy to prevent stroke and blood clots associated with atrial fibrillation, a very Your current US assignment, which began in January 2017, competitive market in Japan; and Eylea (aflibercept), for age- has you leading the largest pharmaceutical business in related macular degeneration, where we partnered with a local the Bayer family. What was your plan for the first 100 days, leader in ophthalmology, Santen Pharmaceutical Co. Ltd. That which many management experts say is a defining moment proved to be a wise choice due to the deep roots Santen had in that, for better or worse, puts your stamp on the business this therapy area, which allowed for extremely rapid uptake going forward. Do you agree with that? of the drug among physicians. Although I think it’s important to leave a positive first impres- Another factor behind our growth was the adept positioning of sion, pharmaceuticals is a long-term business. It’s over time that our local sales force. We knew we had two great products, so we you see the results of your efforts. That is why I valued the four focused on a select range of high-value customers, who we knew years I spent in Japan; I was head of the business long enough from our extensive clinical data would be receptive to a targeted to assess the outcomes from the initiatives I put in place. On ar- message. By being selective, we achieved the highest share of riving in the US, I literally had to rewire myself, given that I had voice in these two therapeutic segments, even though competitors spent the previous nine years in Asia, working in a completely like Pfizer Inc. and Bristol-Myers Squibb had far more troops different culture. I realized immediately that what contributed on the ground. So two good products, carefully launched with to my success there would not necessarily work here. So I took a a consistently strong message around value, along with a well- step back, walked in and set myself up with the task of relearning deployed sales force, put us over the top in growing Bayer sales the US market fundamentals rather than trading on old assump- in Japan. The lesson I draw from the experience is if you don’t tions about the US. I found out quickly what had changed in the have the mass to confront the big players, beat them on smarts. past decade, assessed the unique position that Bayer held in the

marketplace and put together a couple of for a couple of months, we might designate quick wins, where my presence could be felt a single team room for an upcoming prod- by colleagues in short order. uct launch and insist that all members of the team leave their assigned desks and Can you identify one of those quick congregate there. Despite some push back, wins? ‘It’s Bayer’s global the “neighborhooding” model is important An example is the work I initiated first off to try out, because it astounded me that in with the leadership team to transform Bayer priority to establish the open office structure, people still related Pharma’s culture here in the US. It’s an issue only to their “tribe.” People often had no I’ve tagged as a necessity if we are to win the reputation and idea who else sat with them in the very same the race to market. Transitioning to a more row of desks. Even without barriers, this is collaborative workplace never occurs over- presence that makes not the kind of synergistic collaboration night – but the long-term impact is profound. every manager wants to see happen, as a Bayer has a legacy as a decentralized com- us competitive with way to keep things fresh. pany with a variety of distinct businesses. How do we abandon those organizational the larger US-based You have also targeted digital transfor- silos, to recognize that the function you mation as a vehicle to change the culture perform is less important than what you do pharma in their in focusing on customers and to promote for the customer? To answer that question, more collaboration. I’ve looked at how we deploy on various home market. Yes. Technology in biopharma is a game operational mandates at Bayer US Pharrma- changer. I am passionate about it. I don’t ceuticals, such as the review and approval Our US prospects see any biopharma being successful in the of product promotional materials. Here we future without a strategy for digital engage- created a team drawn from many disciplines depend on being ment, where we can interact directly with to determine whether the current approach patients and providers rather than through served the needs of our customers – the able to move up in traditional third-party intermediaries. I have providers, payers and patients who actually created a cross-functional team within Bayer, use our medicines. It’s led to a sea change the domestic sales led by one of our commercial business lead- in which promotion review begins with an ers, to set up a series of digital experiments understanding of the external state of play, rankings, just as we – pilot projects – across the organization. I rather than addressing that perspective later, have purposely made this effort very visible after all the internal politics are resolved. did in Japan’ and hands on: we don’t just talk about it I have also pursued the collaboration on stage. It’s more than words; it’s tangible message through the people I appoint and actions. One of our early conclusions is promote, and in internal communications – Carsten Brunn that predictive analytics needs to be fully to colleagues. I have a monthly video blog integrated into the way we manage our key where I showcase examples of silo-busting accounts. I am also a strong believer in behaviors. It takes grit and discipline to stay behavioral economics and the pioneering on message, but I see it as essential to my work of academics like Richard Thaler of role. I don’t want the standard scenario to the University of Chicago. I am often seeking play out, where a new boss arrives and puts ways to put his theories into practice. everyone on a new diet but three months later the boss is back to eating sweets. People won’t follow you if they see the narrative Where is Bayer today as a recognized competitor and brand as weak and inconsistent. identity in the US? In addition, I am taking to heart some of the things I have seen Bayer is closely associated with Aspirin, an iconic medicine in visits to our research partners, which tend to have offices that that brings with it nearly 100% name recognition. In Japan, I are flexible and informal. At our New Jersey headquarters, we succeeded in pushing our sales ranking from 18 to eight – putting already work in an “open office” environment, without doors and us in the top 10 players in medicine – and I also had high vis- walls. But this still doesn’t reflect the way we work every day, ibility as the head of the EFPIA-linked association of innovative whether it’s working quietly on a desktop, making calls, reading European drug companies in Japan. The US presents a different or attending meetings in person. So now we are implementing story. We rank in the mid-20’s in sales among innovative drug two projects to test the merits of the “neighborhooding” concept, producers in the US, making Bayer only a mid-size player in this where people have no assigned desk but shift back and forth highly competitive market. At the same time, you have that iconic depending on the type of task at hand. I am part of this myself, status for Bayer Aspirin, on the consumer side of our business, along with our commercial operations and research develop- which has a big impact on our image and especially our reputa- ment teams. Today, I might go work in the quiet zone; another tion with patients. It’s a challenge to manage it all. For Bayer, day you will find me in one of our network/collaboration rooms; the US is the ultimate emerging market. Our prospects depend

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on being able to hold fast or move up in the domestic rankings, the time we devoted to scanning the horizon for compounds that just as we did in Japan. It’s Bayer’s global priority to establish play to our therapeutic focus on precision medicines that work the reputation and presence that makes us competitive with across multiple indications. When the early data on larotrectinib the largest US-based pharma in their home market – still the came out at ASCO in 2017, we were already prepped to engage. world’s largest, and likely to remain so for some time to come. Second, is the cooperative internal culture we have created within Bayer, characterized by the close alignment between the SBU and Do you share the view that smaller pharma companies based our US oncology team. The organization maximized our global in Japan or Europe tend to be held back in realizing their scale and expertise while retaining the accessibility – and trust global ambitions due to a difficult pricing environment and – that comes from being more flexible and less bureaucratic than less overall support for innovation than what exists here the bigger players. From the start of negotiations, we expressed in the US? our readiness to work with Loxo management to ensure that the There is a basis for this argument. The way that Europe has distribution of development and commercial rights would still evolved on the pricing front means the incentive to invest in in- give the company the space it needed to innovate and thrive as novation has been moving steadily westward – to the US. This an independent company. is true for Bayer, where we believe the greatest potential value in our product pipeline is sitting right here. There is significant Might you conclude that the pact with Loxo Oncology is an scope for revenue growth: whereas for most pharma companies, example of cultural “fit” and good people management? the US market accounts for 40% to 60% of revenues, Bayer Getting the right talent in place to facilitate this partnership derives a bit more than 20%. Hence there is a lot of upside for was certainly a prerequisite. I also thought we needed to create us – what we call the path to parity. Our strategy in navigating a relatable story to demonstrate the importance of this disease this path consists of two fundamentals: an attractive value and our commitment to innovative solutions for cancer patients. proposition and flawless execution on strategy. The ability to It was essential to get our people on the research side and com- execute – and do it with discipline – is a key learning I brought mercialization side excited about what we could do for these from Japan. It’s a simple premise of good management but it’s patients – and to show the world outside Bayer that oncology surprising still how often you find when moving from one market is a key driver of our future as an enterprise. R&D in the can- to the next that those basics are either presumed or neglected. cer space is an expensive proposition so you must be serious about justifying that investment. The vision behind it has to be Given the challenges in binding strategy to execution, what explained well and presented up front. have you set as top priorities for Bayer’s US pharma busi- I think we’ve done that. Stakeholders now understand our ness this year? strategy, of which the larotrectinib asset is the latest example, is The first, overriding priority is expanding our oncology fran- to find specialty niches in rarer, hard-to-treat cancers for which chise. Bayer has made a global decision to strive for a stronger there are few existing treatment alternatives. It’s a challenging leadership position in selected therapy areas and last year we remit, with a premium to be paid on finding the right patients, established a strategic business unit (SBU) dedicated to this recruiting them for clinical trials, cultivating KOLs from the clinic objective. It’s based here in the US and is headed by Robert and provider community, and securing access for all those eligible LaCaze, an industry veteran who spent many years at BMS for the drug, post approval. Most importantly, there is a need for Co. I’ve also recruited a new SVP for the US oncology business, speed in processing these compounds through registration. Many Bhavesh Ashar, who comes to us from Sanofi and, among other advanced cancer products are still tested in the same manner as things, has the assignment to establish a seamless, “hand in traditional small molecule drugs, with trials that test drugs against glove” relationship with the global team – both groups sit on specific cancer types. Taking this approach can lead to long trial the same floor at our US HQ in Whippany, NJ. The end game, delays due to the many indications linked to tumor type and loca- of course, is to strengthen our oncology portfolio, building on tion, in contrast to the so-called basket trial where the approach is the four marketed products – Nexavar (sorafenib) for primary to test against a specific gene mutation, regardless of tumor type. cancers of the kidney, liver and thyroid; Stivarga (regorafenib) The regulatory system is evolving in this direction but the for metastatic colorectal and advanced gastrointestinal stromal momentum must continue – consider that Loxo’s rolling FDA tumors; Xofigo, (radium Ra223) for advanced prostate cancer; submission for larotrectinib includes Phase I and Phase II data and Aliqopa (copanlisib), approved just last September for covering 17 unique tumor types. That said, we are preparing for relapsed follicular lymphoma – that currently serve more than a decision by the FDA on market authorization for larotrectinib 150,000 patients throughout the US. later this year and a potential launch very soon after that. With regard to the pipeline, we hit our stride very quickly with the development and US commercial co-promotion partnership What about the rest of the product portfolio – is cardiovas- we struck late last year with Loxo Oncology Inc. focused on cular still a priority for Bayer in the US, given that numerous patients with genetically defined cancers and led by Loxo’s TRK companies have chosen to exit this therapy class? inhibitor candidate, larotrectinib. There were other big pharma It is. But we are redefining our objectives in the cardiovascular contenders for the rights to this promising compound, yet it was space to focus on specialty drugs that address CVD in the context Bayer – admittedly a mid-size player in the field – that prevailed of larger life-threatening conditions, the resolution of which in bringing home the deal. I attribute this to two factors. First, is address a significant unmet medical need. Instead of pursu-

ing primary care treatments for hypertension we are looking house expertise in areas ranging from the biology of peptides to at therapies to combat cardiovascular events that accompany manufacturing complex therapies while ensuring our partners at diabetes-induced chronic kidney disease. For example, we are BlueRock can carry their own novel science forward without all testing finerenone, a mineralocorticoid receptor antagonist those big pharma processes and bureaucracy. (MRA), for heart failure in diabetes patients with end-stage renal LEAPS demonstrates we are willing to put money and take risks disease. Success for this new indication is a priority for Bayer around a radical concept in pharma today: to disrupt ourselves first, in the US. It’s symbolic of our continued commitment to CVD, rather than being disrupted by someone else. Bayer’s partnership beyond the scheduled loss of exclusivity for Xarelto early in the with BlueRock is not burdened by endless milestones and proce- next decade. True, it’s a bit different than the single-indication dural legalese. Expectations are long term. We don’t demand results CVD blockbuster model of the past. In fact, our strategy of around the next few operating cycles – it’s understood that the pay providing options for patients with few alternatives is similar offs from a transformative therapy are often measured in years. to what we are doing in oncology – in both instances, long-term survival rates are today still too low. There is a huge clinical and Looking ahead to the start of the next decade, how would social dividend if we can improve on that. you define success for your leadership at Bayer US Phar- maceuticals? What will you expect to have accomplished Is the franchise around women’s health a strategic fit for by then? the Bayer US business going forward? Clearly, it begins with the oncology franchise. The US market Bayer is a leader in this therapeutic category. We have no will by and large determine whether Bayer realizes its potential intention of ceding our position. In pregnancy prevention, we as a major innovative player against what is becoming the world’s have strong products across the board, from oral to long-acting number one killer. It is important to execute well: to launch reversible contraception. The unwanted pregnancy rate here in the larotrectanib and to secure its competitive position with an ef- US is about 50% of the total, which is an important public health fective strategy on market access. We will need to build on this indicator that government and advocacy groups must address. launch to support growth for our four current oncology product A lot needs to be done and we are partnering with a number of offerings, to secure additional indications and to engage the women’s health advocates to focus more attention to empower- provider community by effectively communicating the strengths ing women to take their own reproductive health more seriously. of our pipeline. I also want to see Bayer solidify its reputation In addition, Bayer’s R&D investments in this area are increasingly as a trusted partner with key oncology research institutions like centered on gynecological interventions; we have a very promising Dana-Farber and Mount Sinai. And I’d like to be able to prove compound, vilaprisan, a selective progesterone receptor modulator, we have that trust with real metrics rather than just anecdotes. which is now in a Phase III trial for long-term treatment of uterine As noted, more internal collaboration is an objective I intend to fibroids. This is a debilitating condition that can be life-threatening pursue as well. I look at our market access strategy as a key enabler, and is rarely discussed for personal reasons – a workable treatment a cross-functional center of expertise where we can test out different would help us address another major unmet medical need. Assum- ways to price, demonstrate value and share risks. I think we have ing approval by the FDA, we intend to make vilaprisan the anchor a good team in place to achieve those closer connections to pay- of our women’s health program going forward. ers as well as other stakeholders who help shape their decisions. Following on that, I intend to see that our commercial people and How does Bayer’s global LEAPS program fit into these the early discovery and development teams are fully integrated priorities? as working partners that stand behind our products. I want both LEAPS focuses on external collaborations to advance true groups to feel they are in the same ecosystem. Recently, I took my breakthroughs in science, so it is an essential component of our management team to spend a day at the Broad Institute at MIT and biopharma business model – especially here in the US, the global Harvard, with which we have several research collaborations. We locus for medicines innovation. I learned the value of such relation- met their chief technology officer, who spent a great deal of time ships in Japan, where Bayer built a very productive relationship describing the way the Institute makes decisions. We brought some with Kyoto University professor Shinya Yamanaka, who won the of our learnings that day back to our office, and over time I expect Nobel Prize in 2012 for his discovery of induced pluripotent stem it will re-shape the way we seize opportunities and solve problems. cells (iPS) as a potential treatment pathway for disease. Due to the If it does, I will have accomplished something real. relationship we established with his lab, Bayer was able to license Finally, it’s a personal goal of mine to improve our ties to the US some of his research to help structure our oncology R&D programs. patient community. It bothers me that surveys of patients indicate I am pleased that, with LEAPS, the same kind of synergistic that we as an industry have some problems. Some of that is due to engagement is happening here in the US. In fact, Yamanaka’s the absence of regular, institutionalized interface. I am working to discoveries produced the intellectual property that now underpins change that with a commitment here at Bayer to have that voice the financing and research partnership we forged in December of the patient woven throughout all our business strategies and 2017 with BlueRock Therapeutics, an early-stage company based processes. The door is always open at Bayer Pharmaceuticals, as in Cambridge MA developing stem cell replacement therapies to far as patient input is concerned. treat CVD and CNS disorders. This supportive – but largely hands IV005354

off – relationship is a good example of how LEAPS is helping Bayer Comments: to differentiate itself from the competition. We can apply our in- Email the author: [email protected]

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Intelligence with a Global Perspective

The Premier Resource In The Life Sciences Industry Biomedtracker Pink Sheet Datamonitor Healthcare Pharmaprojects In Vivo RxScorecard Meddevicetracker Scrip Medtrack Sitetrove Medtech Insight Trialtrove

With 15 new gene and cell-based therapies now in late-stage testing, the time is now to consider a critical strategic question: is there a pricing model for these budget-busting treatments that works in both safeguarding returns to innovators and providing access to patients at a price society is willing to pay? An analysis by ZS Associates looks at the options for biopharma going forward.

BY JENNIFER TEDALDI AND he first-ever US gene and cell therapy approvals of 2017 suggest that the ADRIEL KOSCHITZKY industry stands on the brink of a fundamental shift in the way transformative therapies will be financed and accessed by patients. In quick order In evaluating the prospect of a wholesale that acknowledged the clinical merits of the science, the FDA approved the payer exodus from reimbursing these first directly administered gene therapy, Luxturna (voretigene neparvovec- new costly medicines, the signal to watch rzyl),T as well as the first two CAR-T therapies, Kymriah (tisagenlecleucel) and Yescarta for is the totality of the budget impact, (axicabtagene ciloleucel). not the sticker price itself. What makes these therapies noteworthy is that we can call them potentially curative. They’re administered just once, or over a very short time period, but have long-term clini- Of four alternative pricing models cal benefits, and may be able to eliminate, reverse or stop the progression of a disease. evaluated, only one – manufacturer- However, commercialization has been challenging, in large part because today’s managed financing – appears to have practical application in the “real world” biopharma funding models are not designed to valuate or afford this innovation. setting. Under the US’ current funding model, drug costs are incurred immediately, but the value of gene and cell therapies is established only over time – actually a lifetime. This So what? There is a risk that failure complication is compounded by the fact that many patients switch insurance carriers to resolve payment barriers to gene every few years. This means that the party paying the bill may never reap the benefits. and cell therapy could slow or prevent Moreover, the prices needed to secure the commercial viability of gene and cell investments in other potentially therapies, especially for small manufacturers, may not align with what health care transformative therapies now in the systems are willing or able to pay. So far, financial analyst perspectives on the value biopharma pipeline, as well as create of these therapies have significantly exceeded what payers and the public at large new reputational burdens for innovators. instinctively perceive as acceptable. Now that there is an accepted path to regulatory approval, health systems are on the spot to address these structural and financial disparities and find the right balance between affordability and innovation. (Also see “CAR-T Reimbursement: Medicare

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Weighing Bundle For Kymriah, Yescarta one that is ill-suited to meet the rising They told me that they’re using these In 2019” - Pink Sheet, April 25, 2018.) If expectations of clinicians, regulators and drugs before they’re sure they’ll get paid. the balance skews toward incentivizing patients alike? We’re a large system, but we can’t afford innovation over ensuring affordability, to do that, nor can most other hospitals there’s no guarantee that everyone who Current Funding Approaches in this country afford to do so. We need could benefit from these therapies will Given the limited number of gene and to be cautious. We need reassurance that receive them. There’s also little certainty cell therapies currently indicated to treat there is a proper channel to bill.” that maintaining the financing status ultra-orphan populations, most payers A number of approaches are either in quo on payment systems will be suf- and health systems are continuing to rely use or under consideration to alleviate ficient to preserve the financial position on traditional funding and management hospital funding challenges for CAR-T of self-insured employers, catastrophic approaches. Traditional funding mecha- therapies (see Exhibit 2). Overall, we see insurance carriers and even fully insured nisms, however, pose serious cost chal- some progress, including the potential for health plans. On the flip side, if we priori- lenges for therapies that are administered new diagnosis-related groups specific for tize affordability over innovation, there’s just once, or over a very short period of CAR-T therapies, but there are significant no guarantee that manufacturers will time, and have high up-front exposure to issues still to be addressed. invest in developing potentially curative payers (see Exhibit 1). In particular, Medicare recently as- therapies over the long term. Let’s look at how traditional funding signed outpatient reimbursement rates A few manufacturers have acknowl- mechanisms have made it challenging to hospitals, aligned to standard hospital edged that the development of gene and for hospitals to use CAR-T therapies, markups, if hospitals use CAR-T therapies cell therapies isn’t worth it financially. which are administered in the inpatient in the outpatient setting. However, these GlaxoSmithK line PLC, for example, has setting, for now. Under current fund- rates are associated with minimum pa- announced that it plans on divesting its ing mechanisms, when new drugs are tient co-pay amounts in the $80,000 to rare disease portfolio, including its Euro- administered inpatient, hospitals often $100,000 range. pean approved gene therapy, Strimvelis. don’t receive specific reimbursement By law, patients’ financial out-of- But other companies are betting big, and for the drug and therefore may end up pocket exposure is capped below these there are more than 15 additional gene and financially underwater. amounts, but deductibles and out-of- cell therapies in late-stage development for As part of our research, we asked a pocket limits can be high. Despite legal which FDA approval could be sought in the senior pharmacy director at a major hos- caps on patient out-of-pocket amounts, next few years. Some of these therapies are pital that’s also fully integrated as its own cost sharing for Medicare patients may be being developed to target more prevalent, payer. “We’ve been watching,” he said. prohibitive and cannot be offset by co-pay high-impact diseases like hemophilia. “We decided not to sign up to be a center support programs from manufacturers. The essential question for the industry: of excellence [for CAR-T therapies]. Our A variety of approaches are also in will this exciting new wave of potential neighbors did, though, and all of their use or under consideration to alleviate cures end up producing a much-needed heavy lifting is being done at the level payer funding challenges for gene and disruption of an outdated funding model, of the head of contracting and grants. cell therapies (see Exhibit 3).

Exhibit 1 The Most Important Funding Challenges For Provider Organizations, Payers And Patients

STAKEHOLDER KEY FUNDING CHALLENGES

• Reimbursement potentially below cost (inpatient administered therapies) Hospitals and • Short-term cash flow issues due to potentially delayed reimbursement health systems • Time and energy required to secure reimbursement

• Short-term budget impact and short-term business focus Payers (quarterly reports to Wall Street, annual employer bidding cycle) (including self- • Potential for wasted spend due to uncertainty on long-term outcomes insured employers) • High margins for buy and bill therapies: even a few points of markup can be substantial on a high-priced therapy or technology

• Affordability under coinsurance plan designs, especially for Medicare patients Patients • Coverage delays or lack of coverage

SOURCE: ZS Associates

Exhibit 2 Current Approaches In Use Or Under Consideration To Alleviate Hospital Funding Challenges For CAR-T Therapies In The US, When Administered Inpatient

HOSPITAL ISSUE DESIGNED TO REMAINING ISSUES APPROACH OVERVIEW SPECIFIC EXAMPLES ADDRESS TO ADDRESS New technology • NTAPs: Medicare • Both Novartis and • Reimbursement • Doesn’t fully address add-on payments reimbursement above Gilead have applied potentially below cost hospital cost burden: (NTAPs) or typical inpatient for NTAPs for Kymriah historically, NTAPs Medicare outlier rates, such as and Yescarta only pay a fraction payments diagnosis related of the total cost of group (DRG) or per care above the DRG diem rates, for new amount therapies deemed as • Difficult to secure breakthroughs • Outlier payments: additional Medicare reimbursement for patient cases incurring extraordinarily high costs above a defined threshold amount

New drug-specific Medicare options under • CMS is currently • Reimbursement • Can take several DRGs or new consideration: evaluating these potentially below cost years to secure bundled payment • Develop new CAR-T options for 2019 • Short-term cash flow • A new DRG for all models specific Medicare • Some commercial and budget impact future gene and cell DRGs plans have started to • Reimbursement time therapies may not • Use current use specialized case and energy align with Medicare’s bone marrow rates for hospital stated priority of transplant bundle reimbursement of encouraging lower for CAR-T hospital CAR-Ts, carving out drug prices reimbursement drug reimbursement • Payment for non- from associated specialized services medical services, may be at risk, if more focusing on a select funds are allocated number of certified to highly specialized treatment centers services

Reinsurance • Catastrophic coverage • Some, but not • Short-term cash flow • Sustainability: stop above a pre-defined all, hospitals and budget impact loss premiums may total amount have reinsurance rise and become • Hospital-managed mechanisms in place unaffordable funding reserves

SOURCE: ZS Associates

Outcomes-Based Deals For example, the Centers for Medicare thus is not yet addressing the true payer Let’s take a closer look at the pay-for- and Medicaid Services (CMS) will only uncertainty of longer-term efficacy. performance agreements negotiated last pay for Kymriah if the patient responds One of the major challenges for out- year for Kymriah and Luxturna. While within the first month. The probability of comes-based deals for curative therapies neither deal is likely to result in meaning- an unsuccessful outcome at 30 days for a in the US is legislation requiring that ful savings, they may be a signal that the drug that showed an 83% overall remis- Medicaid gets the “best price.” What this needle is starting to move in outcomes- sion rate in a clinical trial is low. One could means is that if a manufacturer offered, based agreements, at least in the context argue that Novartis AG is limiting its risk say, a 100% rebate for patients who don’t of these types of therapies. by choosing a short-term time frame, and respond to the therapy, the company

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Exhibit 3 Current Funding, Distribution And Contracting Approaches In Use Or Under Consideration To Address US Payer Funding Challenges

PAYER ISSUE DESIGNED TO REMAINING ISSUES APPROACH OVERVIEW SPECIFIC EXAMPLES ADDRESS TO ADDRESS Insurance model: • Catastrophic • Self-insured employers • Short-term cash flow • Sustainability: stop stop loss or coverage above • Insurance companies and budget impact loss and overall reinsurance a pre-defined premiums may rise and total amount • Some hospital systems become unaffordable, especially for smaller self-insured employers

Funding model: • Payers have • No concrete examples • Short-term cash flow • Portability: amortized through the option of yet, but Spark and budget impact the average patient a manufacturer paying up front, Therapeutics has made switches insurance or designated with a discount, an amortized payment every three years specialty pharmacy or paying in proposal to the CMS • Financial risk to carry (SP) installments for Luxturna liability for a patient no with interest, • GSK used an amortized longer insured like a mortgage payment plan in • Any type of loan is cost Europe for Strimvelis additive, not reductive

Distribution and • Payer or • Express Scripts (ESI) • “Buy and bill” markup • Doesn’t fully address payment model: SP manages for Luxturna • Providers also benefit cash flow issues payer or SP distribution and • Some private plans, as they don’t have to • Not always possible for purchases drug pays provider including Express front the cost of an inpatient drugs directly, instead of administration Scripts and Harvard $850,000 drug the provider “buying and handling Pilgrim, are using this and billing” the fees model with Luxturna payer for the drug

Payer/manufacturer • Payment • CMS: Kymriah • Uncertainty regarding • Medicaid “best price” contracting model: contingent upon • Harvard Pilgrim: long-term efficacy rules pay for performance efficacy outcome Luxturna • Limited savings if efficacy aligns with clinical trial experience

SOURCE: ZS Associates

would be required to offer the product ‘no sale, no record of payment’ and, there- We see this issue playing out in the to Medicaid for free, even for patients fore, a ‘no best price implication’ deal.” outcomes-based Luxturna deal between who do respond. And many of the gene Harvard Pilgrim and Spark Therapeu- therapies target small groups of patients A Kymriah Precedent? tics Inc.: Harvard Pilgrim has a rebate with significant Medicaid representation. Novartis’ Kymriah deal with the CMS may collection opportunity at 30 to 90 days From this lens, the selection of a 30-day therefore be paving the way for manufac- (linked to the trial assessment time time line for Kymriah may be more inter- turers and other industry partners to waive frame) and then again at 30 months. esting than it first appears: if the patient Medicaid’s best price requirement for Thirty months, not surprisingly, is doesn’t respond within a month, it’s pos- gene therapies. A best price waiver will be around the average amount of time that sible that Novartis may not need to invoice particularly important in making longer- a member stays in a plan. Although the the CMS at all. According to the director of term, outcomes-based deals with multiple specific magnitude of the rebate is confi- contracting at a large payer, “It looks like a rebate opportunities more attractive. dential, best price legislation effectively

Exhibit 4 Summary Of Amortized Funding Models For Gene Therapies Theorized In ICER’s 2017 White Paper On Gene Therapies

MANUFACTURER MANAGED GOVERNMENT CONSUMER LOAN THIRD-PARTY FINANCING FINANCING FINANCING

Patients take out a personal Payer receives a loan from Manufacturer offers an Payer receives a loan loan to enable upfront a financial institution to installment payment option from the government payment for the treatment enable upfront payment to allowing the payer to pay for the to enable upfront outside of regular health the manufacturer treatment in period installments payment insurance

SOURCE: ZS Associates

puts a cap on the size of the rebate. greedy on their price, and to show proof alleviate short-term acute cash flow con- Harvard Pilgrim Senior VP and Chief of concept, but these require a lot of cerns, any type of loan is cost additive, Medical Officer Michael Sherman, who bandwidth to operationalize. We have not reductive. In addition, most payers, was at the negotiating table with Spark to prioritize what’s going to deliver the self-insured employers and hospital Therapeutics, told us: “Of course we return, and that is always a guaranteed systems already have financial reserves wanted more [rebates] than we got, but short-term cost savings.” or catastrophic insurance for unexpected [Medicaid] best price got in the way. Even The problem with the short-term fo- and major costs. As a medical director at with the Medicaid best price ceiling, the cus on guaranteed cost savings is that a regional plan explained, “Let’s suppose alternative was no deal at all. I know at some point there will be diminishing that we, as a publicly traded company, it’s a small population and that we may returns. Steps need to be taken to make take a loan for a gene therapy. This would not see significant savings, and it was a outcomes-based deals more practical, get rated as subordinate corporate debt. lot of work, but it’s important to send a such as investing in third-party-adminis- We’d probably need to carry it on our message to other companies and get some tered databases to track outcomes. Spark balance sheet as a liability, which can momentum going so that we can get best Therapeutics and several other curative hurt our stock price. That’s why it’s more price waivers for future gene therapies.” therapy developers are actively working attractive for us and our self-funded Harvard Pilgrim has built a market po- with patient advocacy groups and legis- employer clients to use stop loss carriers sition and brand reputation around these lators to waive the best price legislation, because it’s not an ongoing liability: it’s types of outcomes-based deals, and not but there’s more work to be done. an annual expense.” just for curative therapies. The real ques- The third model, manufacturer-man- tion is whether we’ll see more of these Amortized Funding Models aged financing, is more interesting. A deals in the short term from other payers. There has been a great deal of discussion manufacturer could choose to manage Payers are more interested in outcomes- recently about amortized funding models the financing themselves or partner with based deals for cell and gene therapies as a potential solution. For example, a large specialty pharmacy both for drug than they are in other circumstances. a 2017 gene therapy white paper from distribution and payment system man- These deals have the potential to address the Institute for Clinical and Economic agement. Payers would have a variety of a real problem: the uncertainty of long- Review (ICER) theorized a number of op- payment options, including payment in term outcomes and the high up-front tions (see Exhibit 4). full or different “down payment” options costs. However, unless the best price issue Let’s start with the first model: con- with associated interest levels. is addressed, we’re unlikely to see many sumer loans. Our view is that such Our perspective is that this third model more-specific examples in the short term. models are highly unlikely to succeed. has the most practical potential for the Payers’ savings opportunity will need to be Fifty-seven percent of Americans have CMS specifically, but significant chal- large enough to justify the work required. less than $1,000 in savings, and many lenges remain in applying such a model As an executive at a large payer told us: patients with inherited genetic diseases for private commercial payers, who deal “Today, finding an ROI on an outcomes- are on Medicaid. Who would underwrite with frequent membership turnover. based contract for a gene therapy is like a direct-to-consumer loan for a multimil- Private payers have major concerns about finding a unicorn. So far, they’ve just lion-dollar drug? becoming contractually responsible for been a splash out in the public domain The second and fourth models, which paying for patients who could switch creating a warm and fuzzy feeling. involve payers taking out loans from health plans prior to the deal’s end date. They’re a way to take some heat off the either banks or the government, are also As a pharmacy director at a national plan manufacturer in the press for looking unlikely to succeed. Even if such models told us, “Bottom line: it’s not prudent or

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good management for an insurance com- market, or even major insurance market by the highest price levels seen to date. pany to carry liability for patients who disruption. The instinctual – and practical – sticker aren’t paying premium. That’s asking me A medical director at a large plan re- shock is real, and often outweighs ratio- to break the gold standard of insurance.” sponded: “I just have this feeling in my nal discussions of “value-based prices,” Biopharma companies also will need gut that there’s very little in this world like we saw with Sovaldi (sofosbuvir). to assess whether they truly want to get that would justify more than $1 million. Let’s consider the price levels that into the lending business. While a manu- I don’t know. Maybe $2 million? But even early-stage gene therapy companies need facturer may trust that a large health plan if it were more expensive – say, $4 mil- to secure to attract enough capital to get would be good for a multimillion-dollar lion – and the data were really good, we their therapies to market. From this per- loan, would a smaller plan like Oscar can’t say no. We’d all get ripped apart in spective, a drug may very soon launch at Health also be? Is the US government the press if the system didn’t work to get a price that generates sticker shock, to a good for a multimillion-dollar loan? these cures to all patients for whom the degree far beyond what the industry has A manufacturer would also need to evidence clearly supports a benefit.” seen to date. assess whether they are structured to An interesting theme emerged from Michael Sherman at Harvard Pilgrim take on financial liability to account for these payer discussions: an instinctual responded: “As much as I hate to say this, financial risk and manage the associ- feeling of what price is acceptable, either $750,000 is the new $300,000. Soon, $1.5 ated financial regulatory implications. subconsciously or consciously shaped million may be the new $750,000, and then Small biopharma companies may find $2 million may be the new $1.5 million.” manufacturer-managed financing more He paused for a moment and then added, challenging than large companies would. “There’s an element of getting desensi- A health policy professor recently tized [to these prices] like people do to theorized some sort of industry-wide continued news of violence in the media.” mechanism that would allow for portabil- Shortly after conducting our interviews, ity of an annuity payment, such that the ‘There’s an element analysts at Leerink Partners LLC increased responsibility to pay followed the patient. their estimate of the likely prices for the Legislative action would be needed to re- of getting desensitized new hemophilia A gene therapies to $1.5 quire all health plans to participate; prac- million, and possibly $2 million. tically speaking, this is highly unlikely. to these prices like Practically speaking, it’s probably not Even if concerted policy action made going to be a single, very high price that this type of legislation a reality, private people do to triggers a major change. The true signal that payers and state government payers still an evolution in our funding approaches has would have major concerns. As a medical continued news finally arrived may be the totality of budget director said, “I can’t imagine calling up impact, especially if it’s sustained. Not all competitor plans and haggling over prac- of violence in the of the gene therapies in late-stage develop- ticalities of transferring liability, even if ment are for orphan diseases. the government said I had to. It would media’ For example, what if premiums for conflict with our competitive strategies stop loss coverage become so much and come with a ton of compliance and more expensive that some self-insured legal red tape.” – Michael Sherman employers choose to forego it? And then the following year, the financial health of On The Horizon: A Tipping Point? a few of these employers takes a public One of the reasons we haven’t seen more beating, as a result of back-to-back claims innovation in funding of gene and cell for multimillion-dollar drugs? What if therapies is their novelty. To date, the employers can no longer afford to self- overall budget impact has been relatively fund their coverage, fully insured plans limited. However, if we look at the grow- start taking on the sickest patients, and ing pipeline of gene and cell therapies, overall insurance premiums go up by budget impact concerns may become more than 100% over the next few years? acute cash flow problems for smaller, A few private payers have wondered self-insured employers, provider groups about the possibility of the government and catastrophic insurance carriers. taking full responsibility for curative thera- ZS recently asked several payers about pies, as is the case in many other countries. any triggers that could be an impetus for The government would set reimbursement change in gene and cell therapy funding and coverage criteria and potentially even models, wondering whether we’ll see a negotiate prices. Drug price negotiation has specific price level, total budget impact been on the CMS wish list for a while now, or a gene therapy removed from the but all efforts to do so in the US have failed

to date. And Congressional Budget Office of models, which reduce provider cash flow of payers – may receive the most value, projections indicate savings from negotia- issues and payers’ need to pay a markup and take a multi-stakeholder approach tions would be negligible over time. through a “buy and bill” model, are feasible to value communication. Manufacturers for outpatient-administered drugs and also need to work with payers to help The Path Forward work well within the current system. Expect them develop organizational goals that Despite the seeming deadlock, there are to see this approach used more frequently have a longer-term focus. a number of approaches that could help as more outpatient-administered curative promote the continued development of po- therapies are approved. • Develop transparent pricing frame- tential cures and long-term patient access: works. Practically, this needs to be led by • Provide payers with advanced no- manufacturers but also validated by inde- • Ensure a strong policy focus from tice. In alignment with legislated 21st pendent third parties. ICER has made a early stages of development, and engage Century Cures Act standards, manufac- start, but we need to avoid looking at each early with the CMS and commercial pay- turers can seek appropriate opportuni- drug in a vacuum: a value-based price for ers on policy and billing issues. A strong ties to proactively provide payers with each individual therapy in the pipeline policy focus and savvyness are critical for information, including on appropriate may not align with the finite amount of curative therapies and likely will differenti- patient profiles, to help understand and money available to pay for all of them ate the commercial winners and losers. In forecast budget impact. Where substan- over time. Pricing approaches that take the short term, we should continue to build tial cost savings opportunities exist, this tension into account could go a long the momentum that companies such as economic value should be at the forefront way as part of a collaborative solution. Spark Therapeutics and bf bluebird bio Inc. of curative therapy value stories. We can The conflict between the need for a profit are creating to secure Medicaid best price imagine how this may play out with the incentive to fund research on major scien- waivers for gene therapies. Highly focused new gene therapies in development for tific innovation and the ability to pay for and coordinated policy engagement will hemophilia. The list prices for factor VIII such investigative work is, at its core, an be needed to make policy changes like therapies, the drugs currently used to ethical one. Manufacturers may consider drug-specific Medicare DRGs or amortized treat hemophilia, are about $300,000 to consulting with health ethicists at major payment options a reality for the CMS. A $450,000 a year, and they’re taken over universities as part of developing pricing drug company working alone isn’t going a patient’s lifetime. A story about a new frameworks for these types of therapies to prevail: providers, drug companies, curative therapy that centers on minimal and being more vocal about their commit- health plans and employers will need to budget impact due to reduction in factor ment to developing potential cures. come together and convince the CMS that VIII use would be compelling, especially For curative therapies to reach patients we need to make changes that allow the if coupled with agreement about which successfully, there’s much that has to whole system to function more effectively. drug payments are offset by reductions in change in a system that was built for Manufacturers, payers, employers and factor VIII use in the real world. maintenance therapies – the non-cures. patient advocacy groups need to work The industry as a whole needs to rise to the together to enact meaningful legislative • Ensure evidence development pro- challenge; otherwise, there’s no guarantee change. For curative therapies that require grams have a long-term focus. Real- that everyone who can benefit from these an inpatient stay for drug administration world evidence and postmarketing cures will receive them. And the political and patient management, getting hospitals commitments to support durability of backlash from that scenario will hit the in- to use these drugs and securing reimburse- efficacy and safety will be critical to -ad novative industry’s reputation – first and ment for them is a substantially more dress concerns about the long-term value. last. There’s also a high risk that the com- complex process than for typical specialty New approaches and economic models mercialization challenges met by the first drugs. Manufacturers need to engage early to help extrapolate short-term trial data few gene therapies may prevent long-term with the CMS and commercial payers on and understand the potential need for investment in developing other transfor- complicated billing and coding issues to re-treatment also will help. mational therapies. After all, the pricing ensure that each step of the treatment and and funding decisions that we make in management protocols can be billed. When • Broaden the definition of gene the early days of the new therapeutic appropriate, manufacturers need to think therapy value. ICER may have under- paradigm will have far-reaching effects on through a variety of alternative inpatient weighted some of the long-term societal patients’ ability to access potential cures funding models like NTAPs, new DRGs and value of improved vision in its determi- for years to come. new types of payment bundles to alleviate nation that Luxturna isn’t cost-effective. IV005347 hospitals’ cost burdens. Manufacturers need to be smart and start early in their efforts to determine which • Develop specialty distribution mod- of their drug’s benefits are most likely to Jennifer Tedaldi is a leader in ZS Associ- els. The payers we spoke with are very be undervalued by traditional assess- ates’ Value and Access practice. She can interested in specialty distribution models ment approaches, to identify a broader be reached at [email protected]. such as the one we’ve seen Express Scripts ecosystem of expanded drug benefits, Adriel Koschitzky is an associate in the Holding Co. use for Luxturna. These types to identify which stakeholders – outside Value and Access practice.

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MEETING GROWTH CHALLENGES ROUNDTABLE PANEL PART 3: Pursuing Growth Without Overreaching BY MIKE WARD

eveloping products that of MabVax Therapeutics Holdings, Inc., and activator – a number of the first movers are clinically meaningful Dennis Podlesak, COO at Domain Associ- prospered but many withered on the vine. requires more than a novel ates LLC, in a roundtable interview about The FIPCO model fell out of fashion and approach to an unmet medi- the challenges company executives face as subsequent start-ups pursued strategies cal need. A panel of biotech they try to build their business. Sponsored that took assets to proof of concept be- executivesD and venture investors discuss by Freyeur & Trogue, IMPACTIV BioConsult fore licensing to established commercial how to meet the challenges of building a and rbb Communications, the roundtable organizations. The advent of personalized sustainable business from day one. took place during the J.P. Morgan Health- medicines and initiatives to incentivize In Vivo spoke with Gil Van Bokkelen, care Conference in San Francisco. development of therapeutics to treat chairman and CEO of Athersys, Inc., Daniel Three decades ago when biotech was in orphan diseases has underpinned a re- R. Orlando, COO of Vericel Corporation, its infancy many of the pioneers had ambi- naissance of the FIPCO model. However, Robert McNeil, general partner and man- tions to create fully integrated pharma- challenges still exist. aging director of Sanderling Ventures and ceutical companies (FIPCOs). Picking low Growth strategies are dependent on CEO of DALCOR Pharmaceuticals, Ali Fat- hanging fruit – recombinant versions of several factors. First, the founders and taey president and CEO of Curis, Inc., Mei therapeutically relevant human proteins, initial investors need to think about Mei Hu, co-founder and CEO of United such as insulin, human growth hormone, their ambitions for the assets they have: Neuroscience, Inc., Gregory Hanson, CFO erythropoietin and tissue plasminogen Are they looking to develop programs

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to proof of concept to then license or license fees and milestones from the plat- sell to other companies to commercial- form that were recycled into proprietary Ali Fattaey ize asset by asset? Are they wanting to programs. “What is important is to how to President & CEO, Curis Inc. pursue a build-to-buy business model, retain as much value as possible,” added which usually involves early involvement Curis’ Fattaey. with a potential purchaser? Or is the In 2003, Curis signed a collabora- plan to create a stand-alone commercial tive research, development and license scale company? Second, to achieve their agreement with Genentech that gave ambitions they need access to clinically the Roche company an exclusive, global, meaningful assets, capital and teams with royalty-bearing license to make, use, sell relevant experience. and import small molecule and antibody Robert McNeil Managing Director, Sanderling Ventures “Most companies end up partnering Hedgehog pathway inhibitors for hu- & CEO, DALCOR Pharmaceuticals their main programs or lead portfolio as- man therapeutic applications, including sets with a big company, which sometimes cancer therapy. Genentech subsequently leads to complete acquisition. Big pharma granted a sublicense to Roche for non-US has been preying on biotechs for the past rights to Erivedge (vismodegib), which 10 to 15 years and increasingly we are was the first FDA approved medicine for now seeing big biotechs taking the same the treatment of metastatic or locally route,” noted Athersys’ Van Bokkelen. advanced basal cell carcinoma. Companies with platforms that can “It was a different time and the com- Daniel R. Orlando generate multiple therapeutic opportuni- pany did give away commercial rights. COO, Vericel Corporation ties can buy the time they need to trans- At that time, I was at Onyx and it took a form into commercial stand-alone enti- different route and retained all the com- ties. “We acquired our core regenerative mercial rights we could, and obviously it medicine technology from the University did very well,” he noted. of Minnesota and recognized that putting Onyx Pharmaceuticals was the com- it into a platform that yields a number of pany behind Nexavar (sorafenib), co- clinical programs was the best route. It is developed and co-marketed with Bayer, our intention to take that all the way to approved for renal cell carcinoma and Dennis Podlesak the finish line but I understand that it is currently the only targeted treatment Partner, Domain Associates LLC a long hard road. We have been at it for available for first-line hepatocellular car- more than 20 years and not all organiza- cinoma patients, Stivarga (regorafenib), tions are going to be able to maintain a tyrosine kinase inhibitor approved for consistent leadership, have consistency the treatment of metastatic colorectal of vision or frankly have patient enough cancer, and Kyprolis (carfilzomib), the investors to be able to do that,” he added. proteasome inhibiting multiple myeloma drug. Onyx was acquired by Amgen for PLATFORMS AS SPRINGBOARDS $10.4 billion in 2013. While royalties Mei Mei Hu During the 1990s, the biotech sector from Eviredge – the company pulled in Co-founder & CEO, United Neuroscience Inc. shifted from the FIPCO model where just over $9 million in 2017 – have been companies attempted to develop and important to Curis, the company is now commercialize therapeutics on their own looking to leverage as much as it can – many crashed and burned following from the multiple partnering opportuni- failures in their lead programs– to the ties its platform offers, while retaining an less risky platform model that allowed ambition to become a profitably sustain- biotechs to create a plethora of products able commercial organization. that would be sold on to companies with In order to grow, Fattaey believes com- Gil Van Bokkelen established commercial infrastructures. panies need to retain as much as they can Chairman & CEO, Athersys Inc. The challenge of the platform model in and keep a close grip on development the early days was that it was often a and marketing plans. “Mathematically, it proxy for a fee-for- service approach that is fairly simple. With one drug, you have constrained the ability for companies to four opportunities to access capital. One gain critical mass as they sold off the is equity and the other three are the com- family silver. This gave rise to a hybrid mercial rights associated with the US, model, which saw companies generate European and Asian markets. If you have Gregory Hanson CFO, MabVax Therapeutics Holdings, Inc. THOUGHT LEADERSHIP IN ASSOCIATION WITH FREYEUR & TROGUE, IMPACTIV BIOCONSULT, AND rbb COMMUNICATIONS

two assets then you have seven options. have a single focus, know the regulatory uptake of MACI as well as substantial The choices become a little easier – we path and can commercialize them. For growth for Epicel. Total net revenues for don’t have to choose one drug to give away smaller companies like us that is a much the year ended December 31, 2017 were in order to try and finance another one. By more feasible option,” she added. $63.9 million, including $43.9 million of licensing commercial rights to markets we Admitting that she started off pursu- Carticel and MACI net revenues, $18.9 are never going to address– we are not going a philosophy of being vertically million of Epicel net revenue and $1.2 ing to try and commercialize in Asia – we integrated and doing everything, United million in license revenue. Total net rev- can hang onto assets and focus where we Neuroscience’s Hu has shifted her focus enues for the year ended December 31, can target discrete disease populations. to what her company is good at and 2017 increased 18% over 2016. So we look at them and ask ourselves as finding partners to supplement those In guidance released at its full year a management team, board and company areas where it is less accomplished. “That results meeting, the company expects what do we strategically want to do about means you don’t have to acquire them,” total net product revenues for the full it? We are not interested in Asia so those she argued. If anything, she is awash with year 2018, excluding additional license commercial rights create a financial op- technology and rather than looking for revenue, to be in the range of $73 million portunity for us,” he explained. technologies to acquire she is looking to $78 million. “We will continue on this However, partners have to be able to for partners that would use the platform path. With a strong balance sheet and an offer more than just hard cash. “You have in other areas. expanded sales force in 2018, we have to ask yourself, are they willing to put in “We have figured out a way to get the positioned the company for continued more commitment than just dollars? Are body to respond to endogenous proteins – strong revenue growth that will take us they willing to put their expertise into no other vaccine can do that safely– and to profitability,” he added. your drugs? That is what is important there are many involved in chronic dis- Access to sustainable revenues pro- to us. In the case of Eviredge, Roche and eases. So if another company came to us vides businesses with more flexibility. Genentech continue to market it phenom- and said they would like our technology “Once you are a revenue generating com- enally across the globe,” he added. to help them out we would look to figure pany, your access to capital changes – you Having a broad platform creates the out how it would also work for us. Even if find you can be more creative accessing additional challenge for small biotechs you are outlicensing you are still commit- a debt and equity mix. Armed with such of knowing what to focus on. Noting that ting to that relationship and dedicating financial firepower, the company can now her company is developing a technology resources. This is a constant calculus– for look at other options to fuel its growth. that has potential in many areas, United us right now we are approached by a num- For us, the interesting thing would be Neuroscience’s Hu asked: “We know we ber of companies for different programs. to make an acquisition of a product or can go broad but do we want to do so all Our primary focus, however, is to build our company. That would require significant the way? Our constraint is whether we own pipeline,” added Hu. investment but it is the kind of thing we have the finances to take all the programs are discussing,” explained Orlando. forward. It is a question of which ones we FUNDING GROWTH If Vericel were to embark on the acqui- de-prioritize and maybe partner off.” Access to capital is a rate-determining sition path, Orlando added, it is currently step in the growth of early-stage compa- most likely to buy something that fits well ADOPTING ORPHANS nies, for companies generating revenues, with its existing business. “We are in es- Homing in on discrete disease popula- the task is less challenging. Describing his sence an orphan company and so have to tions in specific markets offers biotechs company as a different animal from others be cautious. We don’t do a lot of basic R&D an opportunity to cut their commercial represented in the roundtable, Vericel’s and so would be looking at something like teeth without overreaching. Orphan dis- Orlando noted that its rapid growth in the a cell therapy that is in the latter stages of eases provide such a sweet spot. Although past four years has been underpinned by development,” he explained. United Neuroscience’s lead program is an the assets bought from Genzyme follow- As it starts to replace Carticel with Alzheimer’s vaccine, Hu has no expectation ing its acquisition by Sanofi. MACI, Vericel has freed up a lot of its that her company will try and take that “We just launched our replacement manufacturing capacity. “We are a fairly all the way. “We are a small translational product last year and have expanded the rare entity in that we are a commercial company and that is where our core is right number of sales representatives from 21 manufacturer of cell therapies and there now. We don’t see ourselves commercial- to 28 and expect to increase that this are many small companies that are inch- izing an Alzheimer’s vaccine as that would year. We are in a rapid organic growth ing their way to the market. Manufactur- be a big leap for us. Our priority is to find phase,” he noted. ing quality product can be very difficult a partner to do that,” she noted. Indeed, Vericel reported its third for some companies so there may be some Hu, like many biotech leaders, prefers straight quarter of 30% or higher revenue opportunities there for us,” he noted. orphan indications because she thinks she growth compared to the same quarter Indeed, with its strong revenue growth can handle them. “Many companies are of the prior year for the fourth quarter and improving balance sheet, Vericel being built to focus on rare diseases. They of 2017 driven by both the accelerating is not short of opportunities. “We have

40 | In Vivo | June 2018 invivo.pharmamedtechbi.com THOUGHT LEADERSHIP IN ASSOCIATION WITH FREYEUR & TROGUE, IMPACTIV BIOCONSULT, AND rbb COMMUNICATIONS

people coming to us with companies tion of its North American royalty stream resistant depression; central neuro- that we might buy and sometimes they to Drug Royalty, while licensing some pathic pain in multiple sclerosis patients; have financing support as well. We are, European country rights to a number of diabetic peripheral neuropathic pain; and however, busy preparing ourselves for the regional pharma companies. Parkinson’s disease levodopa induced growth we are experiencing right now – “In that way, we financed ourselves dyskinesia. Japan’s Otsuka Pharmaceuti- it is important not to get distracted. We organically with license agreements with cal acquired Avanir at the end of 2014 have been a very disciplined company to companies that would fund our R&D for $3.5 billion. date,” he added. people – we had about 20 people who Although MabVax is a smaller company, were funded at the time by various big Hanson is staying true to his philosophy KEEPING A LID ON COSTS pharma,” he recalled. of keeping costs variable. “It allows you to As capital preservation is essential for The challenge for CFOs is when pro- adjust if you have a delay. In my experi- keeping biotechs on course, companies grams disappoint and decisions need ence, clinical trials never get completed in need to keep a tight rein on costs, not to be taken to not continue as that can the timeline you really want – things hap- get over-leveraged, nor run out of cash. leave a company exposed to fixed costs. pen – it could be some regulatory issue or That means the executives with financial “As a CFO, I am a believer that when you it takes longer than expected to bring on responsibilities will view growth strate- have uncertainty you want to have vari- another clinical site,” he explained. gies through a different lens. able costs because if you hire people you “Organically, you can grow if you have As a CFO, MabVax’s Hanson, who has can have a pyramid of costs. You have massive amounts of funds, you have an had experience in building businesses to have more buildings, more chemistry investor that believes in you, will stay both organically and through acquisition, labs, biology labs and, at that time, that with you. If $150 million came into our agrees that he sees things differently. “At worked out at about $50k per person in company that would be outstanding for Avanir Pharmaceuticals, we took the or- overheads. It is probably a higher number us. We have backers who have invested ganic growth route and intended to take these days,” he added. At the point when time and time again but you have to be our lead compound, the cold sore product Avanir decided it needed to start a sales in line with your investors, your manage- Abreva, all the way. We ended up having force, the management team chose not ment, your board, know your markets and to license the product to GSK because it to hire one but instead get a commercial your assets to grow organically,” he added. went over the counter immediately and capability through acquisition. Thinking about technologies that we didn’t have a sales force for that kind Having flirted with a monoclonal an- MabVax might bring in-house, a good fit, of product. If we could have detailed it, tibody platform, Avanir built a presence according to Hanson, would be antibody- we would have kept it,” he noted. in the CNS space, ultimately succeeding drug conjugate (ADC) expertise. “We don’t Avanir had previously licensed North with the approval of Nuedexta, a combi- have ADC experience so finding a com- American and other ex-European rights nation of the NMDA receptor antagonist pany that can provide that would be good. for Abreva (docosanol 10%) to Bristol dextromethorphan with quinidine sulfate, We are aware of companies like Seattle Myers Squibb in 1996, a deal that was a cytochrome P450 enzyme inhibitor, in Genetics but they would be more likely to terminated a year later. The company then pseudobulbar affect. acquire us. We do look at technologies we filed an NDA in 1998 and licensed the US Dextromethorphan with quinidine don’t have and look to acquire them and and Canadian rights to GSK in 2000.A few sulfate is also in Phase II studies in have had some discussions on that front months later the product was approved other indications including: agitation in to try and find the right fit. Figuring out by the FDA as an OTC treatment of oral Alzheimer’s disease; amyotrophic lateral the valuations of activities is usually the herpes. Avanir subsequently sold a por- sclerosis; autism in adults; treatment biggest challenge,” he added.

This is the final installment of multi-part coverage of the Meeting Growth Challenges Roundtable, sponsored by Freyeur & Trogue, IMPACTIV BioConsult and rbb Communications, conducted during the J.P. Morgan Healthcare Conference in San Francisco.

© 2018 by Informa Business Intelligence, Inc., an Informa company. All rights reserved. No part of this publication may be reproduced in any form or incorporated into any information retrieval system without the written permission of the copyright owner.

❚ On the Move Recent executive appointments in the life sciences industry

❚ DIANE BENO COMPANY CHANGES SVP, Quality, Albany Molecular Research

AZOULAY, Salomon, MD BRIDY, Shawn D. To: Roivant Sciences GMBH, To: Inovio Pharmaceuticals Inc., CMO (May) VP, Bus. Dev. (May) From: Pfizer Essential Health, SVP, CMO From: Bridy Advisors, Managing Dir. Phone: +41-61-225-44-82 Phone: 267-440-4200

BAYEVER, Eliel, MD BULLER, Fabian, PhD To: OncoQuest Inc., CMO (May) To: Neurimmune Holdings AG, From: Glenmark Pharmaceuticals Inc., CBO (Apr) ❚ KENNETH BERLIN VP, Head, Oncology From: Johnson & Johnson Innovation, President & CEO, Advaxis Phone: 780-448-1400 Dir., New Ventures Phone: +41-44-755-4646

BENO, Diane M. To: Albany Molecular Research Inc., BUTCHER, Alan SVP, Quality (Apr) To: AMAG Pharmaceuticals Inc., From: Abbott Medical Optics Inc., EVP, CBO (May) Divisional VP, Global Ops. From: Purdue Pharma LP, Phone: 518-512-2020 SVP, Licensing & Bus. Dev. Phone: 617-498-3300 ❚ RICHARD BRAND BERGER, Dietmar P., MD, PhD CFO, To: Atara Biotherapeutics Inc., CALLAHAN, Chris Laboratory for Advanced Medicine Global Head, R&D (May) To: PierianDx, From: Roche/Genetech, SVP, Global Chief Commercial Officer (Apr) Head, Prod. Dev., Clin. Science From: Sunquest Information Systems, Hematology & Oncology VP, Product Strategy & Bus. Dev. Phone: 650-278-8930 Phone: 314-628-0035

BERLIN, Kenneth A. CASTLEMAN, David To: Advaxis Inc., Pres.& CEO (Apr) To: CoreLink LLC, VP, R&D (Apr) From: Rosetta Genomics Ltd., From: Zimmer Biomet Holdings Inc., ❚ Pres. & CEO Staff Engineer FABIAN BULLER Phone: 609-452-9813 Phone: 888-349-7808 CBO, Neurimmune Holdings

BOND, Alan CHIN, William W., MD To: Dune Medical Devices Inc., To: Frequency Therapeutics, CFO (May) CMO (Apr) From: Given Imaging, Americas, CFO From: Eli Lilly & Co., Phone: 484-320-7536 SVP, Drug Discovery & Clinical Investigation Phone: 866-389-1970 BRAND, Richard To: Laboratory for Advanced Medicine ❚ Inc., CFO (May) CHRIS CALLAHAN Chief Commercial Officer, PierianDx From: BeyondSpring, CFO Phone: 949-333-1538

42 | In Vivo | June 2018 invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com ON THE MOVE ❚

COUNTOURIOTIS, Athena M., MD GULFO, Adele To: TP Therapeutics Inc., To: Roivant Sciences GMBH, EVP, CMO (May) Chief of Commercial Dev. (May) From: Adverum Biotechnologies Inc., From: Pfizer US Primary Care, SVP, CMO Pres. & Gen. Mgr. Phone: 858-926-5254 Phone: +41-61-225-44-82

❚ DAVID CASTLEMAN VP, R&D, CoreLink CUKIER, Herm HARTMAN, Charlotte S., PharmD To: BioDelivery Sciences International To: On Target Laboratories Inc., Inc., CEO (May) VP, Clinical Dev. (May) From: Allergan PLC, SVP, Head, From: Heart Metabolics Ltd., Commercial Strategy & Innovation VP, Clinical Dev. Phone: 919-582-9050 Phone: 765-588-4547

CURTIS, Eric L. HAUCK, Gerrit, PhD To: CytRx Corp., Pres. & COO (May) To: Basilea Pharmaceutica Ltd., From: Strategic Consultant CTO (May) Phone: 310-826-5648 From: Sanofi, Cluster Head, ❚ WILLIAM CHIN Synthetic Molecules CMO, Frequency Therapeutics Phone: +41-61-606-11-11 DANSEY, Roger D., MD To: Seattle Genetics Inc., CMO (May) From: Merck Inc., HECHLER, Howard Therapeutic Area Head, To: PolarityTE Inc., CBO (May) Late-Stage Oncology From: Smith & Nephew PLC, Phone: 425-527-4000 Senior Dir., Corp. Dev. Phone: 385-237-2279

DUSEK, Alex To: ERYTECH Pharma SA, HERPIN, Timothy F., PhD ❚ ALEXANDER GEBAUER VP, Commercial Strategy (May) To: Caribou Biosciences Inc., Chairman & CEO, From: Argos Therapeutics Inc., CBO (May) OMEICOS Ophthalmics VP, Commercial Strategy From: AstraZeneca PLC, Phone: +33-4-78-44-38 VP, Head, Transactions Phone: 510-982-6030

EPSTEIN, Rick To: OMNIlife science Inc., CEO (May) JENE, Jill M., PhD From: Sonoma Orthopedic Products Inc., To: PDL BioPharma Inc., Pres. & CEO VP, Bus. Dev. (May) Phone: 508-824-2444 From: twoXAR Inc., SVP, Bus. Dev. Phone: 775-832-8500

❚ ALICK SUN GABLE, Rita SVP, Corporate & Business To: Sensus Healthcare Inc., KALTENBACH, Patrick Development, Cellenkos VP, Sales, Oncology (May) To: Becton Dickinson & Co., From: IBA, Strategic Account Mgr. Pres., Life Sciences (Apr) Phone: 800-324-9890 From: Agilent Technologies Inc., SVP Phone: 201-847-6800

GEBAUER, Alexander, MD, PhD To: OMEICOS Ophthalics, KITT, Michael, MD Chmn. & CEO (Apr) To: Attenua Inc., CEO (Apr) From: Vaccentis AG, Director From: Afferent Pharmaceuticals Inc., Phone: +49-30-9489-4810 CMO Phone: 212-203-8362 ❚ RICHARD WILLIAMS Managing Dir. & Head, Oncology Programs, WuXi NextCODE Genomics

June 2018 | In Vivo | 43 ❚ ON THE MOVE

LAFRENCE, Andrew SHEFFIELD, Holly DIRECTORS To: Biothera Pharmaceuticals Inc., To: Cooper Cos. Inc., SVP, CFO (May) EVP, Chief Strategy Officer (Jun) From: Surmodics Inc., From: UBS Securities LLC, Global Head, BUONO, Stefano VP, Finance, Info. Systems & CFO Medical Tech., Healthcare Banking To: Abeona Therapeutics Inc., Phone: 651-675-0300 Phone: 925-460-3600 Director (May) Phone: 214-665-9495

LEFEBVRE, Eric, MD SUN, Alick To: Pliant Therapeutics Inc., To: Cellenkos Inc., ESSNER, Robert A. CMO (May) SVP, Corp. & Bus. Dev. (Apr) To: Elucida Oncology Inc., From: Allergan PLC, From: Golden Meditech Holdings Ltd., Exec. Director (Apr) Head, Clin. Research & Dev., NASH SVP Phone: 646-701-5931 Phone: 650-481-6717 Phone: 832-962-7628

HUH, Hoyoung, MD, PhD MCKEE, Blaine, PhD TENG, Annie, MD To: Pliant Therapeutics Inc., To: ImmunoGen Inc., EVP, CBO (Apr) To: CANbridge Life Sciences Ltd., VP, Chairman (May) From: Shire PLC, Head, Corp. Dev. Clinical Dev. & Medical Affairs (May) Phone: 650-481-6717 Phone: 781-895-0600 From: Sanofi, Head, Biology & Early Dev. Phone: +86-10-841-48018 KNIGHT, Peter S. MESSERSMITH, Elizabeth, PhD To: bioAffinity Technologies Inc., To: Novan Inc., SVP, Clinical Ops. (Jun) VENDOLA, Keith, MD Director (May) From: Quark Pharmaceuticals Inc., To: Rezolute Inc., CFO (May) Phone: 210-698-5334 SVP, Ops. & Data Mgmt. From: Coherus BioSciences Inc., VP, Phone: 919-485-8080 Competitive Strategy & Chief of Staff SEGHI RECLI, Federico Phone: 303-222-2128 To: Titan Pharmaceuticals Inc., MOATAZEDI, David Director (May) To: Evolus Inc., Pres. & CEO (May) Phone: 650-244-4990 From: Allergan Inc., WARD, Kathleen SVP, US Medical Aesthetics To: On Target Laboratories Inc., Phone: 949-284-4555 VP, Finance (May) VAN DUYNE, Richard From: Tru-Flex, CFO To: Abeona Therapeutics Inc., Phone: 765-588-4547 Director (May) MUIJRERS, Joep, PhD Phone: 214-665-9495 To: PureTech Health PLC, CFO (Apr) From: Life Sciences Partners, WEINSTEIN, Mike Partner & Portfolio Mgr. To: Medtronic PLC, Phone: 617-482-2333 SVP, Strategy (May) ADVISORS From: J.P. Morgan Chase & Co., Managing Dir. ALICI, Evren, MD, PhD PATEL, Chintu Phone: +353-800-633-8766 To: Intellia Therapeutics Inc., To: Adello Biologics LLC, CEO (May) Scientific Advisor (May) From: Amneal Pharmaceuticals, Co-CEO Phone: 857-285-6200 Phone: 732-475-0500 WILLIAMS, Richard, PhD To: WuXi NextCODE Genomics, Managing Dir. & Head, BONINI, Chiara, MD, PhD SALVA, Francisco D. Oncology Programs (Apr) To: Intellia Therapeutics Inc., To: Complexa Inc., Pres. & CEO (May) From: Grail Inc., Group Medical Dir. Scientific Advisor (May) From: Acerta Pharma BV, VP, Ops. Phone: 617-712-1417 Phone: 857-285-6200 Phone: 412-727-8727 WOOD, Nathan DEANGELO, Daniel, MD, PhD SHAHMOUD, Tarek, MD, PhD To: Swift Biosciences Inc., CEO (May) To: Intellia Therapeutics Inc., To: Humanigen Inc., CMO (Apr) From: SGI-DNA, Pres. Scientific Advisor (May) From: Consultant Phone: 734-330-2568 Phone: 857-285-6200 Phone: 650-243-3100

44 | In Vivo | June 2018 invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com ON THE MOVE ❚

GILL, Saar, MD, PhD WOOD, Kathryn, DPhil ONOPCHENKO, John To: Intellia Therapeutics Inc., To: Intellia Therapeutics Inc., To: Endologix Inc., CEO (May) Scientific Advisor (May) Scientific Advisor (May) From: COO Phone: 857-285-6200 Phone: 857-285-6200 Phone: 949-595-7200

LAMBERT, John M., PhD ZUNIGA-PFLUCKER, Juan Carlos, PhD PHILLIPS, Andrew, PhD To: Synaffix BV, Scientific Advisor (May) To: Intellia Therapeutics Inc., To: C4 Therapeutics Inc., Phone: +31-88-022-4505 Scientific Advisor (May) Pres. & CEO (May) Phone: 857-285-6200 From: Pres. & CSO Phone: 202-421-7994 OLWEUS, Johanna, MD, PhD To: Intellia Therapeutics Inc., PROMOTIONS Scientific Advisor (May) SPELLMAN, Mary, MD Phone: 857-285-6200 To: Menlo Therapeutics Inc., HOUCK, David R., PhD CMO (May) To: Aptinyx Inc., Chief Dev. Officer (May) From: SVP, Clinical Dev. TURKA, Laurence, MD From: VP, Drug Dev. Ops. Phone: 650-486-1416 To: Intellia Therapeutics Inc., Phone: 847-871-0377 Scientific Advisor (May) Phone: 857-285-6200 ZEIHER, Bernhardt G., MD IRVING, Bryan, PhD To: Astellas Pharma Inc., To: Five Prime Therapeutics Inc., CMO & Pres., Dev. (Apr) WALKER, Sir John, PhD EVP, CSO (May) From: Pres., Dev. To: ChromaDex Corp., From: VP, Research Phone: +81-3-3244-3000 Scientific Advisor (May) Phone: 415-365-5600 Phone: 949-419-0288

KWON, Paul, MD WHERRY, E. John, PhD To: Menlo Therapeutics Inc., CSO (May) To: Intellia Therapeutics Inc., From: CMO Scientific Advisor (May) Phone: 650-486-1416 Phone: 857-285-6200

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June 2018 | In Vivo | 45 ❚ DEAL-MAKING

Derived from Strategic Transactions, Informa’s premium source for tracking life sciences deal activity, the Deal-Making column is a ❚ Deal-Making survey of recent health care transactions listed by relevant industry segment – In Vitro Diagnostics, Medical Devices, Pharmaceuticals, and Research, Analytical Equipment and Supplies – and then Covering deals made May 2018 categorized by type – Acquisition, Alliance, or Financing. Strategic Transactions is updated daily with in-depth deal analysis, structural and financial terms, and links to SEC-filed contracts. For information about access please contact Customer Care at 800-332-2181 or [email protected]

❚ IN VITRO DIAGNOSTICS Janssen Biotech buys BeneVir option from FKD Therapies Mergers & Acquisitions Avista and Dana buy Kramer Labs Utility gets US rights to two antibiotics from Leo Pharma Myriad Genetics acquires reproductive Takeda’s final offer forShire PLC testing firmCounsyl for $375mm in stands; £46bn merger creates new top Provention Bio gains two clinical- cash and stock ten pharmaco stage projects through deal with MacroGenics Alliances Alliances Mundipharma gains rights to Bactevo announces drug discovery Allergan/Ironwood settle generic Starpharma’s VivaGel BV in Asia, collaboration with BI Linzess patent litigation with MENA, Latin America Aurobindo Financings Teva settles patent litigation with Sarepta licenses five LGMD gene T2 Biosystems nets $43mm through Amarin; gets rights to market generic therapy candidates from Myonexus; public offering Vascepa in US has option to buy company Roche and NeoImmuneTech to test ❚ Anji gets certain Asian rights to MEDICAL DEVICES LipimetiX’s apo E mimetic peptides combination therapy in skin cancers Mergers & Acquisitions Astellas gets rights to Aquinox’s Lodo partners soil-based natural drug Permira buys Corin for undisclosed sum rosiptor in certain APAC territories discovery with Genentech Alliances Outpost licenses exclusive rights Financings Aptar Pharma, Propeller Health team to Arena’s preclinical genitourinary AbSci raises $12mm in Series C up for second time disorder compound financing BioSerenity, Pierre Fabre co-develop AstraZeneca grants Seroquel rights to Ardelyx secures $50mm term loan OAB device Luye Pharma Ardelyx nets $47mm through public SurModics acquires Embolitech’s AZ partners with Procella, Smartwise offering thrombectomy IP to develop cardiac muscle regeneration therapy Ascletis files to go public on Hong Venus Medtech gets rights to Kong exchange Keystone’s cardiovascular devices Beam Therapeutics sublicenses Editas’ gene editing technologies Aslan nets $39mm in US IPO Teleflex acquires products from QT Autolus files for Nasdaq IPO Vascular, gets option to another Brii Biosciences options up to four Vir programs in China Benitec Biopharma raises $A8.8mm Financings Vifor Fresenius licenses ex-US rights to from entitlement offer and placement AxoGen nets $115.6mm in FOPO Cara’s Korsuva for up to $540mm BeyondSpring raises $19.7mm through Public offering nets $18.5mm for Evotec and Celgene partner again, this registered direct offering Check-Cap time for solid tumors Cesca Therapeutics nets $5mm in Inspire Medical nets $116mm Cipla gets Indian rights to FOPO in NYSE IPO MannKind’s Afrezza Cocrystal nets $7.4mm via FOPO Integra LifeSciences nets $303.8mm Lannett buys portfolio of products through public offering Public offering nets $70.5mm from Endo for Coherus Second Sight gets $10mm via PIPE licenses MENA rights Mundipharma CytRx nets $6.6mm through registered to Endoceutics’ Intrarosa dyspareunia direct sale ❚ PHARMACEUTICALS treatment Eiger nets $37.6mm via FOPO Mergers & Acquisitions Epigen Biosciences licenses LPA1 antagonist to Novo Nordisk Evelo Biosciences nets $79mm in IPO Armo scooped up by Lilly for $1.5bn Exelixis partners with Invenra for Iterum nets $74.4mm via IPO Lilly pays $110mm up front plus earn- multi-specific cancer antibodies outs to acquire AurKa Pharma and Kiniksa Pharmaceuticals goes public regain cancer candidate Ferring gets rAd-IFN/Syn3 marketing with $142mm IPO

46 | In Vivo | June 2018 invivo.pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com - - ❚

| 47 ), which ), which DEAL-MAKING In Vivo 2018 | In Vivo June . (May) MEDICAL DEVICES MEDICAL FINANCINGS ACQUISITIONS & MERGERS T2 BIOSYSTEMS INC. BIOSYSTEMS T2 PLC GROUP CORIN Bactevo will receive up-front payments payments up-front receive will Bactevo potential plus funding research and commer and development research, uti- alliance The milestones. cialization Integrated TIME (Totally Bactevo’s lizes synthetic with ) platform Engine Medicines identify to novel technology chemistry advanced BI. TIME uses for leads vivo in medicinally- combine to learning machine with diversity chemical “tagless” relevant target molecular or phenotypic fast super Bactevo samples. in human screening involve that diseases treat to working is and function in mitochondrial defects - Al Parkinson’s including diseases CNS ALS. and zheimer’s ❚ (infectious and hemo- and (infectious Inc. T2 Biosystems through $43mm netted diagnostics) stasis shares common 6.1mm of offering public a to filed originally (The company $7.50. at - the pro put T2 will 5.65mm shares.) sell other corporate R&D and towards ceeds on cash along with that notes and needs, operations fund will the offering hand, (May) 1Q 2020. into Canaccord Banks/Advisors: Investment Scott Montgomery Janney Inc.; Genuity - WBB Securi LLC; Partners Leerink Inc.; LLC ties un- an paying is Permira firm Investment stake a majority acquire to sum disclosed Group orthopedic firm Corin in UK-based PLC DeA Capital, include investors Corin’s - e Parteci Investimenti and Capital, Hunt - manage and CEO current Corin’s pazioni. and in their roles continue will team ment in the firm. investors significant remain - surgi and implants offers The company knee, the hip, repairing for devices cal has It tissues. soft and ankle shoulder, the Op- including technologies, various (OPS System Positioning timized uses advanced computational modeling to computational advanced uses moves. hip joint a patient’s how simulate coat cementless a created also has Corin - - , a DNA screen DNA a , IN VITRO DIAGNOSTICS IN ALLIANCES MERGERS & ACQUISITIONS & MERGERS MYRIAD GENETICS INC. GENETICS MYRIAD INC. COUNSYL BACTEVO LTD. BACTEVO GMBH INGELHEIM BOEHRINGER ❚ acquire to agreed Inc. Genetics Myriad Inc. Counsyl held privately testing, on prenatal focused ing company disor hereditary and health, women’s (May) ders. that of 25% to up $375mm, pay will Myriad exceed to (not stock in Myriad amount - Coun 2.8 times or about 3mm shares), of revenues twelve-month trailing syl’s hereditary and carrier Counsyl’s $134mm. con- offers business screening cancer counseling genetic and DNA testing sumer clients, to out sent are kits Test services. and sample or blood a saliva provide who for lab the Counsyl to back the kit mail health reproductive Counsyl’s processing. product lead by up headed portfolio is screen carrier , a pre-pregnancy Foresight - DNA sam uses that diseases genetic for which parents, potential both from pling Prelude revenues. its of 64% for accounts to test blood maternal another prenatal is - chro any 10 weeks as early as determine The company’s abnormalities. mosomal test screen cancer a hereditary is Reliant ovarian, for risk an individual’s assess to was Counsyl other cancers. and colon, inception its since and in 2007 founded (through $173.4mm of total a raised has Pilot Fund, Founders including backers Asset Sachs Goldman Equity, Growth - Technol Seneca Rosemont Management, most Ventures), Felicis and ogy Partners, Perceptive from round $80mm an recently, - The acquisi 2017. in November Advisors Preventive existing Myriad’s tion grows a new reproductive creating unit, Care this within subsidiary health-focused Myriad as be known will which business, - Banks/Advi Investment . Health Women’s Inc.); Genetics (Myriad LLC Lazard sors: Inc.) (Counsyl Co. & Piper Jaffray entered into a drug discovery a drug discovery into entered Ltd. Bactevo Ingelheim Boehringer with collaboration - com identifyGMBH to small-molecule (May) pounds.

nets $38.5mm through through $38.5mm nets royalty rights royalty PIPE $75mm closes MEI Pharma follow-on via $115.8mm nets Melinta FOPO via $172.7mm nets MyoKardia $15mm commences Oncobiologics $7.5mm gets placement; private for IPO Bio files Provention in IPO $69.8mm nets Rock Scholar $79mm nets Unity Biotechnology in IPO Verastem offering follow-on sells HCR Giapreza HCR sells Pharma La Jolla company an Informa Inc., Information, Business ©2016 Informa ❚ DEAL-MAKING

ing technology designed to enhance rapid development and data interpretation, balloon catheters. It also gets a license to osseointegration as well as a titanium while Pierre Fabre will be more focused on related intellectual property. (May) nitride advanced coating technology. The aspects such as the business model, mar- Under the agreement, Teleflex also has an acquisition represents Permira’s first in ket access, patient/provider experience, option to purchase QT’s Chocolate Heart the orthopedic space. Investment Banks/ and treatment pathway, and additionally drug-coated coronary balloon catheter, Advisors: Rothschild Inc. contributes expertise from its existing which is currently being developed. Fi- urologist relationships. BioSerenity was nancial terms were not disclosed and ALLIANCES founded in 2014 and until now has initially QT must obtain shareholder approval APTAR PHARMA focused on connected diagnostic and for the deal to finalize. Chocolate XD is PROPELLER HEALTH monitoring devices for epilepsy, cardio- a percutaneous transluminal coronary vascular diseases, pregnancy, and sleep Propeller Health and Aptar Pharma have angioplasty catheter for balloon dilatation disorders, but the current collaboration of the stenotic portion of coronary artery signed an agreement to co-develop and enables it to expand into urology. co-market digital medicines across mul- or bypass graft stenosis. The device is tiple disease areas. (May) EMBOLITECH INC. designed to improve myocardial perfusion SURMODICS INC. including in-stent restenosis. Glider is The partnership will bring together Pro- the only torqueable angioplasty balloon peller’s experience in advanced digital Strengthening its peripheral vascular catheter. QT will continue developing therapeutics design and implementation pipeline, Surmodics Inc. is acquiring other devices including the Chocolate with Aptar’s expertise in device develop- Embolitech Inc.’s thrombectomy platform Touch drug-coated percutaneous translu- ment, packaging innovation, and quality and related intellectual property. (May) minal angioplasty balloons; patients are manufacturing. The companies will work Surmodics is paying $5mm up front plus currently being enrolled in an IDE trial. with other pharmaceutical and health- regulatory milestones. With its unique In addition to product development, QT care firms to speed up the development, design, Embolitech’s Thrombomatrix can plans to focus on acquiring and licens- manufacturing, and commercialization remove difficult hard thrombi and emboli ing new products in new therapy areas. of digital medicines for leading marketed (blood clots) from a patient’s vasculature. In February 2017, QT Vascular licensed and pipeline brands. They seek to create The device consists of a double-layered Medtronic worldwide rights to distribute a digital medicine platform that enables nitinol mesh trumpet and two expand- its Chocolate PTA catheter for five years. inhaled, injectable, nasal, and dermal able cages designed to trap the clot and Three months later Medtronic received delivery. Digital medicines can provide quickly remove it from the body’s vascular the option to acquire Chocolate PTA. That real-time patient monitoring and enable bed. Applications for the system include option was exercised earlier this year and personalized treatments, thus improving peripheral, pulmonary, and neurovascular in return Medtronic paid $28mm. patient outcomes. Concurrent with the procedures. Benefits of the technology agreement, Propeller raised $20mm in include reduced procedure and recovery FINANCINGS a Series D financing in which Aptar led times and no need for external capital and contributed $10mm. The partners equipment. AXOGEN INC. teamed up back in 2016 to develop the AxoGen Inc. (allografts and surgical tools first fully-integrated connected metered KEYSTONE HEART LTD. for peripheral nerve regeneration and dose inhaler for respiratory conditions VENUS MEDTECH LTD. repair) netted $115.6mm through the including asthma and chronic obstructive Keystone Heart Ltd. licensed Venus public offering of 3mm shares at $41. The pulmonary disease. Medtech Inc. exclusive rights to develop, company originally planned to sell 2mm manufacture, and market the third-gener- shares. AxoGen will use the proceeds to BIOSERENITY ation TriGuard 3 and the next-generation support long-term tissue processing and PIERRE FABRE GROUP cerebral embolic protection device in Chi- manufacturing facilities for its products- Continuing a 2016 relationship, BioSeren- na and other major Asian markets. (May) -including Avance off-the-shelf processed ity and Pierre Fabre Group have entered an Keystone’s first-generation CE-Marked human nerve allograft; AxoGuard porcine agreement to develop a connected range TriGuard cerebral protection device is the submucosa extracellular matrix nerve con- of devices for the diagnosis, treatment, only one of its kind to offer complete brain nector; and Avive human umbilical cord and monitoring of overactive bladder- coverage to reduce risk of cerebral damage soft tissue membrane--and to increase related urinary disorders. (May) during transcatheter aortic valve replace- capacity. (May) The companies started their initial collab- ment (TAVR) and other cardiovascular Investment Banks/Advisors: JMP Secu- oration with BioSerenity’s development of procedures. Venus offers transcatheter rities LLC; Jefferies & Co. Inc.; Leerink several connected fabric prototypes that valve products as well as devices for use Partners LLC; William Blair & Co. led to the current one. Now the compa- during the entire TAVR procedure. With nies will move to the manufacturing and TriGuard 3 in its portfolio, the company CHECK-CAP LTD. marketing of the urinary device, which is says it is the only provider of a complete Check-Cap Ltd. (colorectal cancer diag- made of fabric underwear worn around cerebral embolic protection, balloon, nostics) netted $18.5mm through a public the abdomen. The system incorporates and valve solution in the TAVR space. The offering of ordinary share units and pre- biometric sensors to record, on a mobile companies partnered back in March 2017 funded warrants. The company issued app, various operating parameters, con- to promote Venus Medtech’s TAVR system 3.2mm units (including the overallotment) tinuously detecting and quantifying the in combination with Keystone’s TriGuard at $5.50 for net proceeds of $16.3mm; patient’s urinary issues, and then forward- cerebral embolic protection device in key each unit consisted of one ordinary ing the readings to a secure cloud platform Asian markets including China. share and a five-year Series C warrant to that the urologist can access for ongoing purchase one share exercisable at $5.50. monitoring. Pierre Fabre will co-finance QT VASCULAR LTD. And it also issued to certain investors R&D for this connected device in exchange TELEFLEX INC. 451k pre-funded units at $5.50, with each for exclusive worldwide commercialization Teleflex Inc. has acquired QT Vascular containing a pre-funded warrant to pur- rights. Using an approach that combines Ltd.’s non-drug coated products including chase one share and a Series C warrant, high-tech engineering and big data analyt- the Chocolate XD and Glider percutaneous for net proceeds of $2.3mm. Proceeds ics, BioSerenity’s role will include device transluminal coronary angioplasty (PTCA) will go towards continued work on the

48 | In Vivo | June 2018 invivo.pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com - - - - ❚

| 49 DEAL-MAKING In Vivo 2018 | In Vivo June Kramer Laboratories Laboratories Kramer for treat for & Foot Toe Fungi-Nail KRAMER LABORATORIES INC. LABORATORIES KRAMER TAKEDA PHARMACEUTICAL CO. LTD. CO. PHARMACEUTICAL TAKEDA PLC SHIRE PE firm Avista Capital Partners and partner and Partners Capital Avista firm PE are group) (an investment Holdings Dana over-the-counter held closely acquiring company medicines for an undisclosed sum. (May) sum. an undisclosed for Inc. offers and in 1983 founded was Kramer the is popular The most products. three antifungal an- sells also It fungus. toe and ing finger for Cura, Hongo HC Max other antifungal, the In foot. athlete’s of burning and itching . Avista Safetussin offers it space, cough Kramer infuse will they say Dana and development the firm’s support to capital will O’Neil Robert Avista’s expansion. and chairman. as board Kramer’s join forth and back of month a over Following fi PLC Shire offers, rejected four and Takeda from bid a merger accepted nally which Ltd. The deal, Co. Pharmaceutical ($61.2bn; £46bn about at Shire values $80bn, in- to close of value enterprise in $30.33 of debt), consists net cluding or share a new Takeda of 0.839 and cash outstanding each for ADSs Takeda 1.678 per value an implied for share, Shire 44% of a total and £49.01 of share Shire (May) equity. 56% and cash began Shire toward advances Takeda’s equity were that bids with in March, Shire’s for little cash too loaded, held - underval said Shire which and liking, offer the current (As company. the ued a out take to have will Takeda stands, the cash cover to loan $31bn bridge Takeda’s boosts The deal amount.) in the US), (especially presence global with firm 10 pharma a Top create will and areas therapy multiple across offerings diseases, GI, rare neurology, including Shire’s therapies. plasma-derived and in mid- and projects includes business a strong and development, late-stage genetic for drugs marketed portfolio of immunology conditions, blood diseases, - neurosci and ophthalmics, indications, $15bn over realized company The ence. of an EBITDA with revenues, in 2017 - oncol its off sold recently (Shire $6.5bn. ogy business $2.4bn; as for to Servier SA bidding the Takeda during occurred that the sale that speculated period, analysts inter lose to Takeda caused have would to attracted was however, Takeda, est. other and offerings disease rare Shire’s Following the course.) stayed and assets, will shareholders Takeda the acquisition, the combined of 50% approximately own on the listed be dual will which entity, York the New and Exchange Stock Tokyo larg the world’s of two Exchange, Stock the largest is The merger markets. est (and arena pharma in the Japanese ever by firm a foreign of takeover the largest - oncolytic viruses can be can viruses oncolytic platform to develop oncolytic oncolytic develop to platform T-Stealth . Armo’s lead asset asset lead . Armo’s Armo BioSciences JANSSEN BIOTECH INC. BIOTECH JANSSEN INC. BIOPHARM BENEVIR ELI LILLY & CO. & LILLY ELI INC. PHARMA AURKA used both as standalone therapies and in and therapies standalone both as used other immunotherapies with combination BeneVir’s inhibitors. checkpoint as such Janssen’s to complementary is technology - in the immuno-oncol R&D activities own advance to intends Janssen ogy space. aimed candidates preclinical BeneVir’s prostate, lung, including tumors solid at cancers. colorectal and is acquiring closely closely acquiring is Inc. Biotech Janssen devel immunotherapies oncolytic held - an undis for Inc. Biopharm oper BeneVir (May) sum. closed - intel in 2011 with founded was BeneVir New York at discovered property lectual its using is . The company University T-Stealth - sys immune the hide from that viruses both cells, cancer destroy to in order tem acti- system immune through and directly vation. - oncol second its penned & Co. Eli Lilly agreeing in one week, ogy acquisition Pharma AurKa held privately acquire to to up plus front, $110mm up for Inc. sales-based and in regulatory- $465mm (May) earn-outs. pipeline, its of a review In 2016 following A inhibitor kinase an aurora sold Lilly - Sci Life Capital TVM AK01) to (named and Pharma, AurKa created TVM ence. the developing with the start-up tasked I Phase cancers. multiple for candidate benefit clinical demonstrated have trials decided now has Lilly and AK01, with the regain to in order AurKa acquire to trials. further clinical pursue and project an- Lilly’s of on the heels comes The deal share per $50 pay will it that nouncement immuno-oncology acquire ($1.5bn) to firm a PEGylated III pegilodecakin, Phase is cancer. pancreatic for candidate IL-10 W. Robert Banks/Advisors: Investment Inc.) Pharma (AurKa Inc. & Co. Baird cell and lung cancer, melanoma, and other and melanoma, cancer, lung and cell company’s the is that While tumors.) solid Armo also trials, in clinical candidate only to projects pre-IND and preclinical brings (an anti-PD-1 AM001 including the table, - (recom AM0015 antibody), monoclonal AM0012 (recombinant and IL-15), binant stance Lilly’s boosts acquisition The IL-12). become will Pegilodecakin in the IO space. the Big but candidate, advanced most its on a LY3300054, working also is Pharma tumors, solid for I PD-L1 inhibitor a Phase - inhibi an IDO1 mAb, a CSF-1R as well as I trials. in Phase all a TIM3 mAb, and tor, Suisse Credit Banks/Advisors: Investment Partners Centerview & Co.); Lilly (Eli Group Inc.) BioSciences (Armo LLC - retinal retinal ingestible scanning capsule for for capsule scanning ingestible PHARMACEUTICALS MERGERS & ACQUISITIONS & MERGERS SECOND SIGHT MEDICAL PRODUCTS INC. PRODUCTS MEDICAL SIGHT SECOND INTEGRA LIFESCIENCES HOLDINGS CORP. HOLDINGS LIFESCIENCES INTEGRA INSPIRE MEDICAL SYSTEMS INC. SYSTEMS MEDICAL INSPIRE ELI LILLY & CO. & LILLY ELI INC. BIOSCIENCES ARMO Second Sight Second maker device Ophthalmic $10mm grossed Inc. Products Medical 6.76mm of placement a private through $1.48 (an 8% at priced shares common company by owned entities to discount) Sight Second Williams. Gregg chairman development clinical for the funds use will - sys prosthesis visual Orion cortical its of obtain and developing finish to and tem, II Argus its for approvals regulatory (in- Corp. Holdings LifeSciences Integra reconstructive for devices and struments and neurosurgery, surgery, general and netted surgery) orthopedic extremity of offering a public through $303.8mm The $58.50. at shares common 5.25mm reduce to the proceeds use will company - an outstand under borrowings revolving (May) facility. ing senior credit JP Morgan Banks/Advisors: Investment LLC Securities Fargo Wells & Co.; Chase (May) system. prosthesis (obstructive (obstructive Inc. Systems Medical Inspire de- neurostimulation (OSA) apnea sleep public initial $115.5mm in its netted vice) shares 7.7mm of on the NYSE offering the $16, at the overallotment) (including its for range anticipated its of end high (May) 5mm shares. proposed originally of Bank Banks/Advisors: Investment & Sachs Goldman Lynch; Merrill America - Nico Stifel LLC; Partners Guggenheim Co.; LLC Securities Fargo Wells Inc.; & Co. laus C-Scan money with screening, cancer colorectal and US in the trials for earmarked also manufacturing of expansion and Europe, (May) capabilities. - Wain HC Banks/Advisors: Investment & Co. wright will pay $50 per share (a $50 per share pay will & Co. Eli Lilly $1.5bn or approximately premium) 79% firm Armo immuno-oncology acquire to a provides The deal Inc. BioSciences the as shareholders, for Armo exit swift a $17 through public went just company offering public initial per share/$137mm (May) year. this in January of III Phase Armo’s to attracted most is Lilly pegilodecakin, candidate IL-10 PEGylated monotherapy a as being studied is which check and chemo with in combination and point inhibitor therapy for pancreatic pancreatic for therapy inhibitor point renal for trials in earlier also (It’s cancer. ❚ company an Informa Inc., Information, Business ©2016 Informa ❚ DEAL-MAKING

a Japanese company), and sits as the erty in-licensed from the University of Brazil, Australia, Saudia Arabia, Mexico, fifth largest pharma M&A overall, behind Alabama, Birmingham. South Korea, Thailand, Argentina, Malay- Pfizer/Warner-Lambert, Glaxo Wellcome/ sia, South Africa, and a number of other Smithkline Beecham, Pfizer/Wyeth, and AQUINOX PHARMACEUTICALS INC. international countries. (May) ASTELLAS PHARMA INC. Actavis/Allergan. Investment Banks/ Luye paid $260mm up front and is re- licensed Advisors: Evercore Partners; JP Morgan Aquinox Pharmaceuticals Inc. sponsible for up to $278mm in additional exclusive rights to Chase & Co.; Nomura Securities Interna- Astellas Pharma Inc. milestones. The Seroquel product will be develop, manufacture, and commercial- tional Inc. (Takeda Pharmaceutical Co. added to the company’s offerings in the ize its rosiptor for all indications in Asia- Ltd.); Citigroup Inc.; Goldman Sachs & CNS space which include a fentanyl patch Pacific countries including Japan, South Co.; Morgan Stanley & Co. (Shire PLC) for chronic pain, buprenorphine for cancer Korea, Australia, Taiwan, Indonesia, and pain and pain that doesn’t respond to non- Malaysia. China and India are excluded ALLIANCES opioid analgesics, rivastigmine patch for under the collaboration. (May) ALLERGAN PLC Alzheimer’s disease, and Jinsiping (sele- Aquinox receives $25mm up front and AUROBINDO PHARMA LTD. giline) for Parkinson’s disease. Seroquel could get up to $60mm in development IRONWOOD PHARMACEUTICALS INC. brought in $85mm in sales during 2017 in milestones, $70mm in commercial mile- Ironwood Pharmaceuticals Inc. and Al- the licensed territories, while Seroquel XR stones, plus sales royalties ranging from generated $63mm. (Both have lost patent lergan PLC have settled patent litigation the low-teens to low-twenties (Strategic with Aurobindo Pharma Ltd. surrounding protection.) AZ is off-loading the rights in Transactions assumes 13-23%). Initially, order to maintain focus on its three core Aurobindo’s abbreviated new drug appli- Aquinox will manufacture and supply ros- cation for generic Linzess (linaclotide). Per therapy areas--cancer, cardiovascular and iptor to Astellas at an agreed-upon cost, metabolic disorders, and renal diseases. terms of the settlement, Aurobindo can but following a transfer of manufacturing begin selling linaclotide in the US begin- technology Astellas would then handle ASTRAZENECA PLC ning on August 5, 2030 subject to FDA manufacturing activities. Aquinox’s lead PROCELLA THERAPEUTICS AB approval. The drug is indicated for irritable compound rosiptor (AQX1125) is an oral SMARTWISE SWEDEN AB bowel syndrome and constipation. (Aller- once-daily SH2-containing inositol phos- AstraZeneca PLC teamed up with Procella gan originally licensed European rights to phatase 1 (SHIP1) activator currently in Therapeutics AB and Smartwise Sweden linaclotide from Ironwood under a 2015 Phase III trials for interstitial cystitis/blad- AB (both subsidiaries of biotech/device agreement, which was expanded in 2017 der pain syndrome. It works by decreas- investment firm SWIB Holdings (Swed- to include global rights except in China ing the inflammatory process, thereby ish Innovation Bridge Co.)) to develop and Japan.) Earlier this year Ironwood and reducing inflammation and inflammatory techniques for regenerating heart muscle Allergan signed a similar deal with Sun pain. According to Biomedtracker, it has following heart attack. (May) Pharmaceutical Industries surrounding a 68% likelihood of approval (6% above AZ gains access to Procella’s stem cell generic Linzess. (May) average). technology, which was developed at the AMARIN CORP. PLC ARENA PHARMACEUTICALS INC. Karolinska Institutet, and Smartwise’s Ex- TEVA PHARMACEUTICAL INDUSTRIES LTD. OUTPOST MEDICINE troducer catheter, also developed at Karo- Teva Pharmaceutical Industries Ltd. and Outpost Medicine gained exclusive world- linska. The micro-catheter is designed for Amarin Corp. PLC have settled patent wide rights to a preclinical genitourinary use in cancer treatment and tissue repair, litigation surrounding Teva’s ANDA for ge- disorder compound from Arena Pharma- and in the case of heart procedures, has neric Vascepa (icosapent ethyl) capsules. ceuticals Inc.’s internal pipeline. (May) the ability to deliver therapies targeted to Under the settlement, Teva can market Outpost will pay $3mm in cash and equity specific areas by accessing different layers icosapent ethyl in the US beginning on up front, up to $100mm in development of the heart muscle. AZ pays undisclosed August 9, 2029. Vascepa is a single mol- and commercialization milestones, and money up front for access to both tech- ecule product consisting of the omega-3 tiered net sales royalties up to the low nologies, and will fund research involved acid known as EPA in ethyl-ester form double-digits (Strategic Transactions in the deal. It will also pay SWIBCo up and is proven to lower triglyceride levels assumes 1-29%). Although a specific to $320mm in development and sales without raising LDL-cholesterol levels. candidate was not named, the licensed milestones for treatments successfully Ongoing patent litigation continues with compound targets an undisclosed G developed under the deal. West-Ward Pharmaceuticals Corp and Dr. protein-coupled receptor (GPCR) with po- BEAM THERAPEUTICS INC. Reddy’s Laboratories Inc. (May) tential in genitourinary disorders, an area EDITAS MEDICINE INC. outside Arena’s key therapeutic focus, ANJI PHARMACEUTICALS INC. Recently founded Beam Therapeutics Inc. leaving Arena to concentrate on its later- LIPIMETIX DEVELOPMENT INC. sublicensed exclusive rights to intellec- phase pipeline development. The deal LipimetiX Development Inc. (majority tual property related to various genome supplements Outpost’s preclinical OP687, owned by Capstone Therapeutics) li- editing technologies Editas Medicine Inc. expected to enter the clinic soon (follow- censed Anji Pharmaceuticals Inc. exclu- had gained through previous deals with ing FDA IND acceptance earlier this year) sive rights to develop and commercialize Harvard University, the Broad Institute, for overactive bladder and irritable bowel AEM28 and analogs in China, Taiwan, and Massachusetts General Hospital. syndrome. Outpost was launched in 2016 and Hong Kong. (May) Beam also signed a concurrent deal with by Takeda and Frazier Healthcare Partners the Broad Institute, Harvard, and MIT for Anji will pay $2mm up front, develop- to develop new therapies for gastrointesti- additional base editing platforms. (May) ment and regulatory milestones, and nal, urologic, and gynecologic disorders. sales royalties. AEM28 is an apolipo- In return for an equity stake in Beam and protein E mimetic peptide in Phase II ASTRAZENECA PLC royalty payments on resulting genetic for homozygous familial hypercholes- LUYE PHARMA GROUP LTD. medicines incorporating the related IP terolemia and preclinical studies for AstraZeneca PLC granted Luye Pharma and technologies, Editas grants Beam acute coronary syndrome and peripheral Group Ltd. rights to sell its schizophrenia exclusive rights to certain Editas’ tech- vascular disease. LipimetiX is develop- and bipolar disease treatment Seroquel/ nologies and an exclusive sublicense ing candidates using intellectual prop- Seroquel XR (quetiapine) in the UK, China, to patent filings from Harvard for base

50 | In Vivo | June 2018 invivo.pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com

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| 51 - (pre

VivaGel (prasterone) (prasterone) Intrarosa is also being also is DEAL-MAKING In Vivo 2018 | In Vivo June Intrarosa ) is indicated indicated is ) Vaginorm Intrarosa subsidiaryPLC Endo International (astodrimer sodium) for bacterial bacterial for sodium) (astodrimer CORP. LTD. CORP. ENDO INTERNATIONAL PLC INTERNATIONAL ENDO INC. CO. LANNETT INC. ENDOCEUTICS INTERNATIONAL MUNDIPHARMA INC. BIOSCIENCES EPIGEN AS NORDISK NOVO for postmenopausal dyspareunia. (May) dyspareunia. postmenopausal for suppository, vaginal daily A as known viously a intercourse), (painful dyspareunia for - atro vulvovaginal of symptom common in a decline by caused a condition phy, - postmeno of tissues vaginal in estrogen (a synthetic Prasterone women. pausal - dehydroepi steroid sex inactive of form by converted (DHEA)) is androsterone androgens into intracellularly enzymes dyspareunia, relieve to estrogens and with associated effects side the without approved was It therapies. estrogen oral Pharmaceuticals AMAG (where in the US in Europe rights) in 2016 and exclusive has year. this earlier trials clinical Canadian and in US studied en- will The deal dysfunction. sexual for women’s its grow to Mundipharma able this also Mundipharma business. health Latin MENA, and Asian, month licensed ’s Starpharma to rights American of a dry powder pulmonary formulation formulation pulmonary a dry powder of MannKind’s using synthesized insulin of delivered and technology Technosphere In 2014 inhaler. easy-to-use small a via Sanofi exclusive licensed MannKind sell and develop to rights worldwide deal the terminated Sanofi but , Afrezza 2016. in early - an undis from acquired Inc. Lannett Co. closed product pending one and approved 23 (May) applications. the but disclosed not were terms Specific payment an up-front includes transaction Details milestones. as well Endo as to only provided not were the products of - solu oral of consist primarily they that formulations. semi-solid a few with tions in over portfolio brought The purchased ending March the 12 months for $175mm drugs the manufacture will Lannett 2018. It facility. generics liquid York New its at own its them under launching anticipates Investment in H2 2019. possibly label (Endo Partners Bourne Banks/Advisors: PLC) International Ltd. Corp. International Mundipharma commercialization exclusive licensed to Africa and East in the Middle rights ’sInc. Endoceutics BV vaginosis. Epigen to rights AS licensed Nordisk Novo - antago LPA1 preclinical ’s Inc. Biosciences a as develop will it which EPGN696, nist kidney chronic and diabetic for treatment - - - exclu in CKD- , an opioid kappa kappa , an opioid Korsuva penned another deal another deal penned Corp. Celgene through which Evotec will will Evotec which through AG Evotec (albumin-bound paclitaxel) is is paclitaxel) (albumin-bound Abraxane CIPLA LTD. CIPLA CORP. MANNKIND CELGENE CORP. CELGENE EVOTEC AG licensed Cipla Ltd. licensed Corp. MannKind ings, ings, with to platform screening phenotypic its use thein therapeutics potential new discover (May) area. any to rights opt-in exclusive gets Celgene in ex the deal, under discovered project could Evotec front. $65mm up for change tiered and milestones significant get also - Cel candidates. successful for royalties richer much is pipeline oncology gene’s tumors; in solid is it than cancers in blood its lung, cell non-small breast, for marketed while cancers, gastric and pancreatic, for in development are other candidates brain and esophageal, renal, pancreatic, for indications cancer Specific cancers. is This disclosed. not were deal current the upon called has time Celgene the second drug its for capabilities screening Evotec’s deal Under a five-year work. development to options has Celgene 2016, in signed using discover could Evotec that programs (iPSC) cell stem pluripotent induced its diseases neurodegenerative in platform sclerosis, lateral amyotrophic including others. and Parkinson’s, Alzheimer’s, time, that front up $45mm paid Celgene in $250mm to up for the potential with milestones. the distribute and market to rights sive (insulin) drug Afrezza II diabetes I and Type (May) in India. powder inhalation po- plus front $2.2mm up pay will Cipla payments, milestones regulatory tential revenue, commitment purchase minimum the handle will Cipla royalties. sales and and in India process approval regulatory the drug. Afrezza supply will MannKind consisting combination a drug-device is Looking to expand its solid tumor offer tumor solid its expand to Looking receptor agonist initially developed for for developed initially agonist receptor in Phase now it’s which (for pain post-op therapy breakthrough US granted III), was indication, the CKD-aP for year last status - likeli 66% a with III, Phase in it’s which for per average) above (4% approval of hood to Cara enables . The deal Biomedtracker Korsuva oral of on expansion focus I) and (Phase pruritus aP in pre-dialysis pruritus disease-associated liver chronic and dermatological as well I), as (Phase (Phase pain chronic osteoarthritis-related IIb) indications. (Korea) (Korea) (Japan) Pharma CKD and ceutical previous under licenses exclusive have costs third-party Cara’s If agreements.) EMA for development clinical to related excess $20mm, the exceed registration Vifor and Cara by equally shared be will Fresenius.

- - (CR845; (CR845;

Korsuva PHARMA LTD. PHARMA & CO. KGAA & CO. CARA THERAPEUTICS THERAPEUTICS CARA INC. AG CARE MEDICAL FRESENIUS BRII BIOSCIENCES BRII INC. BIOTECHNOLOGY VIR VIFOR FRESENIUS MEDICAL CARE RENAL RENAL CARE MEDICAL FRESENIUS VIFOR to find ways to help ways find to AliHealth with nered new with experience a better get patients - be on develop will focus Brii’s therapies. the for medicines ing new breakthrough market. Chinese kidney chronic for injection difelikefalin) in (CKD-aP) pruritus disease-associated (May) patients. dialysis front up $70mm pays Fresenius Vifor $20mm in equity, and ($50mm in cash 1.2mm Cara approximately purchasing premium); 39% a apiece, $17 at shares - ($30mm regula in milestones $470mm and $440mm commercialization); tory, In the US, royalties. double-digit tiered co-promote will Cara and Fresenius Vifor Fresenius of clinics dialysis in the only a profit- under North America Care Medical FMCNA on net based arrangement sharing clinical for responsible is Cara sales. clinic Korsuva of development non-clinical and content all providing (including in the US EU approval). gain to related materials and Pharma Maruishi territories, other the (In launched and entered entered and launched Brii Biosciences - Biotech Vir with an option agreement into (May)nology Inc. exclusive license to options received Brii infectious four to up to in China rights received Brii concurrently assets. disease part and A funding $260mm in Series editing technologies invented by David David by invented editing technologies - tech CRISPR MGH for from and Liu, PhD, MD, Joung, J. Keith by developed nology option an exclusive gets also Beam PhD. Cas9 additional of sublicensing future for editing base in families patent Cpf1 and alliance, a 2014 Through applications. to rights exclusive gained initially Editas - re editing research genome Joung’s Dr. processes, CRISPR/Cas9/TALENS to lated or modify, remove, to be used may which - founda Editas’ genes. defective replace Broad/ from is technology CRISPR tional their licensed also which Harvard/MIT, and 2014 under the company to platforms as well as IP Editas the With deals. 2016 academia, from technologies of suite the portfolio of a broad assemble will Beam multiple across technologies editing base a pipeline generate to use will it platforms medicines. genetic of Vifor Fresenius Medical Care Renal Renal Care Medical Fresenius Vifor between venture Ltd. (a 2010 joint Pharma Fresenius (55%) and Group Pharma Vifor - li (45%)) KGAA & Co. AG Care Medical development worldwide exclusive censed in (except rights commercialization and Cara to South Korea) and the US, Japan, ’s Inc. Therapeutics company an Informa Inc., Information, Business ©2016 Informa ❚ DEAL-MAKING

diseases and other conditions related to exercisable upon FDA marketing approval. MUNDIPHARMA INTERNATIONAL metabolic syndrome. (May) Oncology is new disease area for Ferring, CORP. LTD. Epigen could receive up to $200mm in which has drugs on the market and in STARPHARMA HOLDINGS LTD. up-front and development milestone pay- development for women’s health, urology, Mundipharma International Corp. Ltd. li- ments, plus milestones for sales achieve- GI, endocrinology, and orthopedic indica- censed exclusive commercialization rights ments and tiered royalties. EPGN696 tions. The company plans to create a new in Asia, the Middle East and Africa (MENA), is a lysophosphatidic acid receptor-1 cancer-focused division in the US which and Latin America to Starpharma Holdings antagonist involved in cell signaling and will handle marketing of the treatment. Ltd.’s VivaGel BV (astodrimer sodium) for proliferation, and also in the formation of LEO PHARMA AS bacterial vaginosis (BV). (May) fibrotic tissue. While the initial focus of UTILITY THERAPEUTICS LTD. Under the 15-year agreement, Mundip- development will be on kidney diseases, harma pays Starpharma $A1.3mm ($1mm) Utility therapeutics Ltd. received ex- Epigen also notes that the candidate has up front, up to $A12.2mm ($9.2mm) in clusive US rights to Leo Pharma AS’s potential for nonalcoholic steatohepatitis signing, regulatory, and commercializa- antibiotics mecillinam (injectable) and (an area in which Novo already does re- tion milestones, and a share of revenues pivmecillinam (oral). (May) search) and idiopathic pulmonary fibrosis. on VivaGel BV sales within the licensed The deal is the third for Novo this year. Leo will provide Utility with the full clinical regions. Starpharma retains manufactur- It bid $2.7bn to acquire Belgian biotech datasets for the products. Utility plans to ing rights and will supply the product. Ablynx, but lost out to Sanofi whose bid apply for designation of mecillinam and Mundipharma is responsible for the came in at $5.1bn. Novo also licensed ex- pivmecillinam as Qualified Infectious regulatory process (which it will begin im- clusive global rights to EpiDestiny’s sickle Disease Products for treating complicated mediately) as well as pricing, marketing, cell disease candidate EPI01. In that deal, urinary tract infections. With its unique and promotional activities. VivaGel BV is it could pay over $400mm (including an mechanism of action, mecillinam can bind a water-based, nonantibiotic vaginal gel up-front fee and milestones). exclusively to penicillin-binding protein for both the treatment and prevention of II in the bacterial cell wall and is active BV, formulated using Starpharma’s DEP EXELIXIS INC. against many enterobacteria resistant water-based gel dendrimer drug delivery INVENRA INC. to other penicillins. Pivmecillinam is a technology. The antimicrobial therapy Exelixis Inc. and Invenra Inc. have teamed mecillinam prodrug effective against is already approved in Australia (2017), up to discover and develop multi-specific Gram-negative bacteria. Utility was cre- where it’s marketed as Fleurstat BV by antibodies for cancer in up to seven po- ated specifically to bring these drugs to Aspen Pharmacare, and in Europe (2015). tential projects. (May) the US market. Starpharma filed an NDA with the US FDA The partners will use Invenra’s B-Body MACROGENICS INC. last month under fast track status, with technology--which allows for identifica- PROVENTION BIO INC. approvals expected within 6-8 months; tion of antibodies using high-throughput it has a 94% likelihood of approval (6% discovery, functional screening, and in MacroGenics Inc. granted Provention above average), according to Biomed- vitro/in vivo preclinical characterization- Bio Inc. exclusive global rights to two tracker. Starpharma is also in negotiations -to discover the projects. Invenra is clinical-stage candidates for immune- to license VivaGel BV in the rest of world, responsible for antibody discovery and mediated diseases. (May) but has not yet disclosed any partner(s). generation, and Exelexis will carry out Provention gains MGD010 (renamed Mundipharma adds VivaGel BV to its port- IND-enabling studies, manufacturing, PRV3279), a CD32B/CD79B antagonist folio of feminine care products within its clinical trials, regulatory activities, and in a Phase Ib/IIa trial for systemic Betadine medicines franchise. Betadine is commercialization. Exelixis gets ex- lupus erythematosus, and also takes a range of antiseptic medicines contain- clusive global rights to one preclinical over all rights to teplizumab (PRV031), ing povidone-iodine, but also a brand asset under terms of the deal, though a CD3 antagonist entering Phase III incorporating four main categories of the partners could pursue up to an addi- for early-onset Type I diabetes. For consumer care products in wound, femi- tional six discovery projects (directed to MGD010, Provention issued MacroGen- nine, cold/flu, and infectious diseases. three discovery programs). Exelixis paid ics a warrant for 1% of its outstanding Also this month, Mundipharma licensed $2mm up front and will hand over $2mm stock at an exercise price of $2.50, and exclusive MENA commercialization rights when work on each discovery project will also pay $42.5mm in development to Endoceutics’s Intrarosa (prasterone) commences. It will also pay $131.5mm in and regulatory milestones for the first for postmenopausal dyspareunia, further development and regulatory milestones, indication ($22.5mm more for a sec- broadening its female health offerings. $325mm in sales milestones, and tiered ond), $225mm in sales milestones, and single-digit royalties. single-digit royalties. For teplizumab, MYONEXUS THERAPEUTICS INC. MacroGenics gets a warrant for 8% of SAREPTA THERAPEUTICS INC. FERRING PHARMACEUTICALS AS Provention’s outstanding shares (also Sarepta Therapeutics Inc. licensed exclu- FKD THERAPIES OY exercisable at $2.50), $170mm in regu- sive rights to five ofMyonexus Therapeu- FKD Therapies Oy granted Ferring Phar- latory milestones, and $225mm in sales tics Inc.’s gene therapy pipeline programs maceuticals AS an option to license global milestones, plus single-digit royalties. in limb-girdle muscular dystrophies rights to nadofaragene firadenovec/Syn3 (Financial considerations were revealed (LGMDs). (May) (rAd-IFN/Syn3), a gene therapy in develop- in the S-1 for Provention’s initial public Myonexus receives $60mm up front. ment for bladder cancer. (May) offering, which was filed on the same Sarepta makes development-related mile- Nadofaragene firadenovec consists of an day as the MacroGenics deal was an- stone payments to purchase an exclusive adenovirus containing the gene interferon nounced.) The candidates bring the total option to acquire Myonexus outright--at alfa-2b that is administered by catheter number of projects in Provention’s pipe- any time, including upon review of proof- into the bladder. The treatment is in Phase line to five, alongside a Type I diabetes of-concept data--at a pre-negotiated, fixed III trials for high-grade non-muscle in- compound licensed from Vactech last price, plus sales-related contingent pay- vasive bladder cancer (NMIBC) patients year, and two for Crohn’s disease and ments. Should all development-related who do not respond to Bacillus Calmette- ulcerative colitis gained from Janssen, milestones be met, Sarepta will make ad- Guerin (BCG) therapy. Ferring’s option is also in 2017. ditional payments of up to $45 million over

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an evaluation period of approximately in the US, and possibly other countries. tures Corp and GreenBridge also invested two years. LGMDs are a group of mono- They will test the safety and anti-tumor in the round. The company plans to use genic diseases that lead to weakness and activity of the combination in an esti- the proceeds to expand R&D and scale up wasting of the muscles in the arms and mated 70 PD-(L)1-naiive or refractory capacity of its SoluPro synthetic protein legs; some forms can result in patients patients. HyLeukin-7 is the lead program expression platform. (May) developing cardiomyopathy. Covering for NeoImmuneTech, a 2014 spin-off of the various types of the disease, Myonexus’ Korean biotech Genexine. The candidate ARDELYX INC. LGMD programs are based on an approach consists of homodimeric interleukin-7 Ardelyx Inc. (therapies for GI and cardio- that, like Sarepta’s micro-dystrophin DMD (IL-7) molecule fused to an IgD/IgG4 im- renal diseases) entered into a $50mm gene therapies, utilize the rh.74 adeno- munoglobulin domain, created using the ($46.5mm net) senior secured term loan associated virus (AAVrh.74) vector sys- hyFc half-life extension technology (from facility with Solar Capital and Western tem. The science is based on discoveries Genexine), and is designed to enhance T- Alliance Bank. The loan matures on No- made in the lab of Louise Rodino-Klapac, cell immunity against tumors. HyLeukin-7 vember 1, 2022 and carries an interest PhD (assisted by Jerry Mendell, MD) at is in Phase I for lymphocytopenia, and in rate of 7.45% plus the one-month LIBOR. the Nationwide Children’s Hospital’s preclinical for glioblastoma, melanoma, The company will use some of the funds Center for Gene Therapy. (Sarepta has a Merkel cell carcinoma, and squamous cell to submit the NDA for tenapanor in the license under a 2017 collaboration with carcinoma. In addition, NeoImmuneTech irritable bowel syndrome with constipa- NCH.) Myonexus’ lead IV gene therapy is testing the agent in infectious diseases tion indication in H2, and for the ongoing candidate MYO101 uses the AAVrh.74 including HPV. I-Mab holds development Phase III trial of tenapanor in hyperphos- vector to deliver a corrective copy of the and commercialization rights in Greater phatemia. (May) beta-sarcoglycan gene (shown to decrease China territories under a 2017 deal. Roche ARDELYX INC. fibrosis in mouse models) to treat LGMD2E has launched Tecentriq, a PD-L1 antago- (beta sarcoglycanopathy), which causes nist, for bladder cancer and non-small cell Ardelyx Inc. netted $47mm through a progressive muscle fiber loss, inflamma- lung cancer, and the product is in preclini- public offering of 12.5mm common shares tion, and muscle fiber replacement with cal through Phase III development for over at $4. The company is developing treat- fat and fibrotic tissue. An IND has been two dozen other oncology indications. ments for cardiorenal and gastrointestinal approved by the FDA and a Phase I/IIa diseases, and plans to use the proceeds trial is expected to begin in mid-2018. Ad- GENENTECH INC. to support ongoing development and ditionally, Myonexus has MYO102 in Phase LODO THERAPEUTICS CORP. manufacturing of Phase III tenapanor for I/II (in patients dosed via intramuscular In its first Big Pharma deal,Lodo Thera- hyperphosphatemia in end-stage renal injection or intravascular delivery, with peutics Corp. partnered its genome min- disease patients. Funds will also go to- an IND for systemic IV administration ing and biosynthetic cluster assembly wards NDA submission for tenapanor in expected this year) for LGMD2D (alpha platform with Roche’s Genentech Inc. IBS-C, and for Ardelyx’s hyperkalemia sarcoglycanopathy); MYO103 in preclini- (May) program RDX013. (May) cal studies (with a pre-IND meeting with Genentech’s aim is to discover thera- Investment Banks/Advisors: Jefferies & the FDA planned for 2018) for LGMD2C peutics against multiple undisclosed Co. Inc.; Leerink Partners LLC (gamma sarcoglycanopathy); MYO201, targets. In return, the company will pay with an IND approved for intramuscular Lodo money up front, up to $969mm in ASCLETIS PHARMA INC. injection (expected to be amended this research, development, and commercial- China-based Ascletis Pharma Inc. has year to allow systemic administration) for ization milestones, plus tiered sales royal- filed for its initial public offering on the LGMD2B (dysferlinopathy); and MYO301 ties. This is the second natural products Hong Kong exchange. (May) (preclinical with an IND filing anticipated deal that Genentech has forged in as many ASLAN PHARMACEUTICALS PTE. LTD. during 2018) for LGMD2L (anoctaminopa- months--in April the company teamed up Singapore-based Aslan Pharmaceuticals thy). The deal increases Sarepta’s pipeline with Kineta to develop peptides derived (mainly cancer drug develop- to 21 programs and aligns with its goal from a Caribbean cone snail for chronic Pte. Ltd. of expanding beyond DMD. Concurrent pain. Lodo uses its metagenomics tech- ment) netted $39mm through its US IPO of 6mm American Depositary Shares with the signing of this alliance, Sarepta nology, licensed from Rockefeller Uni- (representing 30mm ordinary shares) at announced it received a negative trend versity, to find natural drug candidates in vote from the EMA’s CHMP on the MAA for soil samples. Specifically, these bioactive $7.03 per ADS. The firm, which had hoped eteplirsen for a proposed DMD indication; small molecules are made from the mi- to sell 7.5mm ADSs, already lists on the the company will request a re-examination crobial DNA present in the soil. In-house, Taipei Exchange following a $33mm IPO by a scientific advisory group. Investment Lodo is initially focused on treating drug- there last year. (May) Banks/Advisors: William Blair & Co. (Myo- resistant microbial infections and cancer. Investment Banks/Advisors: BTIG LLC; nexus Therapeutics Inc.) The company was founded in 2016 with a CLSA; HC Wainwright & Co.; Leerink Part- ners LLC; Piper Jaffray & Co. NEOIMMUNETECH INC. $17mm Series A financing from several ROCHE corporate venture investors including Eli AUTOLUS LTD. Lilly, J&J, and AbbVie. Roche agreed to conduct a combination Autolus Ltd. (T-cell immunotherapies for study of its Tecentriq (atezolizumab) with FINANCINGS cancer) filed for its initial public offering NeoImmuneTech Inc.’s HyLeukin-7 (IL- of American Depositary Shares (each 7-hyFc) in three high-risk skin cancers: ABSCI LLC representing one ordinary share) on the melanoma, Merkel cell carcinoma, and cu- AbSci LLC (bio-manufacturing technolo- Nasdaq Global Exchange. (May) taneous squamous cell carcinoma. (May) gies) raised $12mm in its oversubscribed Investment Banks/Advisors: Goldman NeoImmuneTech and the Immune Oncol- Series C financing round led by Asahi Sachs & Co.; Jefferies & Co. Inc.; Wells ogy Network (a group of North American Glass (also gets a board seat) and with Fargo Securities LLC; William Blair & Co. academic research centers involved in participation from all existing investors immunotherapy studies) will lead the including Phoenix Venture Partners, BENITEC BIOPHARMA LTD. multi-center, open-label Phase Ib/IIa clini- Oregon Venture Fund, WRF Capital and Australian Benitec Biopharma Ltd. (gene cal trial, which will be conducted mainly Souther Co. New investors Columbia Ven- therapy and silencing) raised a combined

54 | In Vivo | June 2018 invivo.pharmamedtechbi.com invivo.pharmaintelligence.informa.com invivo.pharmaintelligence.informa.com - - - - ❚

| 55 DEAL-MAKING In Vivo 2018 | In Vivo June purchased 150k shares shares 150k Sanofi purchased netted $172.7mm through the the through $172.7mm netted (meropenem and vaborbac and (meropenem Vabomere MYOKARDIA INC. MYOKARDIA INC. ONCOBIOLOGICS INC. BIO PROVENTION MELINTA THERAPEUTICS THERAPEUTICS INC. MELINTA ing. Other funds will help Melinta support support Melinta help will funds Other ing. related obligations milestone regulatory to and commercialization European for tam) the for Co. The Medicines to payments - busi disease infectious 2017 November (May) acquisition. ness Cantor Banks/Advisors: Investment & Co.; Chase JP Morgan & Co.; Fitzgerald Inc. Co. & Jefferies MyoKar disease-focused Cardiovascular Inc. dia com- 3.75mm of offering public follow-on (Collaboration each. $49 at mon shares partner use the will MyoKardia in the offering.) its of III trials Phase initiate to proceeds cardiomy hypertrophic for mavacamten II studies Phase planed for and opathy cardiomyopathy. dilated for MYK491 of other R&D support will money Additional (May) activities. of Bank Banks/Advisors: Investment Suisse Credit Lynch; Merrill America Fargo Wells & Co.; Morgan JP Group; LLC Securities antibody (monoclonal Inc. Oncobiologics a into entered cancer) for biosimilars agreement placement $15mm private - Hold Tenshi GMS investor, largest its with company the tranche, In the first ings. gross for shares common 6.38mm sold received also Tenshi $7.5mm. of proceeds an ad- purchase to warrants eight-year (May) $0.975. at shares 10.3mm ditional immune- for (therapies Inc. Provention initial for its filed diseases) mediated (May) on the Nasdaq. offering public Capital MDB Banks/Advisors: Investment ercisable at $2.54. Vivo Capital and CAM and Capital Vivo $2.54. at ercisable New En- by joined were and led Capital Advisors, Perceptive Associates, terprise Tavistock Fund, Value The Biotechnology Health, Amzak and Capital, Boxer Group’s investors. existing and new other plus - develop continued support will Proceeds in clinical inhibitor MEI401, a PI3K of ment relapsed/ for studies proof-of-concept (May) lymphoma. follicular refractory LLC; BTIG Banks/Advisors: Investment Inc.; & Co. Oppenheimer & Co.; Laidlaw Banks SunTrust Inc.; & Co. Nicolaus Stifel LLC Securities Fargo Wells Inc.; - Thera Melinta developer Antibiotics through $115.8mm netted Inc. peutics of offering public follow-on an upsized full (including shares common 24.64mm $5 each. at the overallotment) of exercise to the proceeds use to plans The company expand portfolio, antibiotics in its invest manufactur optimize and force, sales its - - MEI PHARMA INC. PHARMA MEI LA JOLLA PHARMACEUTICAL CO. PHARMACEUTICAL JOLLA LA KINIKSA PHARMACEUTICALS LTD. PHARMACEUTICALS KINIKSA ITERUM THERAPEUTICS THERAPEUTICS ITERUM PLC EVELO BIOSCIENCES INC. BIOSCIENCES EVELO EIGER BIOPHARMACEUTICALS INC. BIOPHARMACEUTICALS EIGER Inc. MEI Pharma drug developer Cancer - place a private through $75mm grossed (a $2.27 at shares common 33mm of ment issued also The company 2% discount). ex shares for 16.5mm warrants five-year sold tiered tiered sold Co. Pharmaceutical La Jolla - (angioten Giapreza its for rights royalty in Partners Royalty HealthCare II) to sin (May) $125mm. for exchange (developing (developing Inc. Pharmaceuticals Kiniksa - autoinflamma for candidates in-licensed netted diseases) autoimmune and tory offering public initial its $142mm through The $18. at shares common 8.48mm of sell to planned originally had company (May) $17-19. between for 7mm shares Goldman Banks/Advisors: Investment JP Mor LLC; JMP Securities & Co.; Sachs Life PacGrow Wedbush & Co.; Chase gan Sciences - Thera Iterum disease-focused Infectious initial in its $74.4mm netted PLC peutics shares 6.15mm ordinary of offering public to planned had The company each. $13 at $14 between shares common 5.33mm sell (May) each. $16 and Guggenheim Banks/Advisors: Investment Need- LLC; Partners Leerink LLC; Partners Markets Capital RBC Inc.; & Co. ham (therapeutics for for (therapeutics Inc. Biosciences Evelo based cancer and diseases inflammatory in $79mm netted network) on the gut-body shares 5.3mm of offering public initial its anticipated its of midpoint the $16.00, at (May) range. - BMO Finan Banks/Advisors: Investment - JMP Securi LLC; & Co. Cowen Group; cial & Co. Stanley Morgan LLC; ties - (develop Inc. BioPharmaceuticals Eiger netted diseases) rare for ing therapies public the follow-on through $37.6mm at shares common 3.2mm of offering the use will The company $12.50 each. of III trial a Phase commence to proceeds infection virus delta hepatitis in lonafarnib lonafarnib of activities regulatory for and syndrome Progeria Hutchison-Gilford in for scheduled is the FDA (a meeting with Q4 2018). (May) LLC; BTIG Banks/Advisors: Investment Piper Inc.; & Co. Thalmann Ladenburg Co. & Jaffray will go towards general corporate needs, needs, corporate general towards go will drug discovery new potential including (May) acquisitions. and work - Wain HC Banks/Advisors: Investment & Co. wright - - (immuno-oncology) (immuno-oncology) COHERUS BIOSCIENCES INC. BIOSCIENCES COHERUS CYTRX CORP. COCRYSTAL PHARMA INC. PHARMA COCRYSTAL BEYONDSPRING INC. BEYONDSPRING THERAPEUTICS INC. CESCA (biosimilars) (biosimilars) Inc. BioSciences Coherus of a follow-on through $70.5mm netted drug conjugates (developing Corp. CytRx Release Drug Activated the Linker using a reg through $6.6mm netted platform) Antiviral therapeutics developer Cocrystal developer therapeutics Antiviral a follow-on in $7.4mm netted Inc. Pharma shares common 4.21mm of offering public R&D ongoing support to each $1.90 at (May) activities. $14.50. at shares 5.2mm common of fering a of creation the for earmarked are Funds prior infrastructure and team commercial - a pegfil CHS1701, of launch the market to neutropenia. febrile for biosimilar grastim of manufacturing support also will Money development ongoing and the compound, - musculoskel for projects other pipeline of and gastrointestinal, autoimmune, etal, (May) conditions. ophthalmic Citigroup Banks/Advisors: Investment JP Morgan & Co.; Wainwright HC Inc.; Mizuho LLC; Group Maxim & Co.; Chase Inc. & Co. Baird W. Robert Ltd.; Bank common 5.6mm of offering direct istered - Wain HC (a 31% discount). $1.25 at shares Proceeds agent. the placement was wright BeyondSpring Inc. BeyondSpring - thera (automated Therapeutics Inc. Cesca therapies) other cell and CAR-T for pies public a follow-on $5mm through netted consists unit (each units 6.5mm of offering com- one five-year and share one common of at share a common purchase to mon warrant 2.7mm and $0.60 at $0.60) of price a strike one of consists unit (each units pre-funded of one share purchase to warrant pre-funded at warrant) common one and stock common the of part use to plans company The $0.59. accrued off pay to offering the from proceeds (May) revolver. its under interest unpaid but - Wain HC Banks/Advisors: Investment & Co. wright $A8.8mm ($6.7mm) from an $A6.2mm an $A6.2mm from ($6.7mm) $A8.8mm - place $A2.6mm an and offer entitlement - Manage Capital Highbridge with ment of consisted offer ment. entitlement The (May) new shares. 36.4mm di- a registered through $19.7mm netted $27.06 at shares 739,095 of offering rect New included Investors (a 3% discount). (Hong Kong) Management Asset China Ltd., Co., Kai Hung Sun Ltd., Everbright and Limited, Management Asset CSOP Ltd. The Development HongKong Tianyi plinabulin, is candidate lead company’s non- advanced for III Phase in is which chemotherapy- and cancer lung cell small (May) neutropenia. induced company an Informa Inc., Information, Business ©2016 Informa ❚ DEAL-MAKING

SCHOLAR ROCK HOLDING CORP. In Vivo Scholar Rock Holding Corp. (discovery and Pharma intelligence | development of antibodies that modulate growth factor signaling) netted $69.8mm editors editorial advisory board in its initial public offering of 5.36mm Lucie Ellis Brian Chapman Managing Editor ZS Associates, Partner shares at $14, the mid-point of its anticipated range. (May) William Looney Benjamin Comer Pharma Editor Investment Banks/Advisors: BMO Finan- PwC, Senior Manager cial Group; Cowen & Co. LLC; Jefferies & Ashley Yeo Health Research Institute Medtech Editor Co. Inc.; Wedbush PacGrow Life Sciences Don Creighton Amanda Micklus UNITY BIOTECHNOLOGY INC. ICON Principal Analyst Global Head of Pricing & Market Access (focused on dis- Unity Biotechnology Inc. Andrea Charles eases of aging) netted $79mm in its initial Editor Custom Content Deborah Dunsire, MD public offering of 5mm shares at $17, the XTuit Pharmaceuticals mid-point of its anticipated range. (May) Regina Paleski President & CEO Contributing Editor Investment Banks/Advisors: Citigroup Les Funtleyder Inc.; Goldman Sachs & Co.; Mizuho Bank E Squared Capital Management research manager Ltd.; Morgan Stanley & Co. Health Care Portfolio Manager Steven Muntner VERASTEM INC. deals analysts Terry Hisey Verastem Inc. netted $38.5mm through a Beth Detuzzi, Deanna Kamienski Deloitte, Senior Principal, public offering of 8.4mm common shares Maureen Riordan Life Science & Health Care Practice (including the overallotment) at $4.50. Ken Kaitin, PhD Funds will go towards upcoming com- design supervisor Director, Tufts Center for the mercialization of lead candidate duvelisib, Gayle Rembold Furbert Study of Drug Development which is awaiting approval for chronic lym- phocytic leukemia, follicular lymphoma, senior designer Barbara Lopez Kunz and peripheral T-cell lymphoma, and will Janet Haniak DIA, Global Chief Executive also support continued development of designers Ellen Licking pipeline candidates and additional cor- Jean Marie Smith, Paul Wilkinson EY, Senior Analyst porate needs. (May) Global Life Sciences Investment Banks/Advisors: Cantor head of editorial ops (pharma) Julie Locklear Fitzgerald & Co. Karen Coleman Managing Partner, Genesis Research head of content Mike Ward Roger Longman Real Endpoints, CEO advertising Christopher Keeling Dan McIntyre Publick House, Partner subscriptions Dan Simmons, Ewan Ritchie Michael Ringel, PhD Shinbo Hidenaga BCG Senior Partner & Managing Director managing director Phil Jarvis Kenneth Schultz, MD Halozyme, Vice President of Innovation, Strategy & Business Development editorial office 605 Third Avenue, Floor 20-22 Jack Wong New York, NY 10017 Baxter Healthcare invivo.pharmaintelligence.informa.com Head of Regulatory Affairs, APAC

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