In Science We Trust
by Isaac Wilson
October 2007
Genentech’s unique model for biopharmaceutical development partnering stresses that science and flexibility are the keys to success.
As the number of approved drugs has dropped precipitously over the last decade, the pharmaceutical industry has experienced a new wave of collaborative deals and partnerships with emerging biotechnology companies. And although traditional, milestone-based royalty agreements are still the normal practice for biopharmaceutical development, alternative partnership models now are more focused, more complex and more driven by the need to rapidly recoup investment capital.
“Over the last five years, partnering deals have gotten more complex and more expensive,” says Joseph McCracken, vice president of business development at Genentech in South San Francisco, Calif., USA. “And this is largely due to the intense competition and demand for novel therapeutic products, particularly in late-stage development,” he adds. From mergers and acquisitions to partnerships and licensing deals, most of this activity is naturally fueled by large pharmaceutical companies trying to fill gaps in their pipelines and drive share price growth. The risks and benefits of any arrangement vary widely however, and emerging biotech companies looking to secure their financial footing have plenty of options for continued financial support.
“Because of the increased cost of ‘plain vanilla’ licensing deals, and the lack of receptivity of the public markets, you’re seeing wholesale acquisitions of companies as opposed to plain licensing,” McCracken says. And although being purchased may be good for the biotech, depending on the company’s short- or long-term goals, much of the acquired company’s foundation may be diluted or lost altogether as part of a larger conglomerate. “When a big pharma company acquires a small biotech, particularly when it’s only interested in one compound or platform, I worry that a lot of the biotech’s other assets and research might be lost.” In light of this and other concerns, McCracken says that Genentech’s business development model is primarily focused on three areas of biology—immunology, molecular oncology and tissue growth and repair—and an assortment of biological pathways within each of those areas.
No stranger to out-licensing deals itself—Genentech partnered with Eli Lilly in the 1970s to develop recombinant-engineered human insulin—the company is engaged in multiple collaborations to support its goals to develop first-in-class or best-in-class therapeutics for life-threatening or life-altering diseases. And McCracken says it all comes back to the science.
Although most companies are focused on only specific therapeutic areas and shop for potential partners that fit that narrow criteria, McCracken says Genentech is different because the company has identified some specific pathways that are fundamentally important in health and disease treatment. “So we’re interested in out-licensing, or developing internally, molecules that modulate those pathways in highly specific ways at all of the druggable targets within the pathway,” he says. “We’re pretty agnostic as to the ultimate therapeutic application or business franchise, because our focus is so specific on those pathways.”
For example, angiogenesis is one of the pathways within tissue growth and repair that Genentech is interested in. “We’re interested in being able to regulate angiogenesis; turn it on, turn it off, dial it up a little bit, dial it down a little bit or keep it regulated in certain tissues and not others,” McCracken says. And through both internal efforts and collaborations, the basic angiogenesis research program has led to a number of different products. Avastin® (bevacizumab) is a full-length monoclonal antibody approved for metastatic colorectal cancer and lung cancer, and Lucentis® (ranibizumab) is an antibody fragment approved for the treatment of neovascular age-related macular degeneration, one of the leading causes of blindness. A third application of the same biology, McCracken says, is a pro-angiogenetic molecule still in development for chronic non-healing wounds, the type that form on the lower extremities of patients with diabetes and often lead to amputation. “So one pathway has given us three different products that have no overlap whatsoever in so far as their therapeutic area or business franchise,” he says. “And that illustrates Genentech’s business model and the way we think about discovery, development and commercialization. It also reflects how we’re different from the traditional pharmaceutical companies and other biotechnology companies.”
In evaluating potential development partners, McCracken says Genentech pays more attention to the science than anything else. “The biggest mistake that companies can make is not judging the science correctly and investing in a project that ultimately fails,” he says. As a result of this focus, McCracken says the company has a very good track record regarding development partnerships. In addition, Genentech is probably beating most of the industry averages in terms of project success in all phases of its development timeline, he says. “What that offers to our partners is a higher overall return on their interest in the collaboration.”
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