Innovation paid dividends in 2012. We often debate the relative “innovation quotient” of the companies we evaluate and invest in here at Atlas, and of the biomedical sector as a whole.
The basic premise we hold is that high innovation quotient opportunities have the best chance for making real impact on patients and hence generating attractive returns. Furthermore, only these types of deals have a shot at early stage exits (e.g., Phase 2 Proof of Concept or earlier), as Pharma is only willing to engage earlier on transformative medicines vs incremental innovations.
In 2011, we saw a bunch of great high innovation quotient wins: B-raf at Plexxikon, PI3Kd at Calistoga, LPA at Amira, dual PI3K/mTor at Intellikine, oncolytic viruses at BioVex, and Astofase Alfa at Enobia.
Real innovation delivered great results again this year. Three big notable wins:
- BTK. Bruton’s Tyrosine Kinase was the belle of the ball at ASH again this year, with fantastic data from Pharmacyclics’ ibrutinib. The excitement around that program propelling their stock price up over 300% in twelve months. Avila obviously benefited from the excitement around this hot target with its sale to Celgene earlier this year.
- CARs. The engineering of T-cells with Chimeric Antigen Receptor (CAR) technology has delivered some astounding, breakthrough data in B-cell cancers. We’re not talking about killing millions of cancer cells, we’re talking about removing kilograms of tumor load (trillions of cells). The early and limited patient response data are staggering. The results from Carl Jung’s lab at Penn prompted a very exciting early deal with Novartis, and I expect this field to accelerate rapidly in 2013.
- DMD. Sarepta’s surprisingly positive data this year with its exon-skipping technology in Duchenne’s Muscular Dystrophy brought hope to patients and their families, and a 450% increase in their stock price since earlier in 2012. Its been a long road for Sarepta (f.k.a. AVI BioPharm) and for RNA therapeutics, but this is a truly remarkable demonstration of this new modalities promise.
Technology platform innovation also closed the year with momentum. Envoy’s cutting-edge neurology target platform was acquired by Takeda for $140M (including a nearly 4x return upfront), and the saga of DeCode Genetics completed a nearly two-decade run with Amgen’s $415M acquisition (a 6x return). Both of these deals were fundamentally high innovation quotient platform biology acquisitions.
It wouldn’t be fair though to just highlight the victories on the side of innovation this year. It’s also tough to innovate. There’s real risk in pushing new biology into clinical development, especially in diseases where gold standards already exits. 2012 was marked with a number of challenging events for novel programs in later stages of development: the failure of AZ’s Syk inhibitor to differentiate from Humira in Phase 2b, Lilly’s anti-BAFF mAb in Phase 3 was terminated due to insufficient efficacy, Pfizer and Lilly’s anti-amyloid mAbs missed their Phase 3 endpoints, Oncothyreon’s immunotherapy for lung cancer blew up this week as did Allon’s cognition program…
The big question on several of those late stage blow-ups is whether a more critical view of their early development data would have prevented those Type I errors (false positives) where the teams pushed them into big expensive Phase 2b/3 studies. I have no idea, but certainly lots of pundit speculation seem to think so.
As we close out the year and think ahead to 2013, it’s nice to celebrate some of the high innovation quotient deals in our space. I know there are many more than the above. I hope readers can share their thoughts on companies or concepts that hit high marks on innovation from their perspective and why.
Lastly, its worth noting that most breakthroughs come from new places – RNA-based drugs (Sarepta), genetic engineering of T-cells (CARs), unprecedented targets (BTK), to name a few. And upon demonstrating promise, these breakthroughs reward the risk-takers behind them – the scientists, entrepreneurs, founders, and investors. But most importantly, they have huge impact on patients and their families. It’s this wonderful combination of doing well by doing good that sums up why we come to work everyday.
