By Steven Dickman, CEO, CBT Advisors
Roche’s Basel-based Global Head, External Research and Technology, Dr. Eric de la Fortelle, stopped by the Swiss consulate in Cambridge last Wednesday after delivering a talk at the R&D Leaders conference in Boston earlier in the week. The ambitious topic was “radical innovation in pharma R&D” and the stimulating talk delivered on its promise.
What’s on Roche’s shopping list? The top three items, in this order, are:
1). Cell therapies. de la Fortelle called cell therapies “personalized medicine at the molecular level,” because cells “find an environment, they home in.” Yes, he said, you can design “pills with sensors” as some device companies had done, but “cells have been evolved to do that.” Roche, it sounds, is already beginning to brave the choppy waters of cell therapy regulation and commercialization in Europe, a topic tackled by CBT Advisors in a recent project.
2). Harnessing RNA biology. Roche recently extended its 2007 alliance with Alnylam Pharmaceuticals, to which it had already sent an upfront payment of $331 million. But “siRNA is just the doorway,” said de la Fortelle (an expensive doorway indeed, we’d observe). There will be other ways to harness all the regulatory aspects of RNA biology, and Roche will apparently pay quite a bit for access to them. One imagines that Alnylam’s subsidiary Regulus Therapeutics and other microRNA-focused companies have been pitching hard in Basel.
3). Next-generation biologics. It was interesting, said de la Fortelle, to see the recent craze for novel scaffolds. A number of companies sold for amounts in the $500 million range, he observed “Was it a bubble?” he asked rhetorically. “These technologies have yet to be connected to benefits to patients, e.g. adnectins and the others.” (Adnexus sold for $505 million in cash and milestones in September, 2007). Meanwhile, something more than “0.3% bioavailability in the central nervous system (CNS) would be nice for a drug that acts like a monoclonal antibody,” said de la Fortelle. Another nice-to-have would be monoclonal-like molecules that act in the cytoplasm, for example to disrupt kinase-kinase interactions. “Maybe it will take twenty years to develop them but we really need them,” he concluded.
Will Roche do deals with biotech or academia in any or all of these areas? Who knows? Even de la Fortelle refreshingly admitted that as a “professional disrupter” within Roche, he is used to having only one bold idea adopted every year or two and that indeed, this counts as success.
de la Fortelle described Roche’s approach to venture capital and biotech as proactive not reactive. “We will come to you. We do not fish in the ocean.” In a private conversation following the formal session, he described to Boston Biotech Watch the deal that for him epitomizes success: Roche’s April, 2007, acquisition of Therapeutic Human Polyclonals Inc. for $56.5 million.
All the polyclonal antibodies were promptly shelved and a rabbit monoclonal antibody platform was brought front and center. Molecules from this platform will soon enter the clinic with the opportunity to do an end-run on humanized antibody patents. That, in de la Fortelle’s view, makes this deal a triumph.
So where is Roche fishing now? Roche has placed a small but important bet on an Israeli VC fund with links to Teva Pharmaceuticals. Roche quietly announced on June 8 of this year that it would enter into a “strategic cooperation” with Pontifax Ventures (an Israeli VC “with a name like the Pope” sounded intriguing, de la Fortelle said). “They were heavy hitters, extremely driven, competent and friendly. We gave Pontifax a confidential list of our key areas of interest. Their job is to mine Israeli innovation.” When I asked de la Fortelle for the difference between the list Roche gave to Pontifax and the three items on the wish list above, he said there is no difference in the themes, just in the degree of detail.
The decision to seek new technologies in Israel is interesting. Israel is a country where, in our experience, there are few fully built-out companies but many brilliant inventors. The majority of Israeli’s biotech innovation landscape consists of tiny teams, single entrepreneurs or lone academics. By relying on an Israeli VC for the leverage brought by knowledge of the local culture, Roche would seem to be hoping to duplicate its success with Therapeutic Human Polyclonals by finding (or commissioning the creation of) intellectual property on the cheap. The approach reminds us in some ways of the path taken by “patent trolls” currently buying intellectual property (IP) or setting up teams of inventors to create IP thickets in the high-tech world (for a well-written explication of this phenomenon, see Malcolm Gladwell’s 2008 New Yorker piece “In the Air”.)
A key difference between Roche and these IP shops is that Roche intends to create actual products out of the IP it finds or commissions in Israel and elsewhere. The IP shops – most visible so far in their high-profile lawsuits against Intel, RIM and other companies – are “non-practicing entities” that mostly want to extract tolls from those who are attempting to commercialize new products. (For example, see “Blackberry held hostage: RIM’s patent trials (and tribulations) show how ‘patent trolls’ can shut companies down: analysis” linked here.)
A key similarity is the goal-oriented pursuit of solutions to known problems and challenges via inventors paid as such rather than by acquiring companies built by VCs, of which Genentech is perhaps the paradigmatic example in biotech.
So if anyone is wondering where Roche thinks it will find the next Genentech or at least the next set of novel approaches, the answer seems clear: Herzliya, Rehovot and Jerusalem.
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