Haberman Associates in Chemical & Engineering News (C&EN) article on Agios Pharmaceuticals

 

Agios Germanos, Greece. Source: http://bit.ly/YRDIBJ

Agios Germanos, Greece. Source: http://bit.ly/YRDIBJ

I was quoted in an article in the November 19, 2012 issue of Chemical & Engineering News (C&EN) by senior editor Lisa M Jarvis. The article is entitled “Agios Takes A Long View In Cell Metabolism.”

The article focuses on Agios Pharmaceuticals’ (Cambridge, MA) strategy for building a company that can endure as an independent firm over a long period of time, and that can also demonstrate sustained performance.

This contrasts with the recent trend toward “virtual biotech companies”–lean companies with only a very few employees that outsource most of their functions, and that are designed for early acquisition by a Big Pharma or large biotech company. The virtual company strategy is designed to deal with the inability of most young biotech companies to go public in the current financial environment. Without the ability to go public, young companies cannot provide early-stage venture capital investors with a profitable exit within a few years after launching the company. Virtual companies typically have a few assets, such as molecules that are ready for preclinical studies or early clinical trials. The goal is to obtain enough evidence that their compounds can become drugs to interest a Big Pharma.

In contrast, there are a few young  “platform companies” that are built on a broad technology platform, which aim to address important areas of biology and potentially to develop numerous products with the potential to address important areas of unmet medical need. One of these is Agios.

“Built to Last” in the current biotech ecosystem

In the C&EN article, I was quoted as saying that only a few platform companies have been launched in recent years. In the Boston area, in addition to Agios, such companies include Forma Therapeutics and Aileron Therapeutics. I was further quoted as saying “These companies are built to last.”

That brings up the old business paradigm from the 1990s and early 2000s–“Built to Last” versus “Built to Flip”. Those involved in building virtual biotech companies–especially venture capitalists and angel investors–do not like the use of “Built to Flip” to characterize their companies. And there are some fine virtual biotechs–some, such as Energesis and Zafgen–which we have covered in our blog.

(Plexxikon, the developer of targeted melanoma drug vemurafenib, also operated as a virtual company. However, it had a technology platform, and had the potential to become an independent biotech with marketed products. Thus Plexxikon did not fit the usual “virtual biotech model”. Nevertheless, it was acquired by Daiichi Sankyo in 2011.)

However, some industry commentators believe that “Built to Flip” is an appropriate designation for virtual biotech companies, and that the virtual model is likely to be detrimental to drug discovery and to the biotech/pharma industry as a whole.

Meanwhile, the 2012 BIO International Convention in Boston had a session entitled “Moving the Goal Posts: How to Build a Free-Standing Biotech from Scratch in Today’s Environment.” This session focused on how to build the “next Vertex or even the next Genentech” (i.e., a “Built to Last” biotech company) in today’s environment. John Evans, the Vice President of Business Development & Operations of Agios was a speaker at that session. The session was moderated by Bruce Booth of Atlas Ventures. Thus, despite the preference for lean virtual biotech companies in the current funding environment, there is an interest in the entrepreneurial and venture capital communities for how free-standing biotechs might emerge under current conditions.

How to build a young platform biotech company

The Biopharmconsortium Blog has included three articles about Agios:

These articles, as well as the November 19 2012 C&EN article, outline how Agios has been building a free-standing biotech in today’s unfavorable environment. Agios’ strategy is based on three elements:

  • A stellar group of scientific founders–Drs. Craig B. Thompson, Tak W. Mak, and Lewis C. Cantley.
  • A strong proprietary technology platform based on cancer metabolism
  • A financing strategy that includes both venture capital and partnerships with established companies. In the case of Agios, their partner is Celgene. The Agios/Celgene partnership provides Agios with $150 million, and allows Agios to maintain control over the direction of its early stage research.

As stated in the C&EN article, the financial security gained via Agios’ funding by its venture investors and by Celgene enables Agios to work on multiple potential targets, with the goal of dominating the field of cancer metabolism. Agios focuses on two types of targets: metabolic enzyme species that are found only in cancer cells, and enzyme species on which a cancer cell has become dependent. Agios researchers intend to develop drugs against targets for which their are predictive biomarkers that identify the right patients for clinical studies.

New developments outlined in the November 19, 2012 C&EN article

Both the November 19, 2012 C&EN article and our Bipharmconsortium Blog articles outline Agios’ program to target a mutated form of isocitrate dehydrogenase 1 (IDH1), which together with mutated IDH2 has been implicated in 70% of human brain cancers. As stated in the C&EN article, Agios researchers have recently reported a series of compounds that selectively inhibit the mutant form of IDH1. This research had been carried out in collaboration with researchers from Ember Therapeutics (Watertown, MA). As we stated in another Biopharmconsortium Blog article, Ember specializes in targeting beige adipocytes for treatment of metabolic diseases.

As we noted in our November 30, 2011 Biopharmconsortium Blog article, Agios had slated a portion of the $78 million that it raised in its Series C financing to expand its R&D efforts into inborn errors of metabolism (IEMs). IEMs comprise a large class of inherited disorders of metabolism, most of which are defects in single genes that code for metabolic enzymes. These rare metabolic diseases have a high level of unmet medical need.

As outlined in the C&EN article, Agios’ work with mutant IDH1 and IDH2 is serving as a bridge to the company’s programs in IEMs. IDH2 mutations have been found in a class of children with 2-hydroxyglutaric aciduria, a rare inherited neurometabolic disorder that can cause developmental delay, epilepsy, and a set of other pathologies.

According to the C&EN article, IEMs are of special strategic interest to Agios. Agios CEO David Schenkein stated that expanding the company’s R&D efforts into IEMs helps the company to manage the risk profile of its portfolio. In the case of cancer, Agios researchers must identify and validate targets involved in the pathobiology of these diseases, and then to find drugs that modulate these targets. In the case of IEMs, disease biology is already validated by genetics.

Moreover, IEMs have small patient populations. Thus only small clinical trials are needed to bring a drug to market. Agios therefore believes that it can bring drugs for these diseases to market on its own, without the need for a larger partner such as Celgene or a Big Pharma.

As we discussed in a Biopharmconsortium Blog article on improving the clinical trial system, although rare diseases only require small clinical trials, finding and recruiting patients for the trials is made more difficult because of the very small number of patients with a particular disease. One solution is to work with patient advocates and “disease organizations”, some of which have patient registries. In the case of 2-hydroxyglutaric aciduria and other organic acidemias, a “disease organization” exists–the Organic Acidemia Association (OAA). Perhaps Agios will find it fruitful to work with the OAA in its patient recruitment efforts.

Currently, Agios is focused on getting compounds into the clinic–both for IEMs and for cancer. Looking down the road, the company’s $180 million war chest should enable Agios to put several compounds through proof-of-concept studies, according to Dr. Schenkein. (This is besides any cancer drug candidates that are licensed by Celgene.) Despite Agios’ strategy of conducting small trials for IEM drug candidates, Dr. Schenkein said that the company will eventually need to go public to achieve its strategic goal of dominating the cancer metabolism field.

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As the producers of this blog, and as consultants to the biotechnology and pharmaceutical industry, Haberman Associates would like to hear from you. If you are in a biotech or pharmaceutical company, and would like a 15-20-minute, no-obligation telephone discussion of issues raised by this or other blog articles, or an initial one-to-one consultation on an issue that is key to your company’s success, please contact us by phone or e-mail.  We also welcome your comments on this or any other article on this blog

Haberman Associates in Chemical & Engineering News (C&EN) article on Agios Pharmaceuticals was last modified: December 28th, 2012 by Allan Haberman

3 Responses

  1. Roger Frechette
    Roger Frechette January 9, 2013 at 4:33 pm |

    Not so sure about the built to flip vs built to last argument – more like comparison of built to flip vs built to flip for really big $$.

  2. Allan Haberman
    Allan Haberman January 9, 2013 at 4:49 pm |

    In this acquisition-intensive era, even Built to Last companies may be acquired. Two prominent examples are Genentech and Genzyme.

    However, Built to Last companies usually exist a lot longer as independent companies than do virtual companies, so the acquisition of a Built to Last company can hardly be described as a quick flip.

    Moreover, the acquirer of a Built to Last company might even restructure itself to resemble a larger version of the acquired company. That is what has been happening with Roche/Genentech and Sanofi/Genzyme. That could not happen after the acquisition of a virtual biotech company, which generally lacks the size, strategic depth, and product portfolio of either the acquiring company or a Built to Last biotech company.

  3. Roger Frechette
    Roger Frechette January 9, 2013 at 5:31 pm |

    While the party line is that Agios, as other similar entities, was built to last, this is not a convincing claim. By no stretch of the imagination can Genzyme, Genentech, Schering Plough, etc, be considered ‘flips’. These companies were founded at a time when acquisitions were rare and there was a clear path to sustainability through an IPO. However, even the most recent examples of such companies – like Vertex – would not be possible today. Perhaps some time in the future, but certainly not today. While partnerships can reduce, or even eliminate burn, profits from sales are needed to keep Wall Street happy…and, of late, they don’t seem to be in the mood to wait 10-20 years for profits.

    Regardless of how cool the science is or how ‘brave’ they were for pushing forward with non-traditional inhibitors, Agios was a very long way away from having a revenue stream from approved, marketed therapeutics. We’ll never know whether they would have been able to pull it off, but it seems unlikely that even the most dedicated VC’s would have been willing/able to stick around for another decade while waiting for an IPO. Now, while a pre-sales IPO might be possible, several area companies are working on offerings, every time a company manages to hype its way to the public markets before having a convincing revenue stream (before completing clinical trials, completing NDA submission and approval, and securing reimbursement codes), the market gets impatient, the stock tanks and the IPO window closes again for a while. Could be a big risk to bet the farm on an IPO and watch the window close when some other company’s hype gets there first – and then tanks.

    My comment was referring to the path to acquisition for big dollars that some groups have been targeting, with varying degrees of success. While a lean, virtual entity might make decent multiples on investment in the relatively short term, investors with big budgets, big plans, really effective business development strategies and M&A marketing skills, etc., can look to Agios, Sirtris, and other such big ticket acquisitions for very big returns. Don’t know if this is inherently good or bad – certainly good financially for the investors that succeed. However, from the standpoint of creating useful treatments for real medical needs, the lean, virtual approach may work just as well, and may even have an advantage due to the sharp focus that the model requires.

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