Genentech`s James Sabry discusses their approach to changes in the deal environment




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Video title: Genentech`s James Sabry discusses their approach to changes in the deal environment
Released on: August 24, 2011. © PharmaTelevision Ltd
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In this episode of PharmaTelevision News Review, filmed at BIO 2011, Fintan Walton talks to James Sabry, Vice President of Genentech Partnering.
Relationship between Genentech and Roche
Fintan Walton:
Hello and welcome to PharmaTelevision News Review here at BIO 2011 in Washington. On this show I have James Sabry, who is Vice President of Genentech Partnering, welcome.
James Sabry:
Thank you Fintan.
Fintan Walton:
James, we talked last year with Dan Zabrowski, we talked a lot about the relationship between Genentech and Roche I think that is pretty well established now, but just how is that relationship going?
James Sabry:
It continues to go really well Fintan, I know we did talk last year about that and about how we both Genentech and Roche have separate research and early development groups that feed into a common global late stage development commercial and manufacturing group. I think people get that now, they get that we are autonomous centres that partnering can happen with each group there may be advantages of going with Roche for certain assets, going with Genentech for certain assets and we are finding now that partners understand that message is out there both groups are very active and we feel and the survey seem to corraborate this that Genentech and Roche is the ideal partner in fact the number one partner in surveys in the last year, last year or two and so we are very happy with how that's worked out.
Fintan Walton:
Okay, and if anybody who's got relationship with one another continue that relationship and just contact?
James Sabry:
Exactly and if they are not sure about who they wanna work with contact anyone in the group or happy to re-communicate a lot, there is a lot of communication between Dan's group and mine, so we'll get it to the right group in the end.
James Sabry's perspective: Changes in deal environment
Fintan Walton:
Okay, so let's just go into the environment, obviously Genentech was the first player in biotechnology has got huge amount of experience, knowledge of what's the industry has been like, today we've got a new challenge I suppose and it's a challenge not just only for established pharmaceutical, biotech companies like Genentech and Roche, but also for the obviously the biotech companies who are trying to emerge who've got these interesting technologies, so from your perspective what things are changing for you and have you changed the way in which you have to do deals?
James Sabry:
We have and in fact the biggest factor right now for biotech companies is their restricted capital environment they're in, public markets don't really exist if acquisitions happen they happen late in the life of a company 8, 10-years out from start and investors are really wondering how do they get a return on their investment in a meaningful way in the sector as a result you see many investors move to late stage products only, this is not necessarily good thing for us because we are interested in innovation and in new ideas as they come out of universities, so one thing that we're noticing is that partnering is happening earlier that instead of partnering in Phase I and Phase II we are doing most of our deals pre-clinically and companies because they don't have enough capital to bring products forward into the clinic as they used to are now deciding to partner earlier and so we did 20 deals since I've last seen you actually 21 if we count on last yesterday and all of them were pre-clinical deals, all of them were assets that were still in the research lab that were working with the partner company to move forward into development.
Fintan Walton:
One of the things that's happened recently GSK has made its name in option based deals, you are doing option based deals?
James Sabry:
We did, we did a number of option based deals last year in this case what you really pay for is just to get first in line and you can exercise the option to do a licensing really with them at some later time, for the company to get some money for it we secure it that first in line position that can be attractive to a company that allows them to continue to discover and develop the asset on their own and build their own capabilities, for other companies standard in-licensing agreement or research collaboration is the best thing.
Genentech's strategy on financial responsibility in deals
Fintan Walton:
So with these more cash straps biotechnology companies so you are doing earlier based deals, in terms of ensuring that those companies continue to get finance, because obviously what you don't want to do is to get into relationship with the company that ultimately has financing problems, so how do you look after that issue?
James Sabry:
Well the important thing is to realize that many of the companies we deal with have multiple assets and they are partnering with us for only one of them, we like to look at companies that have strong venture based financing and financing by funds that have dry powder still available in their fund for further development or further company development, in the end the products when it comes to Genentech is our financial responsibility and we pay usually for all of the continuing discovery and development and then pay back milestones and royalties to the company itself.
Fintan Walton:
More traditional like?
James Sabry:
That's right.
Fintan Walton:
So for an example Rochehas got its own venturing arm how does that operate in relation to Genentech?
James Sabry:
We can use it, we can make equity investments in companies we are actually thinking of starting companies with academics where Roche venture becomes the equity entity it does, so it becomes the entity for us to make equity investments as well as for Roche.
Importance of Alliance management functions in partnering
Fintan Walton:
Okay, so when it comes to the other part of responsibility these alliances as well so how are they changing in the environment?
James Sabry:
The alliance management function is really important part of what partnering does and in many companies these are separate organizations the beauty by the way we have a set up and Roche has the same way the business development guys and alliance management guys are all under one group, so there is a these guys are involved before the alliance begins it's really the alliance managers that make the magic happen after the alliance functions and that's we finding ourselves getting more and more connected with the biotech companies more giving into them of our expertise as we go forward and I think that's become a richer part of what we do.
Fintan Walton:
I mean one of the key things as we all know about taking drugs through development is risk and obviously better communication derisks the risk apparent risk that you already have.
James Sabry:
That's right.
Deal with Forma Therapeutics
Fintan Walton:
You've also mentioned a deal that you did yesterday could you tell us a little bit about that deal and why it's quite different and unique with Genentech?
James Sabry:
Yes, the deal you are referring to is a deal we did with Forma Therapeutics [PharmaDeals ID = 41557] yesterday and it was an asset acquisition where instead of buying the company we actually just bought the asset itself, it's a staged bio so there is certain amount of cash that goes that is given by Genentech to the investors at the beginning as an upfront payment, but instead of going to the company that upfront goes to the investors themselves as we buy the asset itself from the investors, the advantage for this is an investor can get a partial return on their investment early on in a company's life and they can retain all the other elements of the company for further growth development, so it's attractive for certain companies that need an exit earlier than they would in a standard company acquisition which would occur much later in the development of an asset.
Fintan Walton:
And what was the asset that made you go that far to do that type?
James Sabry:
It was a very attractive cancer target program they had worked on for a number of years, they had developed some wonderful chemical matter, we saw the opportunity for companion diagnostics to actually pre select which patient who would respond to this drug and it was that program that we purchased.
Genentech's key criteria on doing acquisitions
Fintan Walton:
Okay, just on the M&A side obviously the number of options open for investors to get money back from their investments is limited because the IPO market which you described already, when it comes to doing acquisitions you've just mentioned one there what are the key criteria from a Genentech point of view for doing an acquisition?
James Sabry:
The real question is how excited are we in the program and in the science, I think that's key for us, in order to do an acquisition we are actually putting more money earlier on into the deal we have to be more excited about the program than in a standard license agreement, the other thing is does the company want to be acquired and in fact that turns out to be the main limiting factors are they truly fully economics that we think are reasonable up for sale and there is always a price of which every company is for sale, the question is that price we want to put in.
Fintan Walton:
Right, and it doesn't work strategically obviously if you act right?
James Sabry:
That's right.
James Sabry's outlook on shape of biotech industry in next five years
Fintan Walton:
Now just going into the future James, what do you see, how do you see our industry moving? What sort of shape do you see the industry being in- in the next say five-years?
James Sabry:
I think in the next 5 to 10-years Fintan, you are going to see the industry move towards more innovative products and almost all of them with companion diagnostics, the power of being able to sub select the patients and go after therapeutics that truly attack the drivers of disease whether it would be oncology, inflammation or neuroscience allows this industry and we've seen this especially in the last year to develop therapeutics with dramatic efficacy it's those kinds of drugs that I think society really wants, I think society is growing tired of me-too drugs that offer minimal clinical benefit for a significant price and are willing to pay heavily for drugs that really do have dramatic clinical benefit. I think we are going to see a shift away from me-too type of drugs towards innovative drugs with companion diagnostics.
Fintan Walton:
But the innovation comes along with understanding the underlying base of disease?
James Sabry:
It does.
Fintan Walton:
And being able to diagnose that early?
James Sabry:
Correct.
Fintan Walton:
So how do you get that mix?
James Sabry:
Well that's a discussion we have with our academic colleagues all the time and in fact one thing I will say is it's really important for countries like the United States and the countries in Western Europe to continue to fund basic science, because that's where that understanding comes from.
Fintan Walton:
James Sabry, thank you very much indeed for coming on the show.
James Sabry:
You are welcome.
Fintan Walton
Dr Fintan Walton is the Founder and CEO of PharmaVentures . After completing his doctoral research on the genetics of cell proliferation at the University of Michigan(US)and Trinity College (Dublin, Ireland), Dr Walton gained broad commercial experience in biotechnology in management positions at Bass and Celltech plc (1982-1992).
James Sabry
Vice President
James Sabry MD, PhD., has been the Chief Executive Officer and President of Ar"te Therapeutics Inc., since July 2008. Dr. Sabry co-founded Cytokinetics Incorporated., in August 1997 and has been its Consultant since April 1, 2008. James Sabry serves as Vice President of Partnering at Genentech, Inc. He has a wealth of drug discovery, development, and biotechnology management experience. Dr. Sabry served as the Chief Executive Officer of Cytokinetics Incorporated, from August 1997 to January 2006 and also as its President from August 1997 to February 2006. He has been the Chairman of Scientific Advisory Board at Cytokinetics Incorporated, since April 1, 2008. Dr. Sabry served as an Executive Chairman of Cytokinetics Incorporated, from January 22, 2007 to March 31, 2008 and also served as its Chairman from April 1, 2008 to March 16, 2010. He is a Member of Dean's Council of the Kennedy School of Government at Harvard University. He serves as a Director of HopeLab and Arete Therapeutics Inc. He served as an Executive Director of Cytokinetics Incorporated from August 1997 to March 16, 2010. He serves as a Member of Advisory Boards of California Institute of Quantitative Biosciences. He held faculty positions at the University of California, San Francisco and Harvard Medical School from 1984 to 1987. Dr. Sabry received a M.D. from Queen's University and a PhD in Cell Biology from the University of California, San Francisco.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
Genentech
Genentech was founded more than 35 years ago, in 1976, by the late venture capitalist Robert A. Swanson and the biochemist Dr. Herbert W. Boyer. In the early 1970s, Boyer and geneticist Stanley Cohen pioneered a new scientific field called recombinant DNA technology. Upon learning about this development, Swanson placed a call to Boyer and requested a meeting. Boyer agreed to give the young entrepreneur 10 minutes of his time. Swanson's enthusiasm for the technology and his faith in its commercial potential were contagious, and the meeting extended from 10 minutes to three hours; by its conclusion, Genentech was born. Though Swanson and Boyer faced skepticism from both the academic and business communities, they forged ahead with their idea. The company's goal was to develop a new generation of therapeutics created from genetically engineered copies of naturally occurring molecules important in human health and disease. Within a few short years, Genentech scientists proved it was possible to make medicines by splicing genes into fast-growing bacteria that produced therapeuticproteins. Today Genentech continues to use genetic engineering techniques and advanced technologies to develop medicines that address significant unmet needs and provide clinical benefits to millions of patients worldwide. In March 2009, Genentech became a member of the Roche Group. As part of their merger agreement, Roche and Genentech combined their pharmaceutical operations in the United States. Genentech's South San Francisco campus now serves as the headquarters for Roche pharmaceutical operations in the United States. Genentech Research and Early Development operates as an independent center within Roche.