Interview with Alain VertÃ¨s (Sloan Fellow, London Business School: Managing Director, NxR Biotechnologies GmbH, Basel, Switzerland), on the cell therapy industry and how we can proactively bring therapies to the market faster.
With the potential to impact the treatment of certain diseases that are still to this date insufficiently addressed by conventional pharmaceuticals, including those diseases with no treatment at present, regenerative medicine and cell therapy in particular have the potential to change the way we approach healthcare. However, the industry is still in its infancy. In this interview Alain VertÃ¨s shares his perspectives on the industry, and how to bring therapies to the market faster.
Alain VertÃ¨s, PhD, MBA, is managing director of Basel, Switzerland-based NxR Biotechnologies, a consultancy that assists companies in funding, positioning and commercializing biotech products. He is an active business development consultant focused on technology deployment, and innovation funding and commercialization.VertÃ¨s has contributed to research (molecular biology, microbiology, sustainable chemistry), manufacturing (amino acids, enzymes), contract research (Battelle Memorial Institute, PPD), and strategic alliances in pharmaceuticals (Roche, Pfizer, Lilly), biotech (Mesoblast, Targazyme), petrochemicals (Mitsubishi Chemical Corp.), industrial biotechnology, public research and consulting. With worldwide experience in partnering and licensing groups of big pharmas and biotechs, he has led reviews of strategic needs for finding, implementing and managing partnerships, from licensing to M&As. With hands-on involvement in the deployment of radical innovation — for example, bringing to patients disease-modifying, paradigm-changing therapeutics, he has managed major siRNA and regenerative medicine alliances, and has led global therapeutic stem cell initiatives.
To kick off the interview, I’d like to ask you how you became involved in cell therapy, as you have worked, and continue to work, in both industrial and pharmaceutical biotechnology?
It dates back from my research with F. Hoffmann La Roche in Basel (Switzerland) when I was working in the partnering department, and one of the projects was to look for emerging technologies that could make a difference. A task force was thus created to understand the potential of regenerative medicine.I led a small team of about 10 people covering all the functional areas and all the disease areas at Roche, as well as all the main sites of the company. This diversity in terms of professional experience and competencies, as well as diversity of opinions (I had by design some nay-sayers in the team, and everyone was proactively encouraged to give feedback) provided us with the best basis for leveraging collective wisdom and making the right decision in this new field for the organisation. Given that we were entering terra incognita, and given that we had to continuously integrate the dynamics of progress in substitute products arising from conventional technologies, such a design was critical to ensure that our evaluations and decisions were based on exhaustive analyses in terms of technology risks, business models and financial pay-offs. We left no stone unturned. We looked at the entire landscape in terms of technology, biotechnology companies, academics, universities and public centers in the field, with the remit of finding where we could source partnering opportunities and best position our entry into this field. By this I mean not only platform technology-to-products assets, but also products that could make a difference to the portfolio of Roche and of course to patients — at the end of the day, patient benefit is what we care about. So that was part of my involvement — very much a pharmaceutical focus.
Next I moved to a different role, which was to transition more into the entrepreneurial side and created my own consulting business in Basel, helping companies revisit new strategies coming into this new area, also conducting business development, divestiture, and fundraising.
Industrial biotechnology is quite a different area of biotechnology and my experience dates back from my days at the Institut Pasteur in Paris and in Japan at Mitsubishi Petrochemical Company. Industrial biotechnology has been my initial field of interest, with a focus on the molecular biotechnology of microorganisms to manufacture specialty and commodity chemicals. I still work in this arena with some former colleagues, and have published recently a perspective book in the field of biofuels for example; what’s more, I have an active collaboration with a biofuels and biopolymers start-up from the University of Tokyo.
Are there any lessons that the cell therapy or regenerative medicine industry can learn from traditional pharmaceutical biotechnology?
Absolutely! What’s more, I think these lessons have not been sufficiently leveraged yet. Looking at traditional conventional pharmaceutical therapeutics, first and foremost is the structure of how to do core development and translational work — this translational development needs to be carried out on cell therapies with the same rigor as on any conventional therapeutic molecule. It’s important because even though stem cells and stem cell products have a huge potential, success will only come if we ensure that we operate with the highest standards; it’s all about operational excellence in highly regulated environments. Medical tourism, for example, is something that needs to be considered prudently: it may be done for good reasons, but we need to make sure that promises made to patients are based on solid evidence validated at a sufficient statistical power.
The second lesson from traditional pharma that could be learned is the experience that the field got from monoclonal antibodies; essentially that is the birth of biotechnology. The bottom line is that it took about 25 years for the monoclonal antibody technology to emerge and it’s only since maybe 2007 that there were only three major companies (Roche, Genentech and Amgen) with double digits from monoclonals in terms of percentages of sales. Things have since changed: between 2007 and 2010 this field has accelerated and most monoclonal antibody work is nowadays conducted with pharma partners.The lesson here is first the time it takes to bring an emerging technology to a commercial reality, following typical technology adoption patterns, and the second lesson we can already derive from this is the need to try to anticipate along the technology S-curve that regenerative medicine is still to go through. If you look at monoclonals, the first concept was demonstrated in rodents, but to translate this stunning discovery to humans the big problem was to realise that one has to humanise the antibodies, and as much as possible to the full extent. The critical step was thus to work and work again on the efficacy. If you look at the history of the development of the antibody technology at the finer detail level, you can distinguish several stages of technology development, several S-curves. What is important here is, again, to try to anticipate what those S-curves will look like for regenerative medicine in general and cytotherapies in particular. This is a critical success factor: if you anticipate and learn, you can better advise on the particular needs and try to accelerate the technology cycle. That’s important because if we do nothing and carry on as usual, these therapies will certainly come to market, but they may take 10—15 years longer than if we’d been more proactive with our approach. This is what I’m passionate about and trying to advocate — being proactive and taking advantage of the lessons in monoclonal antibodies to foster a faster adoption of the technology of therapeutic stem cells.
“This is what I’m passionate about and trying to advocate — being proactive and taking advantage of the lessons in monoclonal antibodies to foster a faster adoption of the technology of therapeutic stem cells.”
What lessons can be learned from industrial biotechnology?
In terms of lessons from industrial biotechnology, it’s very much about the molecular tools that we can implement. I’ve always worked on bacteria to produce an effect of interest, where we modulate the gene expression levels of biosynthetic enzymes and the general metabolism of microorganisms growing or resting in a fermenter to produce a particular product of interest. It’s a very similar concept in the patient when you try to leverage the capabilities of living cells to generate clinical benefits, notably the sensing and responding properties of living cells. This is a very interesting parallel to explore because in industrial biotechnology we now routinely use a mix of technologies; in particular systems biology and all the global ‘omics’ technologies (genomics, transcriptomics, proteomics, metabolomics). Whereas this tendency took almost 25 years, of course punctuated by the development and refinement of these analytical techniques and related instruments, it has created for industrial biotechnology tremendous advantages in terms of cost of goods, to the point where one can now consider to cost-efficiently manufacture at the industrial scale commodity chemicals, something that was totally unrealistic before. These types of technologies such as systems biology have not been implemented sufficiently in regenerative medicine, despite some good progress in the past 15 years to develop in silico tools for the development of conventional therapeutics via ‘virtual patients’. There is much to learn still with the systems biology of stem cells as individual entities; undoubtedly we can devise better products if we use better and more powerful tools.
“There is much to learn still with the systems biology of stem cells as individual entities; undoubtedly we can devise better products if we use better and more powerful tools.”
You have previously spoken about the market not valuing stem cell programs or companies fairly — why do you think this is?
I would say it’s a finance issue. When you invest in product development you try optimize your risk : benefit ratio to generate the largest payoff, and you need to do this across different technology and product areas to optimise financial returns. Again, financial returns are good because they provide incentives for achieving more investment, and thus contribute to general healthcare more by bringing to the market more innovative treatments for unmet medical needs. The monoclonal antibody industry almost bankrupted very early on. The first 15 clinical trials with monoclonal antibodies were a complete failure and it took courage to continue to invest in the field… and a few landmark strategic alliances with visionary pharmaceutical companies.
The reason why the market is not valuing stem cell technologies correctly is firstly because of the perceived remaining technology risk, as no cell therapy product demonstrating safety and efficacy is yet on the worldwide market (I am not considering here tissue engineering products such as skin substitutes); and secondly the competition of other types of products including conventional products. Here, the opportunity cost represents a tremendous hurdle, as it may seem to be a better opportunity at present to invest in a new monoclonal antibody, than into a cytotherapy — with the notable exception of CAR T-cells. The final reason is the strength of the portfolios of pharma companies; if they are already diverse enough they don’t necessarily experience the need to venture into these new high-risk technologies. In contrast, companies that are more exposed by having a very high share of their businesses in a single specific area where there are significant threats of substitutes, these companies will have more appetite to venture into emerging technologies as long as this diversity provides them with promises of great returns.
What do you think will change how the market values stem cell programs and companies?
I think it will boil down to a key demonstration of efficacy, and if you look at the market some companies have advanced portfolios with Phase II and III programs, therefore this defining moment, or if you will this inflexion point in market cap, is near. Yet, the valuation of stem cell therapeutics companies still remains extremely low. If you do a comparison with monoclonal antibodies companies, perhaps the best example is Genentech, which was bought in 2009 by Roche at a market cap equivalent of US$64 billion, whereas the market cap equivalent in 1990, the date of the first equity investment by Roche in Genentech, was US$3.5 billion — one could argue that the market was not rewarding then the portfolio’s potential, and that the perceived remaining risk was a big reason for this.
Another demonstration of this is what we have seen in the CAR T-cell arena. Five years ago these technologies were interesting but nevertheless very far from demonstration. Now, if you consider the valuation of companies like Juno Therapeutics or Kite Pharma, the market cap of Juno is in excess of US$5 billion and that of Kite more than US$3 billion. Even more remarkable is that Juno’s share prices increased 60% at the beginning of its IPO. Now this technology is all the rage and is being rewarded, simply because CAR T-cells have been validated in a way via several milestone alliances with big pharmas, alliances that were implemented once these products had shown stunning efficacy in several oncology indications where essentially there was no other hope. I think this is a clear indication that, once you get a clear demonstration that stem cell therapies are safe and efficacious compared with commercial biologics (I would like to emphasize here again the opportunity cost hurdle), we will see the market rewarding the field. What’s more, we can expect that once a top five big pharma makes a significant investment, several other big pharmas will quickly follow, in a textbook technology diffusion pattern.
What do you consider to be the major limitations of commercialisation of stem cell or cell therapy products?
That’s an important question. One major limitation is the cost of manufacturing. By the way, solving the manufacturing issue is what brought monoclonal antibodies to a reality. The second perhaps most important is again to demonstrate confidence in safety and efficacy; I mean here that one needs to unambiguously demonstrate that cytotherapies can deliver clinical benefits that no conventional products can deliver, either by enabling the treatment of heretofore untreatable conditions, or by delivering dramatically superior efficacy or safety attributes as compared to conventional pharmaceutical modalities. That is where the concept of adaptive medicine comes into play. A good definition of adaptive medicine is the use of pharmaceuticals that can adapt to the idiosyncrasies of a particular patient with the dual goal to minimize side effects and maximize efficacy.
There is a lot of work going on to help reduce these limitations. For example, in the UK the Cell Therapy Catapult aims to bring potential products from early stages into something that is commercially viable, and there are lots of experts such as yourself acting as consultants for commercialisation. However, what more do you think can be done to really push more products forward to a state where they are commercially viable?
A big part of the problem, or rather the solution, is to pull large pharma companies in investing more into the field and earlier than they have done so historically when adopting other emerging technologies such as monoclonals. Engaging large pharma and large biotechnology companies is really important as these companies, beyond their financial muscles, bring first excellence in operations (regulatory, manufacturing, commercial) and second unmatched incremental innovation competences that are absolutely necessary to reach the bedside stage. Like any typical large company in any industrial field of activity, big pharma companies are typically really resistant to the adoption of emerging technologies — for good financial reasons that have been translated over the years into the corporate cultures of these companies. What’s important here is to find a way to increase the rate of adoption of the regenerative medicine concept by these companies, that is, to increase the number of strategic alliances between pharma and cytotherapy developers. You see, strategic alliances are critical success factors for large companies to expand their competences beyond their existing knowledge boundaries.
How can this be done?
Promoting awareness at all hierarchical and functional levels of these corporations. It cannot be overemphasized that the key word here is “all”. You see, short of an extremely strong mandate from the CEO’s office, what is required to overcome the barriers to radical innovation in very large organizations is to reach what I would call “cultural resonance”. Biotechs typically make two capital mistakes in their partnering efforts: one is to focus on trying to convince solely top management — which is ignoring the fact that the large middle management base and influential internal scientists play an important sounding board role, they can both promote or impede adoption (there is perhaps nothing more constant than resistance to change), and can do so even after a deal is done; and the other is to have totally unrealistic expectations when biotech business developers solely consider the potential of their technology rather than the true stage of development of the assets they wish to partner.
Promoting awareness can be achieved first, by relentlessly refining our understanding of the mechanisms of action and by communicating these findings in terms of both safety and efficacy attributes of stem cell products; that is, the potential, in every way possible. Relentlessly working at enhancing efficacy is another. Anything that can be done to help technology adoption should be done, and there are examples of such successful mechanisms in the field such as the California Institute of Regenerative Medicine (CIRM), which was created by a remarkable initiative from the people of California. One could view CIRM as aiming essentially at de-risking private investments through public funding of fundamental research or translational research with high perceived risk but high reward. This is a perfectly legitimate use of public monies. And a visionary one. Public investment in the field, tax rebates and so on can help encourage companies to venture into such an emerging area. Likewise, I think that what the UK has done with the Cell Therapy Catapult initiative is simply fantastic, as it creates a cluster structure linking all the different participants, with these fantastic synergies helping companies to de-risk their entry. This way, the UK cell therapy industry can reach its critical mass and steady-state earlier, it can reach its maturity earlier, and thus it can deliver its payoffs earlier.
We could do nothing and wait, and these products would likely be developed anyway, but it would take much more time… and ultimately could cost society significantly more money if one factors in missed productivity costs and avoidable healthcare costs. You see, at the economic level, the health of a nation impacts its total factor productivity. Not to forget the missed opportunity to create new jobs and most importantly to bring earlier transformational treatments to patients who need them to live longer, healthier, more active and better lives.
“We could do nothing and wait, and these products would likely be developed anyway, but it would take much more time… and ultimately could cost society significantly more money if one factors in missed productivity costs and avoidable healthcare costs.”
Do you have any final thoughts you would like to share?
I believe that leveraging the mechanics of technology adoption is a big part of success here. The kinetics of success depend on whether one can tip the balance towards earlier adoption and thus increase the rate of regenerative medicine technology diffusion in large pharmaceutical and biotechnology companies. It’s the human side of disruptive innovation. To solve this, and until the first game-changing stem cell therapy products hit the market, option deals (to gain acceptance and lower resistance, and thus reach cultural resonance towards new technology adoption), geographic deals with mid-size pharmas (who need to access radical innovation before big pharmas express significant interest as they would be outbid by them for the most valuable assets), and value-based deals (to bypass perceived technology, regulatory and market risks) could be part of the answer. This could be compared to the gambit strategy in the game of chess where a material advantage is temporarily relinquished to obtain a more dynamic position enriched in winning opportunities.
Financial & competing interests disclosure
VertÃ¨s discloses that, among the companies cited herewith, he has
financial involvement with Mesoblast (Melbourne, Australia), and
Targazyme (TX, USA).
- Stem Cells in Regenerative Medicine: Science, Regulation and Business Strategies
(Wiley-Blackwell, November 2015)