Roche Strikes Three Major Biotech Partnerships in a Single Day

[News Event]: Roche, which has recently been actively forging partnerships worldwide, announced three collaboration intentions with biotechnology companies in a single day. First, it partnered with Sosei Heptares, a Japanese company specializing in the structure-based design of GPCR drugs, to co-develop therapies addressing unmet medical needs; however, specific targets were not disclosed. Sosei Heptares will receive an upfront payment of $26 million and up to $1 billion in milestone payments. Subsequently, Roche announced a collaboration with Skyhawk Therapeutics, a developer of small-molecule RNA modulators, to jointly develop treatments for oncology and neurodegenerative diseases. The upfront payment was not disclosed, but milestone payments are expected to reach billions of dollars. The third partnership is with Convelo Therapeutics to develop neurological drugs, such as those for multiple sclerosis. Neither the upfront nor the milestone payments for this deal were disclosed.

[Drug Source Analysis]: Sosei’s core technology is cryo-electron microscopy (cryo-EM), which was awarded the Nobel Prize in 2017. G protein-coupled receptors (GPCRs) represent the most important class of receptors, and currently one-third of all drugs are GPCR ligands. However, these traditional drugs often exhibit poor selectivity; many central nervous system (CNS) GPCR drugs act in a “machine-gun” manner, hitting the intended target but also affecting numerous related off-targets. Additionally, some GPCRs have poor druggability and require peptide ligands. Historically, it has been difficult to characterize GPCRs outside their native lipid bilayer environment in cell membranes, leaving drug design lacking structural basis. Although some X-ray crystallography structures were available, cryo-EM has made the structural elucidation of these membrane receptors much easier. Skyhawk’s small-molecule RNA modulators also represent a cutting-edge frontier; Roche’s own spinal muscular atrophy (SMA) drug, risdiplam, an exon 7 splicing modifier, has already demonstrated certain clinical efficacy. Another prominent smaller company developing small-molecule RNA modulators is Arrakis Therapeutics, while major pharmaceutical companies such as Novartis and Pfizer have also invested in this field; notably, Pfizer’s ATTR-CM drug tafamidis has already been marketed. Convelo’s technology focuses on developing a class of myelin-derived lipid molecules that protect neurons.

These collaborations clearly target mostly disruptive technologies addressing high unmet medical needs, many of which are early-stage technologies. This has been Celgene’s core strategy over the past decade. Unfortunately, Celgene’s execution capabilities were somewhat lacking, and it made basic mistakes in the development of several key acquired assets, casting some doubt on this model. As discussed recently, new drug discovery is highly dependent on randomness; even traditional powerhouses like Merck nearly discarded Keytruda. One strategy to avoid such errors is to diversify early-stage projects while establishing a relatively efficient evaluation system capable of eliminating low-probability-of-success projects at minimal cost and maximum speed—known as the “Kill the losers” strategy. However, determining when to terminate these “losers” and on what grounds remains a complex challenge. One prominent investor believes that a single negative data point should be sufficient to halt a project, yet there are also numerous examples, such as Amarin’s fish oil drug Vascepa, where a high-stakes gamble ultimately succeeded.

Of course, diversification does not mean a lack of selectivity. Beyond the two essential criteria of technological novelty and unmet medical needs, whether the technology renders drug design more scientific is also a significant consideration. Industry lore attributes an unwritten rule to Sabry, Roche’s head of Business Development, known as the “Sabry Rule”: drugs with unclear mechanisms of action should not enter clinical development. The veracity of this rule remains uncertain to outsiders. However, many prominent investors now prioritize the depth of understanding regarding the relationship between a drug’s mechanism and the disease over the size of the patient population. This is because truly effective drugs can recoup costs through high pricing even if the patient pool is small. For instance, although NTRK mutations are present in only 1% of patients, this did not prevent Loxo from being acquired by Eli Lilly for $8 billion. In contrast, mediocre drugs like Belviq, even in a massive market such as weight loss, could only be sold to partners at rock-bottom prices.

Roche has recently been highly active in mergers, acquisitions, and collaborations, ranging from the $4.8 billion acquisition of Spark Therapeutics to smaller deals such as that with Jecure, a company focused on NASH. Roche is also making significant investments in emerging technologies; for instance, Adaptive Biotechnologies, which recently raised $300 million in its IPO, received an upfront payment of $300 million from Roche for their collaboration, while the upfront payment for the partnership with Xencor reached $120 million. Other notable collaborations include working with SQZ Biotechnologies on cell-squeeze drug delivery technology, partnering with Microbiotica to develop IBD therapies based on bacterial biomarkers, collaborating with Lodo Therapeutics and Warp Drive Bio respectively to discover novel antibiotics, and joining forces with Arvinas, a pioneer in protein degradation, to develop small-molecule protein degraders. Nevertheless, such frequent and diverse investment activities remain quite rare.

Source: Sino-Drug Source Author: Lu Renbing