Deals Driving Oncology: ImmunoGen CEO Mark Enyedy on Biopharma’s Year Ahead

Cancer continues to reign in 2018 as the emperor of all maladies, with almost boundless opportunities for companies with a solid base in new science and a differentiated therapy set that can be tailored to the needs of individual patients not served by the current standard of care. ImmunoGen CEO Mark Enyedy tells In Vivo that there’s never been a better time for drugmakers in the oncology marketplace.

Mark Enyedy

Cancer is no longer a “protected” class on the access and reimbursement front, and biopharma companies must also extend their reach to address the co-morbidities and societal implications of the swelling ranks of cancer survivors – itself a sign of industry success.

Overall, 2018 will bring added momentum on the deal-making front. Big pharmas still need additional sources of revenue growth, and the biotechs continue to innovate on the product mix. The main task for business development teams this year will be to mitigate financial risks in evaluating early-stage assets; seamlessly manage deal flow, especially deft and anticipatory approaches to due diligence; and to stay engaged through a deal’s integration process, where most problems arise that eventually can kill a promising partnership.

When it comes to market size and patient need, not all new cancer therapies are created equal. Industry must do a better job aligning investor expectations with the underlying patterns of demand in this space. Forward momentum is also indicated on the key unresolved strategic challenge in cancer innovation – patient access and the price point for the best that new science has to offer.

In the following interview, Immunogen Inc. CEO Mark Enyedy shares his thoughts on the capital and oncology markets, the climate for deal-making and what's on tap for ImmunoGen in 2018.

In Vivo: Do you share the perspective of many analysts that the market for oncology medicines will continue to accelerate as the quality of the science expands in parallel with a truly significant level of unmet medical need?

Mark Enyedy: I do. Annual sales of oncology medicines in the US are already close to $150 billion. I expect we will see revenue numbers well north of that by 2020. The positive outlook is driven by several factors. The first is demographics. Cancer is disproportionately a disease of the aged: the older the population, the higher the incidence. The second is the ability to detect and treat cancers earlier. We are getting better at targeting the population most vulnerable to the condition. The third is therapeutic innovation. The number of novel agents coming on stream is unprecedented. Most of these are setting new standards of care, both as single agents and through new combinations that grow the market by making more cancers treatable and help extend the lives of patients. Of course, it must be acknowledged the list price of these innovations is also increasing. That has an impact on revenues too.

Do you see the product mix in the oncology market changing in response to these factors?

For ImmunoGen, the evolving market environment offers any number of opportunities. Our view is that, into the next decade, surgery and adjuvant therapy will remain the mainstays of treatment for most solid tumors. We expect to see advances in cancer screening technology, allowing for earlier detection and treatment that will improve patient outcomes. Additional progress is going to be made in establishing treatment pathways that address the etiology of an individual tumor, with the distinctive molecular basis of a tumor rather than its anatomical location driving decisions on therapy. A harbinger in 2017 was the FDA’s approval of Merck's [Merck & Co. Inc.] Keytruda [pembrolizumab] for patients with mismatched repair-insufficient solid tumors. It’s the first time that a tumor therapy was endorsed based on its biomarker signature – a marker of progress the cancer research community had been talking about for 20 years.

Hence we predict an increased level of understanding on the mechanism of resistance to cancer cell proliferation, as currently manifested in the commercialization of a new generation of immuno-oncology drugs. Antibody drug conjugates [ADCs] are destined to play well in this space, as their malignant cell-destroying payloads more precisely target tumors; their tolerability profiles also allow for the use of multiple drugs in combination. Not only will the pro-apoptotic small molecules in the ADC raise the potency of each payload, they will also help stimulate a more efficacious immunologic response. The process technology behind the ADC is making them easier to manufacture as well, especially in comparison to the new CAR-T gene-based therapies, which are structurally complex and thus much more expensive to make and deliver to patients. It comes as no surprise that the number of ADC candidates in development has doubled over the past five years.

In summary, the trends suggest that physicians will be able to apply a rich diversity of approaches to treating cancer. There is no single magic bullet – no actual cure yet – but the tools in the cancer-fighting arsenal are going to raise the odds of this disease becoming a manageable, survivable condition. Cancer is now certifiably established as a series of rare diseases that benefit from a multiplicity of options tailored to the profile of the individual patient. Physicians will be examining every tumor in so far as it expresses a particular target, with a solution potentially applicable across a range of indications. It’s much more specific than simply trying to treat a cancer of the lung by attacking the lung with undifferentiated toxins. The outcome will be measurably better for patients.

Our researchers are on the right track. I am very confident about that.

"Cancer is now certifiably established as a series of rare diseases that benefit from a multiplicity of options tailored to the profile of the individual patient. Physicians will be examining every tumor in so far as it expresses a particular target, with a solution potentially applicable across a range of indications." – Mark Enyedy

What about the social and economic implications of this revolutionary progress in cancer research?

Our industry still faces the issue of making these promising therapies accessible at a price that patients and society can bear. I don’t see this going away anytime soon. Access and pricing cannot be swept under the rug; all producers must be more creative in addressing it. I anticipate increased momentum for value-driven approaches to reimbursement on cancer drugs, including a responsibility for drug developers to address value much earlier in the development cycle.

Another impact is the growing focus of the cancer community on survivorship. ASCO [American Society of Clinical Oncology] recently issued a report stating there are now 30 million people with cancer who have passed the five-year mark with no sign of remission. That’s an impressive number. But it also creates some new issues, such as lingering side-effects from treatment, financial exposures, and obtaining the right counseling, community support and follow-up care, especially for psychological problems, including depression. It is good to see that ASCO is making survivorship part of its ongoing agenda. It is building networks and a database on this growing patient cohort. It will reinforce the notion that the response to cancer must entail a broader population health approach rather than a series of acute care medical interventions.

A third element of this question is the necessity for innovators to invest more resources in IT initiatives. Data are already the lingua franca of cancer research and treatment. What we must do now is convince patients to participate directly in the compiling of the data so that the information collected can be applied directly to support more precision in how we treat them. Data that remain disconnected from the patient experience will not be useful in the demonstration of the value that payers want.

What will be necessary to integrate value more fully within the cancer treatment protocol? How do we establish a consensus around value that leads to performance metrics that are clear, consistent and predictable – understood by payers, not just drugmakers?

What’s needed is agreement on the incorporation of evidence beyond the parameters of the RCT. There must be a commitment for some flexibility in creating an evidence base that grows in line with a new medicine’s development path. Clinical experience in the real world must be a necessary supplement. Quality-of-life measurements are a relevant example, along with other patient-reported outcomes, which can be combined with disease-related measurements like progression-free survival and overall survival in a target population. This is the kind of objective data most useful to the patient experience of care.

More bluntly, are cancer drugs no longer viewed by payers and regulators as a “protected class” exempt from pressures to promote access through lower prices?

Cancer is no longer a protected class. Memorial Sloan Kettering’s [Memorial Sloan Kettering Cancer Center] highly public decision in 2012 to deny a formulary listing for Sanofi’s VEGF inhibitor Zaltrap [aflibercept] on grounds its list price was more than twice as high as its comparator equivalent, Avastin [bevacizumab; Genentech Inc.], put an end to that notion. Indeed, evidence of clinical differentiation is today the minimum requirement for achieving a reimbursement nod, both here in the US and elsewhere in the developed world. I think that’s good. It keeps us grounded on what matters most to patients. A philosophy of creating value as a condition for access drives every aspect of ImmunoGen’s development program. We know that such commitment helps us manage a variety of payer responses to the reimbursement hurdle, whether it’s here in the US or in other markets that set their own separate standards, such as the quality-adjusted life years [QALY] formula in the UK or the five-step innovation benefit assessment in France. It’s also increasingly important to shape the postmarketing approval environment by generating data on that larger, real-world experience with the medicines we are providing to patients.

What, in your view, should the FDA be doing to enhance the relevance and pace of the drug development process, particularly in your therapeutic area of expertise?

Richard Pazdur [MD, director of FDA's Oncology Center of Excellence] has done an excellent job in treating oncology as a growth segment in medical innovation. I can’t speak directly on behalf of my colleagues, but my sense is every cancer drug developer today would acknowledge that if you bring a candidate that is innovative forward for FDA review, you will receive the full attention of the agency and its resources to expedite that vital go-to-market decision. Many oncology drugs now get approved well before their target PDUFA date. The message from Dr. Pazdur and his review team is clear: innovation now has priority. If you desire that preferential review status, it will be a sure bet to come when you have a differentiated, well-evidenced product that raises the current standard of care.

What about all those process bottlenecks, such as the proliferation in the number of clinical trials covering the immuno-oncology field? Should FDA be more proactive in managing this issue?

The competition we face in recruiting the right patients for our trials is a challenge. But it exists due to the scientific promise for patients with advanced cancers that have few alternatives. It’s frankly up to us in industry to take a more global approach in trial design and recruitment. Doing so usually adds to the quality of the studies and is certainly welcomed by the FDA in having access to data from a broader and more diverse cohort of patients.

"It is safe to suggest an uptick in M&A in 2018 compared with the last two years. The desire exists among big pharma to grab more of those newly commercialized next-generation therapies, even if the valuations set by the market might be high." – Mark Enyedy

You have an extensive background in the deal-making business at both big pharma and in the specialty rare disease space. How do you see the environment trending for 2018 – are we on the cusp of a boom cycle unleashed by the big reduction in the corporate rate as well as the discounted levy on repatriation of foreign-held profits?

My investment banking contacts tell me big pharma companies are interested in using that cash to make some truly transformative moves in the M&A and licensing fields. I am hearing lots of rumors but I am mindful of the phrase about the pitfalls of “dancing with elephants” – you might get squashed.

Nevertheless, it is safe to suggest an uptick in M&A in 2018 compared with the last two years. The desire exists among big pharma to grab more of those newly commercialized next-generation therapies, even if the valuations set by the market might be high. The best recent example is Gilead’s [Gilead Sciences Inc.] $12 billion acquisition of Kite Pharmaceuticals [Kite Pharma Inc.], where the intent behind the deal was to obtain a single newly authorized product in the high-potential CAR-T space. [See Deal]

The fundamental drivers of the increase in activity are several. First, many big companies still need to supplement their internal R&D pipelines with additional assets beyond what they pursue internally. The second driver is valuations and the prices required to access these assets, which appear to be moderating. Then there is the ability of smaller firms to obtain capital to remain independent and commercialize their own products, rather than sell them. Finally, you have broader policy considerations like the new US tax reform legislation enacted on December 20.

What I see as the overriding factor shaping the deal environment this year is gaining access to external sources of revenue growth. The reasons for this are many but perhaps the most important is the patent cliff and replacing that generic competition with more top-line revenue growth from new and acquired products. Navigating this process of product renewal demands a disciplined and strategic focus. It requires a very consistent stance on M&A, one where you are not tempted to pay too much for an asset. There are still some lofty valuations out there, but by and large the market has stabilized, for both the smaller players and even a large-cap innovator like Biogen [Biogen Inc.]. This pullback in valuations makes it an opportune time for investors interested in finding deals involving larger targets than what we saw during the first half of 2017.

The availability of capital looks to continue the positive trend in 2017, save perhaps for a little lightening in the frothy IPO situation and in the market for secondary offerings. The bottom line is companies will have the capital they need to invest and grow. That’s a good sign for the biotech sector as it ensures continuity in product development, enhancing that value proposition they can deliver to investors. Of course, if you can finance growth through the IPO market or crossover funds, there is less need to go the M&A route. The point is innovative companies will have more options to expand to their potential. That’s a good message for progress in treating and curing disease.

You haven’t focused much on the Jobs Act – the new US tax reform bill. Has this issue been overstated as the progenitor of a large-scale transformation of the industry?

The new tax legislation will be felt more in the big deal context than on the small side. Most of the biotech start-ups that interest big pharma will carry a significant accumulated net loss on their books, a tax advantage that can be limited within the context of a change in ownership control. Other than that, however, I expect the tax impact will be marginal in terms of motivating those smaller deals.

Exhibit 1

ImmunoGen's Partnerships, 2015-Present

Aug. 2017/ ImmunoGen and Jazz enter blood cancer ADC option agreement

May 2017/ Amending earlier deals, Sanofi pays $30m up front for exclusive rights to 4 named, 1 unnamed pipeline compounds, in an amendment of earlier arrangements

May 2017/ Debiopharm gets ImmunoGen's ADC candidate IMGN529 for B-cell malignancies

Feb. 2016/ ImmunoGen adds Merck's Keytruda to its ovarian cancer trials

Mar. 2015/ ImmunoGen sells Kadcyla royalty rights to Immunity Royalty/TPG for $194m

Mar. 2015/ Takeda Oncology licenses exclusive rights to ImmunoGen's ADC technology

Strategic Transactions | Pharma Intelligence, 2017

Do you see a trend back toward acquiring early-stage assets compared with the dwindling number of ready-to-market medicines that are close to registration approval or already there? The idea is that big pharma players must be less concerned with mitigating downstream risk if they want to score big on the innovation front.

Interest continues to reflect a mix of both sentiments. The appetite for early-stage deals is often dictated by how much P&L flexibility the buyers have in taking on the extra R&D overhead. That compares to late-stage transactions where they can tell shareholders the gains will accrue within a short, fixed period of time. I expect the momentum will stay with the latter option, but I could imagine companies would also find it alluring to option an earlier-stage technology on the basis of a strong proof-of-concept, and on the basis of that data, move forward with an effort to expand the science and discover additional indications. It's ultimately a cultural question around a company’s criteria for managing risk; some have a higher tolerance for that than others.

Relevant to this point, we announced a collaboration with Jazz Pharmaceuticals [Jazz Pharmaceuticals PLC] last year around two early-stage, hematology-related ADC programs, IMGN779 and IMGN632, as well as an additional program to be decided during the terms of the agreement. [See Deal]For us, this partnership advances our goal of accelerating development of our early-stage novel ADC assets, while providing us with a global partner and substantial funding to support these programs. The deal also preserved for us the right to co-commercialize one of these assets. For Jazz, the arrangement offers an option-based structure to gain access to an earlier-stage pipeline to complement their commercial oncology portfolio with less P&L exposure. With the timely filing of the IND for IMGN632 and accrual on track for IMGN779, I think the partnership is off to a good start.

What’s on tap for the business development function in biopharma? How will the work of the group change in line with transitions now taking place in the industry business model?

The C-suite is going to expect business development to demonstrate its value in a number of ways. First, the group must be coherent and articulate in building a strategy on deals and partnering, one that will appeal to potential targets and suitors as well. It’s about being recognized as the partner of choice. Communication is critical, explaining the merits of selling an asset to a buyer and also helping that buyer to understand how it can add value to the acquisition. When you are the one buying an asset or a company, it helps to articulate what synergies you bring, not just in managing costs, but in adding to revenue growth. Traction with the top brass to proceed with a deal will not be achieved without a clear-eyed strategy that justifies the investment through a sustainable formula to secure top-line growth, not just tomorrow but for the long term.

Another necessary priority for BD is seamless management of the deal flow and process. It demands being proactive in engaging. If your BD people are getting calls from investment bankers to join an ongoing auction, then your company is not visible enough as a suitor. Your experts should know about a potential target and make the decision well prior to that. It is equally important to analyze and anticipate potential deals before they are presented. You want to be able to kill deals that don’t complement your strategic focus before they start taking up time. Obtaining definitive guidance from the C-suite at every stage of the process is vital. Because the deeper you go, the costlier it will be in extracting the company from the negotiation.

BD is expected to manage the sensitive due diligence phase too. Avoid wasting time on minutiae that will ultimately get bargained away. Focus on identifying and allocating the real risks that might damage or torpedo a deal.

Finally, BD must be a key driver of the integration that occurs after a deal is agreed. A lot of value is either captured or lost in this stage, so early planning and involvement is necessary from BD to guarantee an effective business outcome.

Outside of oncology, what therapy areas excite you the most in terms of future market potential?

Neurodegenerative diseases come top of mind. The risk is high but the potential for patients is great. A strong example of this in addressing unmet medical need is the success of Denali Therapeutic’s [Denali Therapeutics Inc.] IPO in December 2017. [See Deal] It was first filed at $100 million, then raised to $250 million – at the end, the company scored a market valuation of $1.7 billion. Much of the momentum was driven by investor confidence in Denali’s single-minded commitment to this therapy area. It is an area with enormous potential in terms of medical need. For that reason alone, neurodegenerative disorders will attract a major share of risk capital going forward.

What’s on tap for ImmunoGen this year?

We are starting 2018 with increased momentum based on the strategy we laid down after I arrived as CEO in 2016. Our pipeline is progressing well, led by mirvetuximab soravtansine (IMGN853). This is a first-in-class ADC in Phase III development as a single agent for platinum-resistant ovarian cancer. The Phase III FORWARD I registration trial for mirvetuximab is underway and we expect to complete the patient accrual in this study before the end of June this year, with data reading out sometime in the first half of 2019. The candidate is also being assessed for use in combinations for both platinum-resistant and platinum-sensitive disease in the Phase Ib/II FORWARD II trial. This is designed to position mirvetuximab as an earlier-line therapy. Specifically, we are testing it in combination with Merck’s lead immuno-oncology product, Keytruda as well as with the Genentech monoclonal antibody, Avastin. We anticipate a readout on the data with Keytruda at the Society of Gynecological Oncology meeting in March, followed by data on the Avastin combination at ASCO in June. I expect some further data around the two combination studies at the ESMO [European Society for Medical Oncology] event in the fall.

In addition, we are moving on schedule with our novel ADC candidate IMGN779 as a potential treatment for cancers that express for the CD-133 target in acute myeloid leukemia [AML]. We have a Phase I study underway and presented some initial data from the study at the American Society of Hematology [ASH] conference last month. IMGN779 was shown to be well tolerated, while exhibiting anti-leukemia activity and we are continuing with dose escalation.

We also have another ADC, IMGN632, which is just beginning the clinical test phase and is indicated for not only AML but b-cell acute lymphocytic leukemia and other CD-123 positive malignancies. We anticipate more readouts on these two promising ADC therapies by the next ASH meeting at the end of this year. I am confident that ImmunoGen has the necessary clinical differentiation – in both payload potency and patient tolerability – to become the leader in this increasingly crowded therapy segment.

Finally, even though we are a small company, our balance sheet is solid. We added $235 million to our balance sheet in 2017 and retired another $100 million in debt. The point is ImmunoGen has the resources to pursue its growth objectives.

"Overall, there's never been a better time to be in this industry. The level of innovation, often reflected in the drugs approved by the FDA, and especially in the often-unheralded precincts of basic research, is unprecedented." – Mark Enyedy

Are there concerns that remain about the overall environment that might give you pause in 2018, as you build out your commercial platform?

I am confident in ImmunoGen’s future. We generated significant momentum in 2017 and we enter 2018 from a position of strength. Our lead program continues to advance in Phase III; we are accelerating our early-stage programs; and we possess a strong balance sheet as well as a proven management team.

The only issue I foresee is how external events outside the business itself might impede the biotech industry’s ability to continue to raise capital. Investor sentiments clearly play a part in this, and thus it is vital to inform and educate this important constituency. For example, over the past 18 months, we’ve observed a heady burst of excitement over the approval of PARP inhibitor drugs. These new therapies do provide significant benefit against the standard of care in ovarian cancers, but only in a highly specific setting, which is maintenance therapy for patients with recurrent platinum-sensitive disease. The reality is this indication represents only a small segment of the overall market for ovarian cancer. We need to educate investors about the true dynamics of demand in this space – such as how an ADC like mirvetuximab brings forward a much larger range of treatment options for providers and patients, both in the larger cohort of platinum-resistant patients with ovarian cancer as well as a combination therapy with the very latest immuno-oncological agents.

Overall, there’s never been a better time to be in this industry. The level of innovation, often reflected in the drugs approved by the FDA, and especially in the often-unheralded precincts of basic research, is unprecedented. The one blur on the horizon is access and pricing for these innovations. Everyone has to understand that if our industry fails to get out in front in managing this issue, the terms of the debate will end up being set by others, many of whom are less interested in what we contribute to progress in health.