Astellas VP-Business Development Masaki Doi: An Interview With “The Pink Sheet” DAILY (Part 1 of 2)

Japanese pharma exec discusses Astellas’ global licensing strategy, the FibroGen deal, and the changing paradigm of Japanese deal flow.

"The Pink Sheet" DAILY visited recently with Astellas Pharma VP-Business Development Masaki Doi at the company's headquarters in Tokyo to talk about the Japanese pharma's global licensing strategy and the changing paradigm of Japanese deal flow.

Doi has served as VP-Business Development of Astellas (previously Yamanouchi Pharmaceutical) since January 2003. Prior to that, he founded Yamanouchi Venture Capital (now Astellas Venture Capital), and served as president for two years. He started his career at Yamanouchi as a scientific and strategic planner involved in evaluation and decision making for external partnerships.

[Editor's note: This is the first of a two-part interview. Look for the second part in the next issue of "The Pink Sheet" DAILY. For additional coverage of Asia, visit ¹ Pharm Asia News, F-D-C Reports' new free site for Asian biotech and pharmaceutical news.]

"The Pink Sheet" DAILY: Did the merger between Yamanouchi and Fujisawa change the way you do business? Did it make you look for more deals globally as Astellas?

Masaki Doi: As far as my department is concerned, basically no, because I originally was at Yamanouchi, and we have always been chasing global deals. But maybe that is true with our size and infrastructure - our global infrastructure. Maybe that makes it easier to talk to us if the other company wants to look for a global partner, or a partner who has a deep pocket and a global cash flow. In that sense, it has expanded our flexibility to do deals, both in terms of the number of deals and the size of the deal we can afford to do.

But as far as the scope and the aspiration are concerned, there is no change. We have been a global player, and we want to be global.

"The Pink Sheet" DAILY: How important is in-licensing to your strategy at Astellas?

Doi: It is absolutely important. In reality, we depend on the revenue from in-licensed compounds. It holds true on revenue both now and also the future. We are proud that we have an extensive and rich pipeline compared to other Japanese companies. But we still have several therapeutic areas where we would rather expand our pipeline by exploring different kinds of opportunities, because sometimes the normal discovery process will take a long, long time.

We have been active at in-licensing both in our Yamanouchi days and in our Astellas days, and we would like to keep this momentum. We have cut ten major deals since Astellas' inception. We are proud of the speed of our activities, and again, we would like to keep this momentum.

"The Pink Sheet" DAILY: Are there particular therapeutic areas that you are concentrating on for your deals?

Doi: Yes. We are looking for deals in selected areas from a [business development] perspective. These include urology, transplant/immunology - those two come from our heritage areas. And in addition to them, we are looking for compounds in diabetes/cardiovascular, CNS/pain, cancer, and very selectively, infectious diseases.

And why I said "selectively" for infections, we will not do [pneumonia-related] infections, but might do viruses or some other special infections where there is still a huge remaining unmet medical need that exists. We have also added cancer after we looked at the current level of growth of the cancer market, and still saw the huge unmet need remaining in that area.

"The Pink Sheet" DAILY: When you spoke at BIO-Asia this year, you made the point that Astellas considers itself a global company. Are deals like the one you have with Pfizer for Japanese rights to Lipitor the sort of deals that you would likely not do in the future as you try to build on your global presence?

Doi: We are a global player, and basically we would like to chase global deals. That is our basic policy. But we would still like to do Japanese regional deals or regional deals where we include the United States or Europe, as long as the deal is profitable.

[Astellas and Pfizer recently agreed that Astellas will retain Japanese marketing rights to Lipitor (atorvastatin) until 2016 (² (Also see "Astellas/Pfizer Settle Dispute Over Lipitor Rights In Japan" - Pink Sheet, 26 Jan, 2007.)).]

And if some deals only include Japan, we can do it, since we can exploit our current regional sales and marketing organization, which is very strong. And armed with that infrastructure, we can bring benefit to our partners and maximize the value of their product, which otherwise could not be done by a smaller company.

So, a direct answer to your question is that we are interested in both global deals and regional deals. We are flexible.

"The Pink Sheet" DAILY: Flexible, but still wanting global rights on deals?

Doi: Right. And the other blunt way of stating that ... is in the previous model, biotechs liked to first cut a Japanese deal to show their presence in the VC arena, and then by obtaining a slightly higher premium they could seek an exit strategy, which could be an IPO or a larger deal with big pharmas. There was a sense that sometimes they liked to actually use the Japanese deal as a stepping stone.

And no offense to my friends - I have a lot of friends in biotech - but that stepping-stone kind of model doesn't necessarily work for large Japanese companies. Because all Japanese big pharma, like Astellas, Takeda, Daiichi Sankyo, Eisai - all of the firmly established, large-size companies - are looking to come to the United States for deals, and all of us would like to do global deals.

"The Pink Sheet" DAILY: That's really a change from what's traditionally happened.

Doi: Yes.

"The Pink Sheet" DAILY: Have the recent Japanese mergers contributed to that change?

Doi: Right. In one aspect it is probably the mergers - it is that kind of general trend.

"The Pink Sheet" DAILY: Another thing you mentioned at BIO-Asia is that in an ideal world you would love to be able to do later-stage deals or deals with products already on the market, but in the "real world," there's now tremendous competition for those deals. How are you managing that situation to ensure that Astellas makes the right deals?

Doi: Maybe I can answer you in two ways. If a compound is at the late stage, say after Phase III or an NDA, and if the compound is really necessary for Astellas, and particularly if it could be a transformational step for Astellas, then sometimes the management likes to support us in paying a chunk of money. In that sense, our management is sometimes very courageous and we can make a very bold move. And that's one side of the answer to your question.

But even in those cases, basically there are companies who have deeper pockets than us and sometimes we can't match that money on the table. So that's what I mean at times by "the real world," because in a sense we are not the only players who may see value in what we see value in. So in that sense, if the opportunity is visible the competition is huge.

Back to the second part of your question, if it is an earlier-stage deal, we could differentiate ourselves from competitors in our flexibility. We are ready to accommodate partners' needs. We are ready to hear other voices - what is the aspiration, what is the hidden agenda, what do their board members basically want. We can use many types of facets and could be flexible for the structure of the deal, including involvement of a territorial split, copromotion arrangements, quid-pro-quo, research collaboration, equity capital contribution, etc.

"The Pink Sheet" DAILY: You started the VC arm at Yamanouchi prior to the merger?

Doi: Yes, five years ago. We named it Yamanouchi Venture Captal, now Astellas Venture Capital or AVC.

"The Pink Sheet" DAILY: How is the VC arm incorporated into your strategy?

Doi: They look at the very early stage companies. In one aspect, we use it as the voice of Astellas to the biotech and venture capital communities. It is a special and a very secluded community, and only certain persons can get in.

For instance, if we ever change our therapeutic focus, AVC will travel around and visit many VCs in the United States, who are our friends, and we could tell them that we have changed our therapeutic fields of focus.

"The Pink Sheet" DAILY: What does Astellas expect for its VC investments? Is there a right of first refusal?

Doi: No, we do not expect that. What we would like to claim is a Board observer right.

We just make an investment, then take a look at the progress. And eventually if everything goes well, the company might first want to talk to us even though we don't have anything in written rights. And we, to a certain extent, might be looked at very favorably because we know each other from a very early embryo stage of the program. That is really the kind of thing we expect from the investment.

"The Pink Sheet" DAILY : One of your partnerships that has generated a lot of attention is the one you signed with FibroGen for oral anemia compounds that could be worth more than $700 million. That was a deal that started off for Japanese rights, and then last year, Astellas expanded that deal to also get European rights and the Middle East and a couple of other regions, but not U.S. rights. Can you talk a little bit more about that?

Doi: To the audience who knows what the compound is, and where it's going to be marketed, it's a dream drug, really. Everyone wanted that drug, and still wants it. It's an oral erythropoietin (EPO) inducer, with a potential expansion of the indication, starting with dialysis, non-dialysis, chemotherapy-induced anemia, and we can foresee other potential indications in areas where injectable EPO has never been prescribed.

[The Astellas/FibroGen deal has been singled out by some observers as an example of how Japanese pharmas are changing the paradigm of global deal flow (³ (Also see "Japanese Mergers Provide Opening For Biotech Deals – Novartis Licensing Head" - Pink Sheet, 31 Jan, 2007.)).]

Also, you should not underestimate the growth in a number of the new territories included in the deal, for instance, Russia, Turkey....and those countries joining the EU...And those countries are all included in Astellas' territories.

And thirdly, there are many risk-mitigating structures included in the deal. A publicly disclosed part is that the deal is not only for one compound but for a series of compounds.

So there is a robust right for risk mitigation incorporated into the deal, and looking at the whole picture of future opportunities we think that it is a great opportunity. It was a transformational deal for Astellas.

"The Pink Sheet" DAILY: Could you talk a little bit about the competition for the FibroGen deal?

Doi: Yes. We were very fortunate that we cut the first Japanese regional deal in 2004. We formed a joint team between Japanese clinical development people, Japanese researchers, and FibroGen researchers located in the United States - South San Francisco.

They formed a joint team and worked together very closely And through those activities, our people addressed all of the concerns and issues that the FibroGen people raised. We showed the management of FibroGen we were committed to the success of the program. That earned the trust of the FibroGen company, and particularly their CEO, Tom Neff. They liked us very much.

I don't know how many companies they might have seen, how many U.S. or European big pharma, but in their words, we were the best experience they had in collaborating with big pharma or Japanese big pharma. When the time came that FibroGen had to think about European or U.S. partners, all the usual suspects came to them and put the money on the table. But Astellas had already earned the trust of Fibrogen management and the Board as well.

"The Pink Sheet" DAILY: So the existing relationship played a big part in closing the second deal?

Doi: That's right. My point is that the Board members and Tom Neff and the other management of FibroGen took a long time discussing what the products should cost. Meanwhile the Astellas people, particularly the scientists, are very serious, and our people are very good collaborators.

FibroGen came to the conclusion that, OK, we should pick Astellas. That's how our relationship helped, and how the second deal became a transformational deal. And sometimes regional deals work like that.

- Joshua Berlin ([email protected])