Boehringer’s Philosophy Of Deal-Making: A Conversation With Ioannis Sapountzis And Scott DeWire

Boehringer’s Philosophy Of DealMaking: A Conversation With Ioannis Sapountzis And Scott DeWire

BY JOSEPH HAAS

Executive Summary

The German pharma’s top business development execs explain how they balance IO and targeted cancer therapy in their portfolio, views on major M&A and how to make deals during a global pandemic.

In an interview with Scrip, Boehringer Ingelheim International GmbH’s top business development executives offered their views on conducting transactions amid a pandemic, why a company usually focused on partnerships has bought three cancer biotechs in recent years, and how it generally views major M&A.

Having been with the family-owned firm for about 15 years, Ioannis Sapountzis has graduated from leading US business development and licensing to overseeing BI’s global deal-making activity. (Also see “Boehringer Ingelheim’s Partnering Focus: An Interview With Ioannis Sapountzis” - Scrip, 30 Jun, 2017.) Stepping into his shoes earlier this year to head up US business development and licensing was Scott DeWire, a five-year veteran of BI.

In a posting on BI’s website heading into BIO 2020, DeWire discussed BI’s efforts to help grow local biotechnology ecosystems in the US and internationally. He said he is often asked for advice by young entrepreneurs at the company’s Grass Roots Initiatives events, which are designed to develop biotech hubs through mentoring, an academy and a competition. (Also see “Big Pharma BD Execs Tell Start-Ups: Don’t Be Afraid To Ask Us For Help” - Scrip, 28 Feb, 2020.)

“I always say the same thing: Focus on what it is that you do better than anybody else,” DeWire said. “Don’t try to do it all. Just figure out what your secret sauce is, what’s your value proposition, and then put all your effort there. If you can clearly define that, then please get in touch with me and we can talk further about partnering to develop the next generation of breakthrough medicines.”

In past conversations, Sapountzis told Scrip that BI’s deal-making sweet spot is partnering on early innovation, but that doesn’t mean the company doesn’t do M&A too. (Also see “BI’s Business Development Focus Remains On Early Collaboration” - Scrip, 20 Jun, 2018.) Making the deal structure fit BI and the partner’s needs is the company’s ultimate goal in business development.

Sapountzis and DeWire discussed that idea and more in a wide-ranging interview on 9 June, which has been edited for brevity.

Q: BI has had a particularly busy year of dealmaking. Why is that?

A: Sapountzis:

I think 2019 was an outstanding year for BI period, on all fronts, beyond the external innovation front. You’ve seen our increased deal-making and it’s also true that we have continuously grown our emphasis on external innovation. Now, about 50% of our pipeline comes from external innovation and last year, in particular, we were successful in making a large number of deals that were in preclinical or early clinical development stage.

That has been the result, I think, of three things: One is our continued effort to identify the best opportunities that are out there; the second is a strategic initiative to become more of a partner of choice in the world; and the third one is making sure that collaboration and bringing together like-minded people and strengthening the concepts that a partner has identified to BI has become front-and-center to every scientist in our organization. I think it’s a bit of a cultural change, it’s getting the right processes and then also getting the right assets, so all of these together have helped us in the last year and early this year to be very active.

A: DeWire:

What you’re seeing is steady progression in increasing our partnering activity. This is building on several years of realizing that we need to partner with the outside world, bring all these great minds together scientifically.

We are increasing our internal metrics for working with partners on the outside and 2019 was an exceptional year when we were able to not only identify good partners but then act on those partnerships and bring them to transaction. We hope for 2020 and 2021 to be just as productive as 2019.

Q: One of your noteworthy deals recently was the acquisition of Northern Biologics Inc. (Also see “BI Strengthens Research Efforts

In IO Stromal Biology And Retinal Disease” -

Scrip, 14 May, 2020.) My sense from talking in the past is that BI has been more inclined toward partnering than toward acquisition.

Has that changed at all, and if you are more interested now in acquisitions, is BI is

looking for bolt-ons or even possibly largerscale acquisitions?

A: Sapountzis:

We are agnostic to transaction type as long as it’s the right asset. Actually, when an acquisition is the right thing to do, we do it.

Here, it’s really about not acquiring a company to buy ourselves sales or buy ourselves out of some near-term challenges we may face.

We buy a company because it makes sense to have the asset, to make sure that we build something together. If M&A is the transaction type that is right for the project, right for the partner and right for BI, then we’re not shy at all on executing an acquisition.

A: DeWire:

What you’ve heard in the past is that we prefer a partnership model but we’ve done three acquisitions in three years in the oncology space, between ViraTherapeutics GmbH, a company with an oncolytic virus out of

Innsbruck, Austria; Amal Therapeutics SA, a cancer vaccine company based in Geneva,

Switzerland; and now Northern Biologics, more of a myeloid- and stromal-targeting NME type of company backed by Versant Ventures and based in Toronto. (Also see “Boehringer

Ingelheim To Boost Cancer Immunology

Portfolio with Novel Cancer Vaccines “ - Scrip, 16 Jul, 2019.)

That said, we make the deal structure fit whatever’s best for the partnership. In the first two examples I gave, those are platform technologies that we see could be deployed broadly across a number of different types of tumor indications, aimed at a number of different antigens. In those cases, an acquisition made sense because we wanted to capture all of the know-how, keep the team and the feeling together to execute on those platforms. For Northern Biologics, it just turned that even though it was more of an asset-centric deal when the two parties came together, acquisition of those programs and the Northern Biologics entity is what made sense for both sides. We’re definitely open for licenses, options, things like that, but really when those opportunities arise, we make the business structure fit the situation.

A: Sapountzis:

To your question of whether we’d do largescale M&A, recently there was some talk about

Gilead Sciences Inc. maybe being acquired

AstraZeneca PLC. (Also see “AstraZeneca Gilead

Merger Intriguing But Unlikely” - Scrip, 8 Jun, 2020.) There is no notion for us that would say

“let’s not think about this.” What we want to continue to do is make the deals that are right for the company, that fit to our strategy and that are not driven by short-term goals that we want to achieve. In everything we do in terms of partnering, we want to achieve a broader goal.

We had a large-scale acquisition in the past, not in our pharmaceutical business, but a couple of years ago, we swapped our consumer health business to Sanofi for their animal health business, building real champions in each of those pockets where we alone as two companies holding portfolios in animal health and consumer health were not able to have the critical mass. (Also see “Sanofi Adds Consumer Brands, Grows Footprint With Boehringer Ingelheim Deal” - Pink Sheet, 28 Jun, 2016.)

So, it made perfect strategic sense for us. If we find an opportunity that makes perfect sense for BI, I wouldn’t say that this is not the type of transaction that we would entertain. It should always be driven by the value that we think the deal could create for patients, why BI should be involved in this and continue to maximize the value of the opportunity.

Q: We’ve heard that as more business development is being done virtually during the pandemic, it’s created some efficiencies and industry is getting better at doing business this way. (Also see “Biopharmas

Manage To Deal During Pandemic” - Scrip, 9

Jun, 2020.) How has COVID-19 affected BI in deal-making?

A: DeWire:

The short answer is that there are pros and cons to the COVID-19 situation for deal-making.

With the Northern Biologics deal, we had set the negotiation process just barely in motion around the Christmas holidays of 2019, we’d met with the CEO and the business officer and determined that maybe this was a good thing that we wanted to do. And then right after

JP Morgan, we got out of that frenzy and the

COVID-19 situation set in.

For us, we were able to push that deal through terms negotiation, internal alignment and the various contracts that had to be negotiated and agreed to by the end of April all by phone. We didn’t even do much Zoom there. One positive was that everybody’s availability was just fantastic because we’re all working at home; time zones were really the only limiter, people on both sides were quite flexible, there were some advisers for the other side on the West coast and we had legal and contract help from the European side, so we were spanning nine hours of time zones, but everybody made it work around their work-from-home, work-life balance and things moved very quickly in terms of availability.

Now, there are certain things you can’t do over the phone, like site visits, manufacturing audits. Northern Biologics was using a CRO to make its clinical supply of material and we had to essentially put that audit on hold until after signature. Things like that you can’t do, but we were able to push ourselves a lot on how we could do a deal virtually. Virtual data rooms, off-site calls. So, there were definitely pros and cons.

I would say overall, our deal flow at BI has been steady through COVID-19, and I think this is reflected in the industry too. It’s likely that a lot of the COVID-related deals helped buttress those figures but even with that, there’s been a lot of deal-making across the industry during this time. It really hasn’t slowed down much.

A: Sapountzis:

It’s also difficult to predict how effective digital meetings like BIO will be for continuing to allow us to conduct initial conversations. BI is very science-driven when it comes to selecting our opportunities, so we participate in a lot of scientific conferences. Scott would have been at ASCO in other years, now he was stuck in front of a computer watching presentations.

A: DeWire:

From a business development perspective, virtual ASCO wasn’t quite [the same] because so many of the meetings that the business development people have are surrounding the event rather than at the seminars or poster sessions. Usually, during my time at ASCO, I’m running back and forth between three or four hotels and coffee shops and meeting people, and I’m lucky if I get to attend one actual seminar. So, the fact that all the seminars went off virtually just fine, I think that’s just great that they were able to adapt that, but I’m a little more skeptical on the business development side.

Q: Last year, BI did a deal with Yuhan Corp. in non-alcoholic steatohepatitis (NASH). (Also see “Boehringer Adds Yuhan’s First

In-Class Dual Agonist To NASH Portfolio” - Scrip, 1 Jul, 2019.) There’s some upheaval

in that space lately – Genfit SA had its disappointing Phase III data readout and now Intercept Pharmaceuticals Inc. has seen it timelines for approval pushed back. (Also see “Intercept’s NASH Approval Timeline Shuffled Again With FDA Delay” - Scrip, 22 May, 2020.) Does BI sense an even greater opportunity in NASH now?

A: Sapountzis:

I think we are all cognizant that a lot of the drugs that have been initially studied in NASH may not have been built up with a scientific value proposition, with lab work and screening and then bringing all of that understanding forward. Those were assets where we saw potential in NASH, but they were not designed to help NASH patients in the first place. With the latest developments, we see that some of these fibrotic, inflammatory and steatosis concepts that they tried to address may not yield the benefit that we all wish to see in those patients.

What we see more now is combination concepts or early-stage concepts that address specific mechanisms that we think underly the disease. That’s where BI sees a great opportunity, where our portfolio is built to address all the critical points of NASH, either through combined molecules like in the Yuhan deal or combining individual concepts and addressing fibrotic, inflammation and steatosis components of the disease and through that providing a powerful, meaningful effect or cure in patients. (Also see “Boehringer Ingelheim Confident Of A Happier Ending In NASH Than HCV” - Scrip, 5 Jan, 2018.)

For us, it’s not really about winning near-term but about bringing much needed therapies to patients and we are committed long-term to this. While Yuhan was an important partnership, in January, we did a second one in Asia with Enleofen Bio Pte. Ltd. where we partnered on an interleukin-11 antibody, also a central node in fibrotic diseases. We think this has a lot of potential in many diseases including NASH, but also beyond NASH in fibrotic diseases of the lung or the gut.

Q: In cancer, what does the acquisition of

Northern Biology and its work in stromal biology add to what BI already was doing in immuno-oncology? And what is your philosophy on how you split your cancer R&D focus between IO and non-IO approaches?

A: DeWire:

We continue to be focused [on] what we call cancer’s big four – the four undruggable targets that we think could have the most impact for patients and address the most unmet need.

These are MEK, KRAS, p53 and beta-catenin. (Also see “Boehringer Ingelheim Snaps Up

Lupin’s MEK Inhibitor For Difficult-To-Treat

Cancers” - Scrip, 4 Sep, 2019.) We continue to be very focused there on cracking those targets using new technologies, things like PROTACs [proteolysis targeting chimera] to get at some of these protein-protein interactions and degrade some of these proteins.

On the IO side, we’re looking to go after the segment of patients who are unaddressed by current checkpoint therapies, current approved IO therapies … a cold-to-hot-tumor strategy. (Also see “Deal Watch: Vir Partnering With Alnylam, WuXi On Coronavirus Treatments” - Scrip, 5 Mar, 2020.) There are many different arms of our IO strategy – one is to increase myeloid cell activity. This would be your novel immune antigen-presenting cells and one of the assets from Northern Biologics is in this myeloid

space. Another arm of that is this tumor stromal concept – the idea that surrounding certain tumor types there is a mass of extracellular matrix that almost forms a wall or a net around the tumors. This is both a physical barrier in that it’s hard to get immune cells through and it’s an immunosuppressive barrier too. The idea with the lead program from Northern Biologics is this an anti-periostin antibody that will disrupt this tumor stroma and allow penetration of the right immune cells to get in there and do their job.

We think there’s a lot to be gained overall in our cancer strategy of having these two arms – the targeted therapies and IO – and reaping the benefits of smart combinations between those two, so that’s an area of synergy that we’re always looking for.

Q: What can you tell us about the recent deal with CDR-Life and the emphasis on retinal disease? [On 13 May, BI obtained worldwide license rights to compounds derived from

CDR-Life’s antibody fragment platform against a specific target for geographic atrophy, a condition caused by age-related macular degeneration. The Swiss biotech can earn up to €475m (about $531m) under the deal.]

A: Sapountzis:

This is one of the new areas of interest at BI that we have highlighted this year. It’s an area of interest where we’re building on our strength in diabetic retinopathy and how we have been working from our diabetes franchise into those diabetic complications, [which] has now become a more dedicated, committed path to strengthen our retinal health portfolio internally, but also through partnerships.

We have an emerging pipeline of clinical-stage assets, preclinical and research stage built through internal discovery and also through partnerships and we want to continue to apply the knowledge that we learned and take a holistic research approach into what targets the key mechanisms and the pathogenesis of those retinal diseases. There, I think, with our partner CDR-Life, we found a great molecule and program that we think will bring benefit to patients in geographic atrophy, one of the five focus areas that we have selected to focus our efforts on in retinal health.

There was another deal last year with Inflammasome Therapeutics Inc. also going in the direction of retinal health for intravitreal drug delivery. (Also see “Deal Watch: Another Delay For Roche/Spark, While FTC Ups AbbVie/ Allergan Merger Scrutiny” - Scrip, 3 Oct, 2019.) It’s an ongoing process and we will continue to work and collaborate with companies in the retinal space.