Celgene, Merck & Co. Prime Examples of Novel Science "Renaissance," Says VC
January 29, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Big Pharma is finally taking bets on novel science and their faith in the space is creating a “renaissance” in biotech that is extremely exciting for venture capitalists and the broader scientific community worldwide, Julie Papanek, a principal at Canaan Partners, told BioSpace Thursday.
Papanek, a former Genentech staffer who worked on commercial brand plans, forecasting and recommending modifications to Phase III trials designs for marketed and pipeline oncology products for the company, is now on the VC side of the business. A graduate of Stanford's Graduate School of Business, where she was the teaching assistant for the Biodesign Innovation course and an officer of the Healthcare Club, Papanek now scours the market looking for just the right deal.
“The 2015 outlook for Canaan is focused on novel drug targets and new modalities. We continue to look at areas of high unmet medical need such as Hep B, which I think is the next Hep C, particularly one company, Novira. We are also looking at other anti-infectives start-ups,” said Papanek.
Indeed, Canaan backed four out of the last 10 antibiotics approved by the U.S. Food and Drug Administration (FDA), which has established them as the early stage leaders when it comes to anti-infectives and antivirals.
“All of that space is really coming back into interest, exemplified by the Cubist Pharmaceuticals, Inc. acquisition by Merck & Co. ,” said Papanek. “Part of the momentum is that the FDA has created incentive programs, and part of it is that antibiotic resistant bacterial infections have progressed to a crisis level.”
She told BioSpace she is delighted by the amount of interest large companies and investments firms are showing in novel science.
“For us, it’s always, how can a company develop a new type of drug modality that allow you to go after those novel targets? We’ve had traditional chemistry and biological approaches for a very long time, but that’s not been enough. That’s limited where therapeutics have gone in the past,” she said. “Now we are seeing that there’s a resurgence of gene therapy, vaccine companies, and other approaches you can go after high medical need with new science.”
Companies that in the past like Merck or Pfizer Inc. that may have shut down units that weren’t necessarily producing results have roared back into the novel targets marketplace, as they realize they can follow the “Celgene” model and create science in-house—instead of paying to catch up later.
“Now, you’re seeing companies take large bets on novel science. And if you don’t have it you’re going to have to pay to catch up,” Papanek said in the interview.
“I’m intrigued with how Celgene is pursuing its deals--they’re creating a number of option agreements that ensure they won’t have to pay high prices for those pathways later,” she said. “Celgene is a standout in terms of volume of pathways, targets and differentiated products in oncology that they’re taking bets on. [It’s] just really amazing stuff.”
With the Nasdaq Biotech Index gaining 11.2 percent in the fourth quarter, adding to another solid total return of 34.4 percent in 2014, buzz about a “biotech bubble” has been consistent. But Papanek said that as long as companies continue to have sound fundamentals, the sector’s growth is a net positive, because it will be driven by new product launches, important regulatory approvals and the positive outcome of key pipeline drug candidates.
“We wouldn’t say the market is frothy. There are a number of companies that definitely have created the value by addressing unmet needs with tremendous science. It’s a renaissance of healthcare. There’s a resurgence of platforms that were considered abandoned,” she said.
“Now, is every company in the market doing that right now? No. So we are looking for companies that are creating durable value, irrespective of the market.”
Venture capitalists continue to be amazed at the amount of early stage interest from Big Pharma, said Papanek, and Canaan continues to applaud what had been much larger, traditionally conservative companies for their willingness to embrace a dynamic biotech ecosystem.
“I’m just really impressed at the range of diversity and I’m impressed that pharma is taking risks. We are excited about what we’re hearing that Big Pharma wants to buy, which is often not in an exciting therapeutic group,” said Papanek.
“They’ve moved down to Phase 1, sometimes even preclinical, acquisitions. I hope they’ll continue to want to back those assets and also collaborate with venture capital on Series A and early stage life science deals,” she said. “Gene therapy, Alzheimer’s, vaccines—they are all part of a renaissance.”
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