Analyse

Are European biotechnology companies sufficiently protected?

Le 19 juin 2015 par Portail de l'IE
biotechnologie genfit jean christophe marcoux ims health

Jean-Christophe Marcoux, consultant at IMS Health, is addressing some of the key challenges European biotechs face today, and he does it from an infowar perspective. This gives a great opportunity to understand what’s at stake, and it provides key insights on strategies that can be used. It’s also a call for action to all European players willing and able to preserve patients’ interests.

European biotechnology companies have been subject to an increasing level of attention recently. One obvious illustration of this phenomenon is related to the journey many of them have made on stock markets, be it Euronext or Nasdaq. This level of interest is justified by the promises they hold for patients, healthcare providers, payers, and of course investors. A direct consequence is that economic predators see these innovative companies as ideal targets, and what the French biotech Genfit had to face a few weeks ago – to take just one example – illustrates this reality. But beyond this particular case, the crucial question is this one: are European biotechnology companies well protected today?

The French Portal of Competitive Intelligence has decided to look into this question, and had a long conversation with Jean-Christophe Marcoux, expert in competitive intelligence and information war. He is based in Brussels (Belgium) and is senior consultant for IMS Health, a well-known international player when it comes to understanding the complexity of the healthcare business environment and the associated ecosystem.

Portal: First of all, how would you define biotech industry today, and what key characteristics should be kept in mind?

Jean-Christophe Marcoux: For our specific purpose, I propose to define biotechnology industry as the aggregation of all individual business companies that use living systems or organisms to develop complex molecular entities, as opposed to chemical synthesis of simple entities. In the pharmaceutical industry value chain, such companies have been playing an increasingly important role in recent years, because major pharmaceutical multinationals have on their side increasingly decided to outsource risks related to fundamental research. This trend is due to the precautionary principle, and its direct consequence is materialized by stricter guidance from FDA and EMA aiming for an optimized patient safety. This evolution led to higher R&D costs as well as longer drug development leadtimes for all industry players. Today, a typical journey for a biotech company starts with a series of clinical trials, from pre-clinical to phase 2 or 3. Then, if/when risk is gone thanks to a positive risk/benefit profile of the molecule, three options are typically considered: sell the company, license the molecule, or transform the company into a bigger biopharma, the latter being an increasingly popular choice (ex. Gilead, Amgen, Celgene, Biogen, etc.). 

A second key element to keep in mind when looking at biotechnology industry is related to some important constrasts that exist between the EU and the US. A simple observation of cultural differences shows different mindsets and perceptions on risk and innovation, which probably explains the drastic gap in market capitalizations on Euronext vs. Nasdaq.

And a third element to point out is the explosion of the global capitalization of the biotechnology sector over the last 12 months, especially in the US, which is suggestive of a financial bubble. But if this is certainly a legitimate concern from an investor point of view, it is however important to put things into perspective. While some biotech companies might indeed be overpriced – especially those still in phase 1 or 2 – many others entered phase 3 or even marketed their molecule already, meaning that risk is strongly reduced if not completely eliminated. Besides, companies such as – again – Gilead, Amgen, Celgene, or Biogen have already proved that therapeutic innovations can be turned into real financial successes. In conclusion, a comparison with what happened to the tech bubble back in 2000 does not seem really appropriate. 

Portal: Can you give us examples of biotech companies that are currently eyed by big pharma players?

JCM: In Belgium, to take an example that is quite close to me, many players are currently in the process of developing high potential solutions, such as Galapagos, now on Nasdaq, Ablynx, already working with partners such as Abbvie, Merck, Novartis or Boehringer Ingelheim, MDXHealth, recognized as a leader for prostate cancer and epigenetics, or Celyad (ex Cardio3 biosciences), very active in cardiology.

In France, researchers are also working on promising innovations, boosting the potential of companies like Innate pharma, which recently partnered with AstraZeneca in oncology, Cellectis, specialized in immunotherapy/oncology and now on Nasdaq, DBV Technologies, providing a patch preventing peanut allergies, Adocia, well known for its expertise in insulins, or Erytech, working on solutions against acute lymphoblastic leukemia.

The Nordics or Germany, just like many other European countries, also generate several innovative health solutions. A quick tour on the European Biotechnology Network website gives an idea on what is happening today.

Portal: But the French contender in NASH, Genfit, is the one that particularly gets your attention: why?

JMC: Genfit is indeed an interesting case. With only 80 employees, it already receives a high level of attention, and the first reason for it is the potential of its main molecule GFT505, now also known under the INN « Elafibranor ». The second reason is related to the fact that this molecule targets NASH (Non Alcoholic SteatoHepatitis), an untapped market estimated at more than $30 billion by analysts.

Genfit is the result of a virtuous ecosystem that finds its origin in the North of France, back in 1995 when M. Jean-François Mouney, then head of the economic and scientific parc Eurasanté provided guidance and leveraged both private and public strengths available at the time to build what is now a very large European pole of healthcare innovation. M. Mouney is now Chairman and CEO of Genfit.

If NASH is such an important disease area, it is because of its direct relation with the escalating obesity issue, which is obviously well known in the US, only emerging in EU according to WHO (predicting a real epidemic by 2030), and definitely also existing in Asia where « Fat China » is a worrying reality. Besides and equally importantly, patients are left with no cure today since no drug has been approved for NASH so far. Yet the medical need is certainly there, confirmed by the status of « breakthrough therapy » given by the FDA to a first contender in NASH. It’s also interesting to note that because NASH is a silent disease, diagnosis will be a major driver to realize the opportunity. In this respect the investment made by Genfit on biomarkers – as non-invasive diagnosis solution – goes in the right direction and might become a key differentiator.

Having said this, what makes GFT505/Elafibranor a serious contender in NASH is also the positive feedback received from the scientific and medical community, giving the molecule a strong flavor of potential blockbuster. First, its safety profile – a crucial element for the regulatory agencies, especially when it is about treating a chronic disease – is demonstrated by Phase 2b results. Then, its efficacy in the most severe patients (NAS≥4, i.e. 85% of the NASH population): not only against placebo, but also when compared (with comparable groups of patients) to the other drug under development, obeticholic acid (OCA), despite a shorter clinical trial for GFT505. GFT505’s pluripotent profile also open doors for an interesting role in the management of cardio metabolic parameters.

But if Genfit is so emblematic in Europe today, it’s also because the gap between the company’s medical potential and its market capitalization as compared to its main competitor is difficult to justify. Genfit was « only » valued €1,6 billion a few weeks before the publication of its phase 2b results, while Intercept – the company developing OCA – was at the same time capitalized at about $7 billion. Biotechnology companies with molecule(s) in phase 3 can obviously not be evaluated against the financial benefit they generate, and are rather evaluated against their potential, which is related to (a) market size, (b) competitive environment, and (c) their relative strengths. While it is obvious that investment in early stage biotechnology is often risky, a reduction of the level of risk typically generates positive market reaction, which was far from the case for Genfit, considering the surprisingly negative – and also extreme – reaction of the market after the disclosure of the results. It therefore raises important questions, and several elements seem to be indicating that an orchestrated attack has somehow targeted Genfit for the likely benefit of players seeking an economic profit.

Portal: So you consider that Genfit’s high potential in NASH turned the French company into a primary target: how do you come to this conclusion?

JCM: First of all and to be clear, when it comes to economic war, European observers need to protect themselves from developing meaningless conspiracy theories. The best approach to avoid this risk is to observe facts with distance, without paranoia, but without innocence either, meaning a certain level of cynicism is recommended given the fact that we live in a world where « business is business ». In other words, some players are tough and unscrupulous, even though they act within legal boundaries and adopt a friendly stance. 

With this in mind, let’s consider the context around Genfit before the disclosure of its phase 2b results:

  • Main competitor – The first contender in NASH is the US-based Intercept, developing the OCA drug. OCA seems efficient but at the same time raises serious questions on its safety profile. Such concerns expressed by the medical community potentially jeopardizes the launch of a phase 3 since both the FDA and the EMA are very strict on cardiovascular side effects. Moreover, the management of Intercept itself is in a difficult situation, since a class action has been triggered in the US, justified by what seems to be a truncated press release about the success of the FLINT study (phase 2b of OCA): indeed, the day after the announcement published by Intercept, the NIH had to publish a correction in the Wall Street Journal, providing additional details hidden the day before, and shedding a different  light on the FLINT results.
  • Players – Beyond Intercept, other stakeholders are also involved, such as some major investors and some financial analysts, all sharing common interests.
  • Capitalization – Just before the announcement of the GOLDEN study (name of the Phase 2b for GFT505/Elafibranor in NASH) results, Intercept weighted $7 billion, against only €1,2 billion for Genfit end of March 2015. At that time, such a difference could be explained – but partially only – by the Nasdaq/Euronext differential, as well as by the relative advantage of Intercept from a calendar perspective (phase 2b already published, breakthrough therapy designation already granted by the FDA).

Then, a close look at the sequence of events after the publication of the GOLDEN results provides insights into what might have really happened:

  • March 27: Despite the good results disclosed, welcomed by Professor Dufour from the EASL governing board (« GFT505 (…) shows impressive results in phase 2b randomized controlled clinical trial »), Genfit stock loses 44% in one single day, based on analysts’ comments ignoring completely the overall content, really positive, of the press release, and focusing exclusively on what might be considered as a communication weakness. This oversight is surprising, especially coming from professionals able to understand the impact and the medical dimension of the GOLDEN results, and therefore the market potential behind.
  • April 24: At 13:30, i.e. the theoretical end time of the « Analysts and investors meeting » organized by Genfit aimed at providing additional elements of proof on GFT505 qualities (via three independent experts, and in the context of the international convention on liver disease in Vienna), the stock is once again seriously attacked while (a) it was gaining 6% in the morning after the press release disclosing – for legal reasons – the exact same content as the meeting, (b) the meeting itself is actually not yet over, and (c) no piece of news has leaked out of the room yet.
  • In both cases, volumes exchanged are very important, the timing is extremely precise, and negative resonance over social media is somewhat exaggerated and therefore suspicious.

Portal: Why such a destabilization attempt? 

JCM: Looking at scientific elements available in March/April 2015, the situation of Intercept did not seem too bright, given the impending arrival of GFT505, potential threat to OCA due to its expected advantage in cardiometabolic protection. Intercept-involved stakeholders – investors and analysts alike – were therefore in a situation where weakening Genfit could have been seen as the only way forward. The rather challenging position of the American contender seems to be confirmed by the phase 3 design of OCA (REGENERATE study), disclosed on May 19:

  • This trial design is indeed aligned to what Genfit designed for its own phase 2b, i.e. « reversion of NASH without worsening of the fibrosis », while Intercept primary endpoint for its phase 2b was only « reduction of NAS score by a minimum of 2 points ».   
  • Intercept has to include an arm at 10mg only, which seems to confirm that cardiovascular issues are a real concern, the idea probably being to reduce side effects, but the risk associated being of course a limited efficacy.
  • In addition, the clinical trial will have to be carried-out in an international multi-site setting, which is something new for Intercept (its phase 2b was only conducted in a limited number of sites in the US) while Genfit had already and proactively decided to remove ethnic/geographic/climatic bias from its phase 2b.
  • OCA will also have to be tested on an unexpected large number of patients, here again reinforcing the idea that cardiovascular side effects are a concern on the FDA side.
  • Last but not least, the phase 3 study is designed with 2 co-primary endpoints (the other being « reversion of fibrosis without worsening of NASH »), which obviously creates a higher risk of missing the target.

Portal: In this context, Genfit’s future is still bright, but what about other European biotechnology companies?

JCM: The Genfit example is indeed suggesting that other European biotechs could be similarly targeted, reinforcing the need to develop some kind of awareness around the risks they are exposed to. And here an interesting parallel can be made between what happened to Genfit at EASL congress, and what happened to another successful French biotech, Innate Pharma, at ASCO congress, where a negative note from an analyst – apparently unfounded – triggered a sharp decline of the stock value. Here again, nothing can be proven, but doubt is allowed.

It is actually not so complicated for a well-organized system to use stock market mechanisms to its own benefit. HFT (High Frequency Trading) is now common and its potential impact has been demonstrated in 2010 (flash crash). Pre-programmed robots can execute transactions on a predefined timing, and hedge-funds can use their power to act in a hidden way in order to orient stock. For instance, looking at Genfit closing price post-EASL shows rounded values three days in a row, which is probably not a total coincidence.

The role of financial analysts is another element that should not be underestimated, since they can really influence stock value, considering their – almost – direct impact on all non-specialist investors who tend to behave as simple followers.      

Last but not least, from a cultural point of view, economic war seems to be more of a reality in the US than in Europe. This is at least what the German-supported US spying operation on European companies and officials by NSA is indicating. The European Commission’s investigations and conclusions about Google’s competitive behavior reinforce this sentiment. Hence, a crucial question comes to mind: is Europe ready to really protect its research programs? If the willingness to collaborate and develop collective intelligence – in order to get stronger – is clearly there (European Biotechnology Network), it is not entirely sure that the Old Continent is really ready to anticipate risks of sophisticated maneuvers. The risk for Europe is to lose some of its most successful research teams, and the risk for patients is to become indirect victims; the pace of scientific research being disturbed by external forces.   

Portal: What are your conclusions and recommendations?

JCM: First I’d like to comment on what the economic war implies when it comes to healthcare. And here we should be clear. The economic war is certainly not an issue in itself, because it is the first and strongest driver for innovation. And for patients, innovation means better treatments, better health solutions, and ultimately better outcome. In that respect it does not really matter whether the winner is American, Chinese, or European. Having said this, whenever the economic war is based on disinformation or deception, there is a need to react, because the ultimate priority is to preserve patients’ interests. To come back to GFT505/Elafibranor, if the drug development is put at risk, or if the process takes longer because of unfair manipulations, the first victims will be patients: more liver transplants, more cardiovascular complications, more liver cancers.  And the second victim will be the society as a whole, because it will have to bear all related extra costs.

It is therefore important that all stakeholders play their role, remain alert and vigilant. Institutions must defend citizens and protect all players that are helping these citizens to live a better life. Physicians should proactively ensure that information spread around new treatments is true, and well understood. Media should not ignore real topics, even if the temptation is sometimes strong to comment more futile pieces of news. And financial players should do their job in the interest of their clients, but also with some sort of consciousness about what their positions imply in terms of public health. Luckily, in the Genfit case, several elements indicate that patients’ interests will be preserved. First, Genfit board seems fully aware of what is potentially happening. Then, investors who do not speculate but invest based on fundamentals know what they do, and the most recent private investments in Genfit indicate an increased level of anglo-saxon presence. No doubt that big pharmas that might co-market GFT505/Elafibranor do also recognize the potential of the molecule. And in the end, the final word will anyway be for the FDA and the EMA, and they will undoubtedly play their role, as independent regulators seeking to improve patients’ lives above all. And by then, country-level institutions such as – in France – the Département de la sécurité économique driven by Eric Delbecque, will certainly have all possible threats clearly mapped on their radars. 

The second element I would like to point out as a conclusion is the need for social media monitoring in healthcare. With the Genfit case we have briefly touched upon the value of listening to what is being said online from a strategic perspective. This activity is indeed essential to understand the digital landscape and influential networks: it helps to identify who says what, when, via what preferred channels, using what specific semantic, leveraging which viral element, etc. But to go beyond this dimension, and come back to the patient as a central point of attention, it is also important to understand that  social media – as one element contributing to the massive shift towards digital/connected healthcare – represents a way to improve medical outcome. It is clear that patients and their families, KSAs (Key Social Advocates), doctors, KOLs (Key Opinion Leaders) and nurses did not wait to listen, produce and share content online. And as a privileged player here, I can tell that patients’ and other stakeholders’ voices are finally being heard. Active social listening has indeed almost become a « new normal » thanks to advanced solutions like Nexxus Social Media, considered by IDC as a key leading solution. The first reason is that it provides a valuable view on all unmet needs along the patient journey: symptoms, choice of a doctor or hospital, diagnosis, therapeutic choice, access to treatment, ease of administration, efficacy or side effects, etc. This helps to fuel thinking when it comes to designing innovative solutions, such as for instance new mobile apps for patients, new services for doctors or hospitals, or new devices for nurses. The second driver for adoption of this solution is related to the possibility to increase patient safety thanks to an in-depth monitoring of all possible adverse events declared online, performed through an optimum blend of technology and human intelligence. Experience and reality show that there are actually not so many adverse events – which actually does not really come as a surprise – but at least the solution provides a safety net for all players, who can be sure to follow specific regulations imposed by the FDA and the EMA. 

About IMS Health

IMS Health is a leading global information and technology services company providing clients in the healthcare industry with comprehensive solutions to measure and improve their performance.End-to-end proprietary applications and configurable solutions connect 10+ petabytes of complex healthcare data through theIMS One™ cloud-based master data management platform, providing comprehensive insights into diseases, treatments, costs and outcomes.

The company’s 15,000 employees blend global consistency and local market knowledge across 100 countries to help clients run their operations more efficiently. Customers include pharmaceutical, consumer health and medical device manufacturers and distributors, providers, payers, government agencies, policymakers, researchers and the financial community.

More information on www.imshealth.com