The Quest For Biotech Independence: Maybe It Isn’t So Quixotic After All

6/6/11Follow @xconomy

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meet demand from patients. Alexion, like Genzyme years ago, has begun to show that rare diseases can create big profit centers. Onyx splits the revenue from its first cancer drug equally with a Big Pharma partner, but it controls all the North American commercial rights to its second drug. And Human Genome Sciences owns half of a potential multi-billion dollar drug for lupus, and has shown interest in acquiring new molecules, moreso than getting acquired.

Vertex, Dendreon and Alexion all own 100 percent of the North American commercial rights to their lead drugs, which gives them control over their lead assets that other companies with Big Pharma partners don’t have. Onyx and Human Genome Sciences do 50/50 partnerships on their lead assets, although Onyx is in the driver’s seat for its second (potentially bigger) drug. And while many investors basked in the glow of Human Genome Sciences FDA approval this spring, the company moved quickly to advance its own pipeline, by obtaining a majority stake in a new cancer drug candidate developed by South San Francisco-based FivePrime Therapeutics.

What it says to me is that there are a handful of companies out there that are starting to show there is still a way to make it through the drug R&D gauntlet. They are built to endure, if they want to. Others are noticing. Exelixis CEO Mike Morrissey told me a few days ago that he thinks about how his company can craft a long-term independence strategy, and he’s been watching the other companies carefully to see how they are doing it.

“What all those companies have in common, and what we are doing now, is focusing on a single asset as the main value driver that allows you to build value in the company as you get better and better data with the compound,” Morrissey says. “You have to walk before you can run, and you have to run before you can sprint.”

Exelixis (NASDAQ: EXEL), with a market valuation $1.3 billion heading into today, has been richly rewarded in the past year since it made a painful round of job cuts and narrowed its focus from a wide portfolio of drug candidates down to essentially one whopper of a bet on a cancer drug.

There is plenty of risk in this strategy—namely, if your lead drug candidate fails, your company is pretty much toast. But investors have shown they can still get excited about new drugs that really make a big difference for patients in need. If biotech executives can personally make it through the drug R&D process with their nerves and stomach lining intact, they can still be drivers of their regional economies, employ lots of people, and maintain their own un-Pharma like corporate culture.

It’s not for the faint of heart, but then again, it never really was, even in the so-called glory days when everybody wanted to grow up to be like Amgen or Genentech.

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