one didn’t have to fight a battle about how much [resources] we are going to devote to external [sources] versus internal [development]. We’ve never had those discussions. It’s just been understood that we will be disciplined, but in consistent fashion, we will access innovation from outside. We are a biotech company and culturally, I think there are some differences between biotech and large pharma in terms of how we view risk-taking and how we view the objective of bringing our pipeline forward, as opposed to all the other purposes one could use a strong financial position for. Also, [In my experience with large pharma] I would say that there were multiple formal committee presentations. In contrast, here, we talk so frequently internally that we don’t have a lot of bureaucratic internal committees. We’re decisive, and usually we take the alignment we have internally, go to our board, and that’s it. There’s not a lot of bureaucracy.
X: What attitude does Celgene take towards its partners in forming its early-stage collaborations?
GG: We have a thought out, affirmed strategy to go to the outside and leave [these companies] at the steering wheel of their programs while they fully focus. Most of these small companies are able to fully focus on an area of biology, drive for drug candidates, and drive for early- stage clinical trials more efficiently than large organizations. They’re focused, they’re experts, and we want to use as much as of that expertise as we can. Celgene does an outstanding job at listening to what its partner is saying when we get into deal discussions. We can’t do everything that we’re asked to do, but we really try to listen to our partner to enable them, and I think the feedback I have from our partners is universally, unswervingly favorable.
X: How has the industry’s dealmaking style changed, and what do you have to do to stay a step ahead?
GG: There’s been a real shift from ‘let’s do a licensing deal with up front payments’ —milestones, royalties—to ‘let’s just do an M&A, or a structured M&A,’ transaction. And that’s been a very noticeable shift. Now we don’t know if this recent IPO window is just a blip, or if this here to stay for the medium or long-term—that could shift the dynamics a little bit—but I think in the time when the public market was closed there was a heavy premium and shift towards M&A transactions. We’ve also shifted away from plain, vanilla licensing deals, or licensing deals for three targets for example, to an Agios or Epizyme-type deal where we say along with our partner that this is an incredibly compelling area of biology that may be transformative for patients in the long term and may produce the more important medicines of tomorrow. When we find such a company, we’ve tended to say that we don’t want to name one or two or three targets, because the area of biology is so rich, this is a ‘green field.’ We don’t know where it’s going to go, so we want to be very broad. That helps us and our partner cover the risk. We believe our chances of getting a drug with our partner go up by working within a broad, novel arena.
X: What leads you to decide on a structured M&A type partnership rather than a broad collaboration?
GG: At the time when the public markets were constrained or closed, it was that investors and small company leadership were seeking exits. Many times those companies are working on an asset which has some very exciting data but the asset is very early or quite risky, and this is where we’ve gone to options to acquire. For us, this type of transaction makes a lot of sense. We fund the company well enough to get through a study, at the end of which is an inflection point. We help them design the study, and if the data come in positive, we’ll be happy to buy the company for a set of prearranged conditions.
X: Epizyme has, to date, been the most successful biotech IPO this year. What led to your interest in Epizyme, and why did you structure the collaboration in the way that you did?
GG: We arguably are the leader in epigenetic therapies, and we basically want to increase the importance of that in our company because we believe that the science is pointing to this being an incredibly important modality in the future. Therefore, we scoured the universe and went for what we thought was the highest science among such companies and that, for our reckoning, was Epizyme. The focus of this collaboration is actually Histonemethyltansferases, and there are 90 of these targets. This is clearly a large “green field” where the biology is rapidly emerging. As a result, no one can know which of the 90 targets would yield important drugs. In such cases, we want to take a broad, long-term view, which also worked out well for our partner.
X: On the opposite end of the spectrum, why is the Quanticel deal structured as an acquisition?
GG: On a transaction like Quanticel, for us to realize the maximum value of the technology, we needed to share with them some of our investigational drugs so they could work on them looking for biomarkers. We needed, therefore, to give them certain samples we had from clinical trials or from the research laboratory. And the only way to do this was to work really closely with them and do effectively a build-to-buy. We ended up putting so much expertise and potential IP into that collaboration that the only way to support the science and the medical objectives of that collaboration was to do a build-to-buy. We take it all, or we don’t, and we have certain protections for what we put in. This also worked well for the Quanticel management and their VC investors, Versant Ventures.
X: What makes you decide on a broad collaboration style, versus a more targeted licensing deal?
GG: It tends to be driven out of a mutual agreement, right up front between us and our partners, that
