FROM THE GROUND UP

George Yancopoulos has been at Regeneron from the very start. We asked him about those good old days, and what he thinks the future has in store.

1. You have been with Regeneron since 1989. Do you think it was easier to start companies then compared to now?
I am not sure if it is any easier or harder to start up a company, but the ultimate vision and goals for start-ups has changed dramatically. In the 70s and 80s we had the examples of Genentech and Amgen to look up to, and because of this, back then in the late 80s and early 90s, most of us starting up companies had the dream that we could build ” FIBCO’s”— or fully integrated biopharmaceutical companies— from the ground up, and these would ultimately have the capability of going from discovery to commercialization over and over again and become major companies. Unfortunately, Regeneron represents one of the rare realizations of that dream over the last couple of decades, and because people have seen how hard it is do build a full-fledged FIBCO from the ground up, I think most start-ups are re-adjusting their dreams and goals, and now settling for ” smaller futures.” That is, the goals are no longer to build a FIBCO, but a company that can perhaps get acquired relatively early on for a single early-stage-product opportunity or because of a useful technological capability.

2. One of the reasons you joined Regeneron was the freedom and lack of bureaucracy of a startup as compared to academia. What are the biggest challenges Regeneron has encountered as it has grown and matured over the years?
It’s been a challenge to stay nimble and resist becoming bureaucratic. More structure and process are necessary when you are nearly 2,000 people—as Regeneron is now, with three commercial products and 10 in clinical development— than when you are 20 or 200 people. The challenge is to keep processes and regulations from getting in the way of innovation, from stifling your people. Our selection this year by Science magazine as the #1 and most respected employer in the biopharmaceutical industry—in a survey that highly valued the innovativeness of the organization— is evidence that we’ve been successful in maintaining the strong science-first culture we started with and attracting great employees.

3. Regeneron has been public since 1991. Can you compare those days to today in terms of financing opportunities for companies?
Financing Regeneron was never easy, but financing a new biotech company is certainly tougher today, not only at the start-up stage but also when you are doing clinical trials, because the costs and some of the regulatory requirements for clinical development have increased very significantly.

4. As a public company in the biotech space, where investments on R&D take so long to yield results, how do you manage Wall Street’s short-term expectations?
Our approach, which was unpopular for years with many on Wall Street, was to invest in research that could lead to technology platforms that could create multiple drug candidates. We have been firm believers that a biotech company needs a foundation that can continue to generate multiple shots on goal. The odds of failure for any individual program are just too high to concentrate investment in one, two, or three programs. And we’ve nurtured relationships with those investors that take a fundamental, longer-term view of the industry. Many of our institutional investors have been with us for years. Lately, they’ve been rewarded handsomely for their patience.

5. What are Regeneron’s views on R&D investment? Has it significantly cut its R&D budget? Where will Regeneron’s drugs of tomorrow come from?
We believe we can continue to expand our pipeline investments and at the same time produce profits for our investors. Our R&D budget is among the largest in the biotech industry. We spent $530 million on R&D last year and more than $700 million if you include what our collaborators spent on joint programs, and that number will be higher this year. We are able to fund a large and growing R&D program for two reasons: Since 2007, a substantial portion of our R&D spending has been reimbursed by Sanofi under our antibody collaboration. And starting this year, thanks to the commercial success of EYLEA® (aflibercept) Injection, we are generating profits that we intend to plow back into the business. And of course, more important than the funding are the ideas—success doesn’t just come from just throwing money at a problem, but having the best and most innovative ideas. The thing that excites me most is that, after more than 20 years, I still believe we come up with some of the most exciting ideas and approaches in the industry, and these will continue to contribute to the building of our pipeline for the future.

6. In your deals with Sanofi, it pays upfront for development of your drugs through the first successful Phase 3, you share 50/50 in the profits and only if the deal is profitable do you reimburse them for your half of the development costs. How were you able to negotiate such favorable terms? What must a biotech company do right, and what must it avoid along the way, in order to have enough leverage to negotiate favorable terms with a bigger company when the time comes?
Sanofi was impressed with the potential of our VelocImmune ® human antibody technology to create an entire portfolio of new drug candidates. The deal works financially for Sanofi as well as for us if it results in successful products, and right now, because of the success of our pipeline and the opportunities it has generated, it looks like a win-win type of deal. The only way to get such a deal is to have the potential to enrich the partner’s pipeline in a more costeffective way than they could alone—if they are convinced that you have more than twice the ability to produce exciting product opportunities as they do per dollar, then of course they would be willing to make such a deal and then share half of the profits.

7. How important is academia to the future of the biotech industry?
Critical, as academic centers are the source of many basic insights and inventions that get applied, tested, and refined by biopharmaceutical companies. However, I am very afraid that many in the pharma industry are cutting their internal efforts for P&L purposes and counting for the discoveries and science to come from elsewhere such as academia. One cannot substitute what you hope to get from academia for having strong internal science and discovery capabilities— once you do that, you are likely to find yourself obsolete and out-of-business. I think this is a major problem in the pharma business.

8. Do you think the biotechnology startup will eventually disappear from the life sciences ecosystem, with academia and non-profit research taking over most of discovery?
No, because there will always be risk-taking visionaries and investors willing to fund them. But unless current trends change dramatically, it’s likely that, compared to the good old days when Regeneron began, there will be fewer drug discovery and development startups, and the ones that get started are likely to be more specialized and have a different business model. Regeneron always wanted to be a FIBCO, and today we are. That’s got to be even harder to achieve today than it was over the past 20 plus years.

George D. Yancopoulos, M.D., Ph.D., has been Executive Vice President, Chief Scientific Officer and President, Regeneron Laboratories since December 2000 and a Director since 2001. He joined the company as Senior Staff Scientist in 1989. He received his Ph.D. in Biochemistry and Molecular Biophysics and his M.D. from Columbia University. Dr. Yancopoulos is a member of the National Academy of Sciences.

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