Aventis/Regeneron: Validation by Association

In the past, drug companies paid big fees up front only for drugs that had demonstrated clear clinical validation. But in paying $80 million cash up front for Regeneron's VEGF Trap cancer candidate--the highest up-front fee ever for a Phase I--Aventis is relying on data generated not by the compound in question, but by another product targeting the same receptor.

Call it validation creep. In the past, drug companies paid big fees up front only for drugs that had demonstrated clear clinical validation. But now Aventis SA is paying the highest up-front fee ever paid for a Phase I compound with little clinical data of its own, based on Phase III data generated by another product candidate targeting the same receptor.

The molecule is Regeneron Pharmaceuticals Inc. 's VEGF Trap, a Phase I angiogenesis inhibitor being developed for both oncology and ophthalmology. Aventis is paying $80 million in cash, another $45 million in equity, a presumptive $25 million pegged to an early clinical milestone, a contemplated several hundred million dollars in development costs and another several hundred million in potential approval milestones to get 50% of the profits in Europe and the US [See Deal]. Regeneron will eventually pay back 50% of the development expenses, but must do so only out of its share of the profits, should profits materialize.

The rationale for this extraordinary deal valuation: although no inhibitor of VEGF (vascular endothelial growth factor) is approved, much less on the market with a track record in patients, VEGF Trap is really a fast follower, reinforced with data from other anti-angiogenic compounds in the class, specifically Genentech Inc. 's Phase III anti-VEGF antibody, bevacizumab (Avastin). But the price also increased because there are no late-stage products available in the arena of VEGF inhibition (only Genentech, Novartis AG , and the combination of Pfizer Inc. and Eyetech Pharmaceuticals Inc. have advanced compounds beyond proof-of-concept trials).

"We didn't regard this compound as a classic Phase I drug," stresses Thomas Hofstaetter, PhD, SVP corporate development at Aventis. "We have [preclinical] knowledge that the approach [of inhibiting VEGF and choking off tumors by preventing the growth of new vasculature] works, plus Avastin has shown it works in a Phase III trial. That made us more positive on the VEGF Trap, and allowed us to view it more like a Phase IIb drug." The $80 million up-front cash, he reasons, therefore represented a more justifiable risk than for a typical Phase I drug.

Nor was Aventis the only pharma to apply that reasoning to a valuation of the Regeneron compound, which is a fusion protein comprising two different receptors to which VEGF binds. The fusion molecule appears to have advantages over antibodies because of its ability to bind several VEGF subtypes and its tighter binding to VEGF: The VEGF Trap also binds at picomolar concentrations--a hundred to a thousand fold tighter than an antibody, Regeneron CEO Leonard Schleifer, MD, PhD, points out, providing a greater degree of receptor blockage. VEGF Trap is in Phase I trials in patients with solid tumors and non-Hodgkin's lymphoma.

The Genentech data, presented in May at the annual meeting of the American Society of Clinical Oncology (ASCO) from a pivotal trial of Avastin in colorectal cancer, reinvigorated widespread interest in VEGF, which had dropped last fall when another pivotal trial of Avastin, used in breast cancer in combination with Roche 's capecitabine (Xeloda), failed. Immediately after the release of the ASCO data, a bidding war for VEGF Trap began. (Regeneron had previously licensed rights to the VEGF Trap to Procter & Gamble Co. , which in 2000 returned them in accord with its desire to focus on muscle wasting diseases [See Deal].)

"There's no doubt that the excitement in the marketplace around Genentech's data with Avastin was a major catalyst," acknowledges Schleifer. "After that, many companies expressed serious interest in doing a transaction." Schleifer claims other companies offered more up front than Aventis, even without the equity component, as well as larger milestone offers along with the same profit splits (although whether any company offered a significantly bigger total package—the combination of up-fronts, milestones, profit split and the expense reimbursement feature—is unclear).

"Prior to the release of the Avastin data in colorectal cancer there were questions as to how well VEGF would play out" as an oncology target, notes Bruce Seeley, head of oncology new product commercialization and licensing for Aventis. But Aventis was already a believer: prior to ASCO it had completed a strategic analysis across a number of disease areas, including reviewing potential targets, target families, and drug classes in oncology. Not only did angiogenesis come out as a leading therapeutic approach in oncology, according to Hofstaetter, the VEGF Trap became "the Number One priority on the licensing wish list."

Indeed, beyond the data and the general promise of using VEGF inhibitors to prevent tumors from accessing a blood supply, two other factors made the drug particularly appealing to Aventis, whose oncology franchise is centered around docetaxel (Taxotere), a fast follower to Bristol-Myers Squibb Co. 's taxane, paclitaxel (Taxol). Given the trend in oncology towards combination therapy using different drugs with different mechanisms, Aventis can presumably leverage the therapeutic and sales synergies of Taxotere. And of interest to Regeneron, Aventis can also apply its experience commercializing Taxotere in the face of Taxol—experience it will have to use in launching VEGF Trap in the face of Avastin.

"What drove Taxotere was our ability to differentiate from Taxol," Hofstaetter recalls. "Our drug worked across a different tumor spectrum, where Taxol didn't." Indeed, in keeping with its fast follower experience with Taxotere, Aventis expects to be able to differentiate VEGF Trap using the Avastin data and its understanding of the VEGF receptor system. And because VEGF Trap is behind Avastin in the clinic, to make the deal work, the drug has to have the potential to offer a better profile than other VEGF products in development.

"It had to show promise of differentiation," explains Bruce Seeley, "and significant potential" over Avastin. Such differentiation "will be an element of our clinical design," he adds, although Seeley won't detail Aventis' clinical plans.

Expect Aventis also to apply lessons it believes it has learned from Avastin's failures. For example, Hofstaetter says Aventis was not overly distressed by the disappointment of the Avastin/Xeloda trial: "Pending further analysis, this may have been an issue of study design and patient selection. Genentech may have selected patients with too much progressive disease: tumor vasculature may be more important early in the growth phase of cancer." In eye disease, clinicians now are injecting angiogenesis inhibitors once a month or every six weeks. But Aventis and Regeneron will use VEGF Trap systemically as well as intravitreally, Schleifer says, possibly dosing less frequently.

The collaborators also expect to work fast. "Because we are a fast follower, we don't have the time to take a sequential approach to development," Seeley suggests. "We need to be aggressive, broad, and smartly test different tumor types and combination regimens," he says, hinting that "there are ways to bring VEGF Trap to market that will surprise." Aventis will run trials in a number of tumor types in parallel, and given the Avastin data, colorectal cancer will certainly be among them. The Phase I trials should wind up next year, and Thomas Hofstaetter believes Aventis could launch the drug "in several indications" around 2007.

Aventis will also test the Regeneron drug in combination with Taxotere, which could boost both drugs. "Data coming out on Taxotere will show that it will continue to be a leader," Seeley promises. "It's a significant asset to build from," he goes on, adding that he expects VEGF Trap to go "hand in hand" with Taxotere and next-generation taxanes.

As for justifying the hefty price tag for VEGF Trap, Hofstaetter says Aventis expects a reasonable return on its investment even if only several indications hit. Likely indications in oncology include colorectal, prostate, breast, and lung cancer; in ophthalmology, trials may include age-related macular degeneration, diabetic macro-edema, and corneal diseases; and the partners may also test VEGF Trap in other diseases where VEGF plays a role in stimulating unwanted blood vessel growth, such as psoriasis.

With the Regeneron transaction, "we probably have made our bets in oncology for the time being unless something extraordinary comes up," Hofstaetter says, especially as the pharma company also needs to feed its pipelines in other disease areas.

If only for its price, the Regeneron deal is also further evidence that Aventis is serious about becoming a player in large molecules in oncology—a strategy the company formulated internally in the last year, and which it began to execute this summer, when it signed a smaller deal with antibody developer ImmunoGen Inc. , in part to beef up its large-molecule validation and early development expertise [See Deal]. (See "Aventis Antes Up in Antibodies," IN VIVO, Sept. 2003 (Also see "Aventis Antes Up in Antibodies " - In Vivo, 1 Sep, 2003.).) Indeed, bioprocessing capability was a selection criterion for Regeneron, with Aventis admittedly not known for developing large molecules, and at a disadvantage versus some other firms despite the fact that it produces recombinant insulin. But "very early on, Aventis took any issue of manufacturing off the table," says Regeneron's Leonard Schleifer, who discussed the subject with Aventis board members. "They said they were totally committed to providing whatever capacity is necessary for manufacturing the product."