Imperative, imperial or even empirical?! No - the M in Mperia is for macrophage!

           

I've been a little out of circulation in the last week or two due to various personal commitments, and among other my blog has suffered a temporary hiatus, but now on this sunny Saturday as we cross over into May, here I am again. While it may be May 1st tomorrow, we are still enduring generally low temperatures which is reflected in the total absence of any green on the trees by my windows, so here's hoping this will change, and soon!

It was a most interesting week at AmorChem given that we had an investment committee to discuss the various potential contenders in our upcoming KNOCK OUT™ competition, to be held on June 2nd at the Hyatt Regency Hotel as part of our annual event day alongside Lumira Capital. We are excited about the prospect of seeing some serious sparring between our contender researchers and our esteemed panel of industry heavyweights who will no doubt not only test their hypotheses, but perhaps try their patience as well - but all is fair in love and war - and knock out! 

Additionally, we had our annual general meeting (AGM) this week, which took stock of us having reached the half-way stage (5 years) of our current AmorChem Fund, elaborating on what we have achieved thus far, and where we are going next. This second half of our first fund's life cycle will also see the closing of our second early stage fund, AmorChem II, and that is something else that we are extremely excited about. 

A major new initiative that was launched at our recent AGM is a further commitment to particular projects that have reached a certain level of maturity, and which have not only maintained initial promise but have increased their commercial potential. We recognise that this handful of portfolio assets have come quite a distance already, and both need and merit an extra push at the top of the hill to get them over a game-changing value inflection point. 

How are we going to do this? Well, given that the local ecosystem has recovered to a significant extent from the lows of the biotech graveyard years of 2008 to 2013 (generally speaking), and considering that investor interest has swung back to the biotech space once again, we intend to create company structures around our most mature projects and grow them inside the virtual walls of those companies. The idea is to further professionalise the ongoing developmental activities and management thereof, in order to increase the potential of raising funds and/or becoming a target for acquisition. 

This process has begun and the first asset out the gate is our program focused on the targeting of the macrophage scavenger receptor, CD36, as it relates to both age-related macular degeneration (AMD) and atherosclerosis/cardiovascular disease. We have two separately funded projects in the CD36 program, one for each disease area, and given the exceptional progress in both cases, we made the decision to consolidate the assets and development-to-date into our very first newco - hence the birth of Mperia Thera!

This endeavour will be spearheaded by local life science serial entrepreneur Maxime Ranger, who was chosen for his prior experience in such enterprises as well as for his deep connections within the local venture capital and institutional investor network. Mperia will continue to develop our CD36-targeting lead candidates moving forward, with a major deliverable being the syndication of a Series A finance round for the company, and/or closing a transaction with a larger biotech or pharma. 

We believe that the timing is right for us to roll out our more mature assets into this newco format, and that such a move is aligned with a renewed desire in the local ecosystem to create new companies and grow the workforce in the biotech sector in Quebec. There is ample infrastructure in place already, and Quebec's preeminence as a biotechnology hub means that an extremely skilled pool of life science talent can be readily tapped into by new ventures. 

There will be a lot more to say about Mperia soon enough, not least as the company will be formally announced at our upcoming KNOCK OUT™ event, in the form of a launch presentation that will update the community on the background, current status and future plans for the company. This will make our event day even more fun than usual, and we are fully motivated by the challenge of transferring certain other technologies on our list into newcos, similarly to Mperia. 

In the meantime, the sun is still shining very brightly out there, so I think it's the perfect time for several laps of the track at Molson Stadium before settling in for dinner and two hours of fishing for king crab on the Bering Sea, courtesy of "Deadliest Catch" on Discovery. Yep, even the Saturday evening entertainment is biology related! :) 

A tech geek's holy trinity - God, Family and Yahoo - and one of them is up for sale!

Back in early February, I discussed the simmering tensions brewing inside the confines of the boardroom of the former Internet giant known as Yahoo! and now it seems that the lid has blown right off the pot and the chickens have indeed come home to roost. In a shocking move, the whole sorry affair is now up for sale, and interested parties have until April 18th to place their bids. Anyone interested?!

The usual suspects are in the bidding war, of course, in particular Google and Microsoft; Yahoo having refused a $45B offer from the latter in 2008, which probably looks significantly more appealing (and more of a mistake to have refused) today! Additionally, media companies such as Time and the Daily Mail are considering offers, along with Verizon who bought AOL last year for $4B. Finally, it is reported that there are a number of private equity companies which may be intending to make an offer for the struggling enterprise. 

If CEO Marissa Mayer was in a tough spot before this, she's in an extremely precarious position now, and it seems inevitable that this state of affairs is likely to lead directly to her departure from Yahoo!, whether it gets sold or not. If it sells for a price found acceptable (only in the context of the mess they are in) to the board, then the new owner will want her out. If it doesn't sell because no entity values the beast at anything close to what the board finds acceptable, then that's a nail-in-the-coffin indictment of her stewardship to date, and she's also out. 

Back in 2000, this scenario would have been unthinkable, when Yahoo was riding high and was valued at almost $260B and offers of several billion dollars would have been laughed off without hesitation. Today, an offer of even $5B would probably have to at least be tabled for consideration, which sort of says it all.  Ms. Mayer has been very reluctant to go down the bidding war route, but it seems that in the end she had zero choice, with activist (if not outright aggressive) investors such as Starboard Value barking across the table.

Hedge fund Starboard has been on Yahoo!'s back for months now, claiming that in the almost four years under Mayer's tenure, nothing has been achieved in terms of truly turning things around, and they have threatened to nominate a whole slew of new directors for the board if nothing is done. Jeff Smith of Starboard made it clear that the changes may start with the board but will include executive leadership, and you know, who could seriously argue that it's not the right thing to do?

Now, it's worth pointing out that it's not the entire company that is up for sale, but just its Internet operations, which these days represents a mere fraction of its overall value, or, depending on who you talk to, another way of putting it is that the entity up for sale has almost no quantifiable value whatsoever! Yahoo!'s Asian holdings (which comprises its stake in Alibaba and Yahoo Japan) are valued at around $34B, but are not for sale, while the part for sale brings Yahoo!'s current market value to (a mere) $35B. Various wags have drawn attention to the fact that Yahoo!'s North American-based web operations are thus essentially worthless. 

Ironically enough, it looks like it will be one of a trio of high profile ex-Googlers who will be in control of Yahoo! at the end of the affair. First off, there's Ms. Mayer herself, who is somewhat legendarily referred to as Google employee #20. The other two who are likely to do battle for control are Tim Armstrong of AOL (owned by Verizon) and Nikesh Arora of SoftBank: the former used to run Google's ad sales wing, and the latter was previously Google's CBO. 

Verizon are clearly interested in the operational side of Yahoo! and that apparently includes the not-for-sale Yahoo Japan, while SoftBank have a specific reason for also eyeing the Asian holdings, given that they already have a majority stake in Yahoo Japan but incur various heavy duty payments for using Yahoo services and branding. So in many ways, Softbank is the ideal buyer of the ailing Yahoo! business, and it is widely believed that it will be either Softbank or Verizon who will end up with the deal. 

It's been a bumpy rollercoaster for Marissa Mayer, but she will still come out of this richer, either way. If she got fired today, that would involve a goodbye of some $12M (which is hardly pocket money) and if she departs as part of any deal, she will walk away with over three times that amount. Yahoo! is being very friendly in that regard, in that the board rewrote the meaning of the change-of-control provision such that any sale of the web business would trigger the larger severance, even if the actual controlling ownership would remain in Asia. 

Why? Well, apart from any other reason, Yahoo! gets rid of her - in a way that will not involve any enmity or litigation - just a simple parting of the ways; that parting is extremely cheap even at the price of $30M plus, because little over a year ago it would have been $110M! Ousting her for a mere $12M is bargain basement level, and must be very tempting for the board today. Somehow, as a modern day CEO of a (once fashionable) huge tech giant, I always found Mayer's stated priorities in life to be quaintly telling: "God, family and Yahoo - in that order." 

That wasn't necessarily reflected in the minute amount of maternity leave she took for her two pregnancies, for which she did take some very vocal criticism from the public and media alike. But irrespective of one's opinion on her trinity of priorities, it is becoming increasingly clear that she will soon be able to exclusively focus on her top two priorities, as Yahoo! will likely not be in the way for very much longer! 

Aggregating hope in the entangled pipelines of Alzheimer's disease!

After many historic failures, if there is one disease that causes horror and fear not only to those afflicted with it, but also in the hearts of an industry wishing to banish it, it has to be Alzheimer's disease. Many big pharma players have tried to come up with the next big discovery, or a new causative mechanism for the disease, and even after a slew of candidate therapeutics made it to the clinic, here we are in 2016 with effectively no disease-modifying therapeutic for this brain-ravaging condition. It's a very tough fight I have had some experience with, having led a preclinical development program for a potentially disease-modifying candidate molecule, in my biotech past! 

Alzheimer's disease drug development has literally become a graveyard of failure, with way too many patients heading to their graves barely remembering who they were, and that is a kind of personal hell and cruel robbery that must be an extremely traumatic way of exiting one's lifespan in this mortal coil. But although the rewards would be great (in both human and ROI terms), so equally devastating have the failures been that drug development in this area has become something of a "where (even) angels fear to tread" territory. 

However, one glimmer of hope has been keeping the candle burning in recent years, and that is the BACE inhibitor category, and in particular, one in co-development at Eli Lilly who picked up the asset from AstraZeneca (AZ) when they were moving to limit their exposure in the Alzheimer's space. It was a $50M deal in 2014 that helped to carry the technology forward, whereby Lilly now has a 50-50 stake in the drug candidate as part and parcel of a deal that could reach half a billion dollars in value for AZ.

The teams have been firmly engaged in AMARANTH, a Phase II/III study of AZD3293, which is an oral beta-site amyloid precursor protein cleaving enzyme (BACE) inhibitor currently under investigation. The recent interim safety analysis by an  independent committee was not intended to measure efficacy; it was more a question of tolerability and safety concerns. There must have been a huge sigh of relief all around when that interim analysis revealed that the study could move forward with no modifications needed. 

This means that the trial can now proceed into a full-blown Phase III study, and the companies have announced their intent to move more or less immediately into the DAYBREAK Phase III trial, where efficacy (in an early setting) will be a key front-and-centre factor. Additionally, they intend to recruit as many as 2,200 patients in some 14 countries to get the data they need to hopefully move this out into the marketplace. This success triggered a milestone payment of $100M from Lilly to AZ, who must be feeling some degree of acknowledgement for their previous efforts in discovery of AZD3293, today!

“Alzheimer’s disease remains one of the biggest challenges facing medical science today. BACE inhibitors have the potential to target one of the key drivers of disease progression and we are delighted that our combined efforts have resulted in the development of AZD3293 moving into the next phase of study. Disease modifying approaches, such as this, have the potential to transform the treatment of Alzheimer’s disease and help patients in this area of large unmet medical need.” said Menelas Pangalos, Executive Vice President, IMED Biotech Unit of AstraZeneca.

Lilly in particular have been feeling the heat in the AD space, having had their own BACE program which was halted over toxicity issues. Additionally, they ran into trouble with a gamma-secretase inhibitor drug candidate, Semagacestat, which actually had damaging effects at higher doses tested in the clinical trial. Further, they experienced yet another failure with Solanuzemab, a humanised mAb against a portion of the beta-amyloid peptide, and that candidate failed in two key Phase III trials, Expedition 1 and 2. 

An unnamed ex-FDA official was quoted at the time as saying that "Solenuzemab does not have a snowball’s chance in a very hot place of getting conditional approval from the FDA", which sort of says it all about what happens after two failed Phase III trials. Lilly took some additional heat for stating that they would "move the goalposts" for Solenuzemab and lower the criteria that would define success, particularly with monitoring of early stage and presymptomatic individuals, and look for improvals in cognition. 

It has been a most challenging if not downright uphill challenge for Lilly, but you know what? Kudos to them! Why? Well, because someone's gotta do it, and their persistence is precisely what is needed in the fight against this brutal disease, and if we need to try and try again to get it right, then fine! It will all have been worth it if any disease-modifying treatment comes online, and I have no problem at all with that company (or companies) reaping huge rewards as a result. Failure in the clinic is almost a given for Alzheimer's disease, as the failure rate is frustratingly close to 100% for over a decade or more.  

Not that Lilly and AZ are entirely alone, having said that. Biogen is another company that has committed to continuing on in the space, and they recently partnered with Eisai on their BACE program, and both Merck and Novartis have their own candidates. One of the most fascinating things about all of these studies is their capacity to put to bed once and for all the possibility that the "BAPtists" had it right all along - and the beta-amyloid hypothesis of Alzheimer's disease hit it right on the head - but it was just a question of where to come at it from, that's all. 

Let's hope that this is indeed the case because irrespective of whether one is a BAPtist or a TAUist, and whether amyloid plaques or neurofibrillary tangles are the major root cause of the disease, the sooner that patients can see any disease-modiifying therapeutic, the better. It's estimated that the prevalence of Alzheimer's disease is already nudging 50 million people worldwide, and in this aging population and era of longevity, that number is set to explode by even 2030. 

Alzheimer's disease is one that has risen phoenix-like out of medical successes in other lifespan-limiting human ailments, but it's a success that came with a considerable price tag and one that has now placed a huge burden on the healthcare system of today. That cost is severely compounded by the human burden (patients, families and caregivers) inherent to the disease, and one has to hope that the flickering candle of hope that was brightened by the good news from Lilly et al. blossoms into a fully-fledged supernova of hope via their upcoming Phase III trials. 

That may be a lot to ask for, and may be seemingly overly optimistic given all of the disappointments, but we have to remain firm in the belief that we can move on from the graveyard of failures (and deaths) and bring some new hope to the bedsides of patients with treatments that keep them living, and increase their quality of life as they struggle with this devastating disease. 

The markets were a little less sanguine though, as the news did little in terms of share prices for either company, but you know, it's pretty hard to impress anyone with respect to Alzheimer's disease data these days, and it may take until some candidate actually proves efficacy in a substantial Phase III trial to get investors hot and bothered. Until then, fingers crossed! 

Crises both corporeal and corporate - business as usual if you are the CEO of Valeant!

      

Anyone who has been reading this blog in the last year knows I have been following the story (occasionally quite soap opera-like) of one J. Michael Pearson and Laval-based Valeant ($VRX), who, as has seemed inevitable for some time now, are about to finally part ways and pursue their futures independently. As early as January this year, I suspected that the end was nigh for Pearson, even before his return to the fold after a stint in hospital with a bout of severe pneumonia. 

I daresay that hospital bed probably seemed a lot more peaceful and comforting than his office did upon return, not least as the SEC announced it would be investigating Valeant mere hours after Pearson strode through the doors for the first time in many months. On top of that, there were new accounting issues at the company, which actually brought Howie Schiller, ex-CFO and sitting President, squarely under the spotlight; a glaring spotlight that had previously been reserved seemingly exclusively for Pearson and which no doubt had further exacerbated the state of his health by year end, 2015.

But he came back to the same set of problems he had previously been able to walk away from via his medical leave - including scrutiny from Congress and US presidential candidates alike, delays in 10-K filing that were due in no small part to the Philidor debacle, and a potential debt default crisis and crashing share prices - so he must have felt he had been sent out of the frying pan into the fire. He was putting out fires in both the corporeal and corporate worlds: from dealing with his own health issues if not his very survival, to walking back into an unhealthy company that clearly needed something cut out of it, surgically, before the disease spread further. 

It can't have been easy, especially as it was becoming clearer and clearer what that something needed to be. But no one has ever said that big Mike isn't a very smart man, and I am pretty certain he saw it coming, maybe as far back as sometime in 2015. I think his medical leave could (should?!) have been used as the perfect exit strategy, but then he would have lost his golden parachute and no CEO worth their salt (even if they are being fired for not being worthy of it!) is going to let that happen without a fight. 

Who knows, but I don't think that Valeant had that level of contempt for him to try and exact that punishment on him, and/or, to an extent they did, but rather than let him go and walk away in relief, they brought him back in from that potential exit to make him face some of the mess that had been left behind after a disastrous year in 2015. He wasn't going to get off that lightly, so in return for being allowed to grab his parachute out, he was forced to return and face some s**t that was of his own making. 

When Valeant announced on a recent Monday that an executive search had been initiated, which had already identified potential candidates such as Fred Hassan (ex-Schering Plough) and Chris Viehbacher (ex-Sanofi), well, the writing was placed very firmly on the wall. On that same day Valeant made clear that it felt that certain practices inside the company, and even it's corporate culture, were clearly not in alignment with what the board felt was good for business, and even the guy brought in to stabilise the ship during Pearson's absence drew fire from the company. Howie Schiller has since been asked to step down as a company director, but in his case, whether due to hubris or honour, he has refused to do so. 

The committee placed to investigate the problems inside the company went so far as to accuse Schiller and the firm's chief accountant of actual "improper conduct" which is likely to draw greater scrutiny, not less, from regulatory watchdogs involved in the whole Valeant debate (if not debacle). 

"The tone at the top of the organization and the performance-based environment may have been contributing factors resulting in the company's improper revenue recognition."

Those are pretty damning and quite telling words, and if you were either Pearson or Schiller then you would most certainly have felt them sting. One cannot help but wonder if the return to the fray of Schiller during Pearson's absence was actually a carefully calculated strategic move - bringing back a key individual who had played a major role (both good and bad?) in getting Valeant to the corporate crossroads they were then at - thereby providing a second scapegoat if/when the appropriate need and time came?

Another dominant player in this story is Bill Ackman of Pershing Square, whose name has also come up repeatedly in my posts on the subject of Valeant. As an activist investor and (former) staunch supporter of Pearson's, he has never been shy of the spotlight or his enthusiasm for continued investment in the company, notwithstanding his offloading of a swathe of Valeant stock on New Year's Eve 2015, in what appeared to be an attempt at an under-the-radar softening of his belief. But Ackman now states that he will play an even more active role in Valeant's next phase, alongside his Pershing Square colleague, Steve Fraidin. 

"I am looking forward to working with the board to identify new leadership for Valeant. The company's large scale and dominant franchises in eye care, dermatology, GI and other therapeutic areas, coupled with its extraordinarily low valuation, present a spectacular opportunity for a world-class healthcare executive."

Ouch. 

Given the mess left behind, the CEO job at Valeant is one helluva daunting proposition, and clearly not one for the faint of heart. It's going to take a rock-solid and rock star-level qualified individual to take the helm, and Valeant can expect that person to make some equally world-class demands, conditions and clause insertions in their contract, as an insurance policy for stepping into what will be a very fiery breach. It's time now for big Mike to breathe and go off to face new challenges, while Valeant strips his identity from their brand and rebrands itself anew with another dynamic individual at the top. 

It could be a great opportunity for whitewashing out their former brand in fact, and coming back fresh with a new logo, a new message, a new corporate culture, and even close to a brand (no pun intended!) new company. Rest assured, I will be watching closely! :)

Photo of Valeant Pharmaceuticals HQ in Laval by Christinne Muschi-Reuters