Wednesday, February 23, 2011

Is Being Lucky the Same as Being Smart?

Forbes has an article co-written by Matthew Herper and Robert Langreth titled "The Next Big Move For The Smartest Biotech Investor", profiling Randal Kirk. Kirk is described as one of the few billionaires who can ascribe that status to biotechnology. Kirk made his money through two companies in the psychiatric drug space: New River Pharmaceuticals developed an ADHD drug (lisdexamfetamine) and then was acquired by Shire whereas Clinical Data developed an antidepressant (vilazodone) and was then purchased by Forest. A key part of the article profiles Kirk's investment in a little-known and secretive synthetic biology company called "Intrexon".

The title is probably meant to gall; it certainly raises my hackles. The most obvious quibble is that it isn't clear either of the drug development companies were really biotech. Of course, that would require defining biotech, but it ideally it would refer to companies which highly depend on recombinant DNA and related technologies. Now, such technologies are embedded in virtually all drug development today, but neither of these drugs sounds like they used much. Both drugs are interesting twists on prior approaches (though I'm not enough of a chemist to judge the novelty of vilazodone).

Lisdexamfetamine is an attempt to make an amphetamine less abusable by linking it to lysine; the linkage is designed to slow absorption via the GI tract while making it non-absorable by other routes. However, despite this intent, it is apparently treated by the FDA as just as abusable as other drugs in the class.

Vilazodone combines the mechanism of action of two different antidepressant classes: it is both a selective serotonin reuptake inhibitor (SSRI) and a partial agonist for serotonin receptors (again, I'm not experienced enough to know to what degree do any prior drugs exhibit both modes of action).

However, Intrexon, from the little bit which can be gleaned from its website and from the article, is apparently going great guns into synthetic biology (plus, they snagged the dna.com domain!). Their base technology is apparently a modular DNA construction strategy, but beyond that there are few details. Claims are made to have exquisite control over transcription in virtually any host. Modesty is not a commodity they deal in:
Kirk says. “If we were in the business of publishing, we could get the cover of Science magazine any issue we wanted,” he boasts.
. One hopes Kirk has gotten some outside experts to peek under the hood; given his background it is difficult to see him as skilled to evaluate such approaches, and Intrexon certainly hasn't made anything public which would enable such a vetting.

What is Intrexon applying their platform to? Well, pretty much everything. Agriculture. Generic protein therapeutics. Novel protein therapeutics. Synfuels. Gene therapy. Industrial products. Consumer products. Small molecule therapeutics. In other words, just about anything that can be imagined that synthetic biology might be applied to.

Sounds a bit familiar: Codon dabbled in many of these (never gene therapy, but then on the other hand there was some far-out stuff that still remains secret). Any platform company tries to leverage their platform in as many spaces as they think it will work -- and tend to see all the world as spaces in which their platform can work. That wasn't just Codon's thinking but clearly Millennium's during the first half decade I was there: small molecule medications, protein therapeutics, antibodies, agriculture -- even the entire healthcare information system. We were going to remake it all. If synfuels had been in style, I'm sure Millennium would have spawned a division there (come to think of it, I think something along those lines did get discussed).

The promise is that lessons learned in one area will be applicable to others; that's the whole concept of a platform. If each project is based on the platform and requires just small project-specific stuff which can't be replicated around in other platforms, then the whole system should fly to the moon!

Unfortunately, that's where platform companies tend to break down. The truth is that most project areas are primarily dealing with issues outside the platform. The deeper you get into a therapeutic project, for example, the less synthetic biology or genomics or anything can contribute. That's not to say their contribution goes to zero, but on a relative scale other things take over. It's hard to see how synthetic biology, for example, will help you design and recruit a clinical trial. Because those later stage projects, with little to no reliance on the platform, are far more valuable than early stage projects which do rely on the platform, many platform companies tone down or abandon the platform once they have some late stage product candidates. Sure, it would be great to replenish the pipeline, but when the choice is forced as to where cash is spent, close-to-market always trumps cool early technology. And, this all assumes you get to a late stage product; by working on everything there is a great risk of succeeding at nothing as a fat portfolio of good projects prevents the emergence of a few great projects.

So I wish them well and hope they can avoid this trap, and by doing so perhaps be the first company to get to market with their platform intact.

What's really irksome is that title "smartest investor". In general, Wall Street and the media are far too willing to ascribe to genius what cannot actually be distinguished from luck. Kirk's had two sizable successes (which, of course, trumps my track record), but both were in relatively well-trodden ground. Even so, if a little bit of the uncertainty of these projects had gone the wrong way, nobody would be touting him as a genius. For example, imagine vilazodone had stumbled on some idiosyncratic toxicity. At least that is somewhat novel; it sounds generous to credit lisdexamfetamine with being anything other than a very small incremental improvement on the existing compounds. Perhaps Kirk's greatest genius was selling his companies at the right time. This is far different than pushing very novel therapeutics from their bare beginnings to the finish line.

4 comments:

Anonymous said...

I also chocked at the title, this is ridiculous, that guy doesn't really have no more talent than most average joe ceo out there, knowing the right people at the right time for the right scoop... there are a handful of smart investors. I aslo have a huge issue with Herper's use of the biotech word. I seem to remember he put ILMN in that field, ILMN is to biotech like Viking is to fast food conglomerates.

Matthew Herper said...

Keith/Anon --

For my entire career, biotech has been used to refer to small companies in drug and biology-related fields. Affymetrix and Celera were classified as "biotech" when I first started covering life sciences.

If we use biotech to mean companies involved in developing drugs using recombinant DNA, the way stocks are classified kind of falls apart. Abbott Laboratories, J&J, and Shire would all be biotechs, and Celgene and Gilead would be pharmas. The lines are blurred -- or maybe there's not any line left.

As for Kirk not having anything on the average CEO: there are only two billionaires in U.S. biotech, Kirk and Patrick Soon-Shiong. Kirk has now built a company up twice, sold it, and pocketed a large profit. That's unique.

Keith Robison said...

Matthew:

I know that is a common usage for biotech, and I am guilty of it two, but in the end it tends to drive the term towards meaninglessness. If every small pharma R&D shop is a biotech, regardless of its methods, then just call it specialty pharma.

On the other hand, I would tend to put ILMN in the biotech world, albeit in a special category of tool shops. The Genome Analyzers rely on some very fancy biochemistry.

I'll agree Kirk has done something unusual. But, given what he specifically did it would seem a stretch to say it has given him any special expertise needed for the new venture, which is venturing much farther into the wilderness than his prior companies (and when Clinical Data ventured in the wilderness of pharmacogenomics, it failed). But, in the end, time will tell whether he can do it again or find himself overmatched by an entirely different set of problems.

buyersstrike said...

Herper and Langreth did not say he was the smartest scientist, nor executive, but rather smartest investor.

And as an investor in biotech/specialty pharma Kirk has been an outstanding success. Regardless of the merits or drawbacks of New River's unique slow release d-amphetamine (let's be honest and call it what is really is) and Clinical Data's vilazodone, Kirk managed to get the companies sold to competitors whose flagship products were coming off patent. Competitors who felt they needed what Kirk was selling.

Both times he made tidy sums for himself and his investors. He bought low and sold high. Is that not the metric that one should use to judge investors?

Compare Kirk's skill in selling his companies to that of the bumbling fools running Savient.

Other smart investors in the biotech world? Kevin Tang immediately comes to mind.