Regeneron VS Gilead: Two modes, the same goal

For Biotech companies, the ability to innovate determines its upper limit

For example, after Regeneron Pharmaceuticals launched the ophthalmic drug Eylea in 2011, it gained a 22% market share in the field of macular degeneration treatment in the United States in the first year, which opened the way for the stock price to soar; after Gilead launched the HIV drug Truvada, the company also started Recognized by the capital market

Although these two companies are leaders in innovative pharmaceutical companies, they have taken two diametrically opposite routes.

By reviewing the rise of these two companies, it may be able to give some enlightenment to Chinese Biotech companies that are in confusion: as long as they focus on research and development, no matter what the model is, they can be successful

/ 01 /

Regeneron: Self-developed technology to conquer key platforms

The success of Regeneron Pharmaceuticals comes from its focus on 20 years of research and development

In the 1980s, with the success of Biotech's first Genentech, there was a wave of Biotech in the United States

In 1988, the 34-year-old Shriver made the most important decision in his life - to start a business in the sea

It can be said that from the day Regeneron was founded, it has been deeply branded as "scientific research" by the market

In the third year of Regeneron's establishment, they successfully attracted the attention of Amgen with a paper published in "Science", and successfully received $15 million in financing from them

At the beginning of the listing, Regeneron did not even have a pipeline that entered into clinical trials, which means that Wall Street invested in Regeneron simply because of the scientific research background of the two founders.

If you look at Regeneron's performance in its first four years of listing, investing in Regeneron was a huge mistake

For Shriver and Jacques Poros, the professional field is what they are good at, but they know nothing about how to play the capital market

Vagelos is a seasoned old professional manager.

Regeneron has historically been too focused on neurological diseases, but the company actually has a strong edge in cell signaling

Sure enough, after strategic adjustment, Regeneron quickly found a development direction, which is the platform strategy, starting from the drug "platform" and cutting into specific drugs

According to an analysis report released by Forbes, pharmaceutical giants spend an average of US$4.

The first platform developed by Regeneron is the Traps technology platform
.

In human cells, cytokines and growth factors work together to cause cellular responses, and once a certain type of factor is overexpressed in the human body, it may cause various diseases
.
Regeneron achieves therapeutic purposes by using two receptors combined into a "trap" to "capture" cytokines and growth factors in the body
.

It is with the Traps technology platform that Regeneron finally launched its first drug, Arcalyst injection, in its 20th year of establishment.
However, the scope of this drug’s application is too narrow, so it did not become a hit
.

The east is not bright, the west is bright
.
Although Arcalyst was not successful, Eylea, an ophthalmic drug launched by Regeneron based on the Traps technology platform, quickly became popular and still contributes most of the company's revenue to this day
.
In addition, the Traps technology platform has also produced drugs such as Zaltrap and Arcalyst
.

Thanks to the success of the Traps technology platform, Regeneron later developed another core platform, the Veloci technology platform
.
This platform includes related platform technologies such as VelocImmune, VelociMouse, VelociMab, Veloci-Bi, Veloci, VelociHum, etc.
It is a full-process platform for antibody drug development
.

In particular, the VelocImmune platform is one of the four global human antibody transgenic mouse platforms.
It can inject 600KB human DNA fragments into the genes of mice to obtain optimized fully human antibodies
.
This has formed Regeneron's impregnable moat
.

It is precisely because of the potential of the Veloci technology platform that Sanofi cooperated with Regeneron to jointly develop Alirocumab, a PCSK9 inhibitor, and Dupixent, a follow-up inflammatory drug
.
In addition to Sanofi, this platform has also won the favor of giant pharmaceutical companies such as Bayer, AstraZeneca, and Astellas, allowing Regeneron to deepen its cooperation with various pharmaceutical companies
.

In 2021, Regeneron's total revenue will reach US$16.
072 billion, of which it is mainly contributed by the ophthalmic drug EYLEA, the inflammatory drug Dupixent and the new crown antibody REGEN-COV (some products Regeneron only has partial revenue rights)
.

Among them, the ophthalmic drug EYLEA and the inflammatory drug Dupixent are the products developed by Regeneron based on the two platforms
.

It can be seen that the success of Regeneron is inseparable from the two self-developed platforms
.
Relying on its strong R&D capabilities, Regeneron has successfully established a key R&D platform through self-research, thus realizing the leap-forward development of the company
.

/ 02 /

Gilead: buy buy buy, buy the future

If Regeneron is a model of self-research and success, Gilead has gone to the other extreme
.

Although Gilead has only been established for 35 years, it is one of the most adept at investing in mergers and acquisitions among global pharmaceutical companies
.
The $11 billion acquisition of Pharmasset, the $11.
9 billion acquisition of Kite Pharma, and the $21 billion acquisition of Immunomedics, when Gilead values ​​its favorite pharmaceutical companies, the dollar is just a number
.

Gilead loves to invest in mergers and acquisitions, which has a great relationship with the company's founder Michael Odan
.
Although Odan graduated from the University of Washington and Johns Hopkins University with a bachelor's degree in chemistry and a doctorate in medicine, he did not have much talent in the field of medicine
.

After finishing his doctorate, Odan chose to go to Harvard to study for an MBA, and after graduation, he joined a venture capital firm and started a financial business
.
After smelling the Biotech wind from Genentech, Odan resigned decisively from the venture capital company and founded a small laboratory with only 6 people, which was later Gilead
.

Similar to Regeneron, Gilead also suffered unstoppable losses in the early days of its establishment.
No product has been launched in the 8 years since its establishment.
Only some contract research projects have earned income, and operating funds can only be obtained by relying entirely on Odan’s capital operation
.

Fortunately, in the process of completing the contract research project, Gilead accumulated some R&D experience and launched its first product, Vistide, in 1996
.
However, the launch of Vistide has not changed Gilead's loss-making situation, and various expenses are still far greater than revenue
.

Fortunately, Gilead has a boss like Odan who is good at capital operation
.
In 1999, Gilead acquired NeXstar Pharmaceuticals for $550 million and acquired two liposome products, AmBisome and DaunoXome
.

At that time, the revenue of NeXstar Pharmaceuticals was three times that of Gilead, and the price of 550 million had exceeded more than half of Gilead's assets, which was a huge gamble
.

But in the end it worked
.
In the second year of the acquisition, Gilead’s revenue reached $169 million, breaking the $100 million mark for the first time
.
This acquisition also allowed Gilead to gain a foothold in the pharmaceutical market for the first time
.

Although Gilead changed its fate through mergers and acquisitions, it was not a random merger greed for scale, but an intentional one based on strategic planning
.
At that time, Odan set up a strategic plan for the "ALL IN virus field" at Gilead, and sold the antisense therapy business to Ionis pharma and the oncology business to OSI pharma in the following two years
.

After focusing on the virus field, Gilead quickly made a breakthrough in the HIV field
.
In 2001, Gilead's first anti-AIDS drug, tenofovir disoproxil, was approved by the FDA
.
Just a year later, Gilead once again spent $464 million to acquire Triangle Pharmaceuticals and acquired the inhibitor drug emtricitabine
.

From the perspective of newcomers, it was the acquisition of emtricitabine that made Gilead quickly become a leading company in the HIV field.
In the 2021 annual report, Gilead still has 60% of its revenue from the HIV field
.

Gilead has followed up on its HIV therapy for many iterations, and for a long time, emtricitabine has been an indispensable presence in combination therapy
.
In particular, the launch of the popular product Truvada in 2004 made Gilead an unshakable giant in the HIV market
.

If the development of Gilead is divided by time period, it can be clearly divided into 4 parts; the mediocrity in 1987-1999, the focus on virology in 2000-2011, and the dual main lines of HIV and HCV in 2012-2016 Development, diversified development since 2017
.

The opportunity for Gilead to enter the HCV field also comes from mergers and acquisitions
.
In 2012, Gilead acquired Pharmasset for $11 billion.
You must know that Pharmasset had only 82 employees at the time, and Gilead spent the equivalent of $140 million per employee
.

Despite the price tag, Gilead's acquisition of Pharmasset is an absolute bargain
.
Pharmasset's core product is the hepatitis C drug Sovaldi.
In the first three months after its launch in 2014, Sovaldi generated an astonishing figure of $2.
3 billion, setting a sales record for a new drug in the United States at that time
.

I think many of my friends already know the follow-up story.
Sovaldi directly cured hepatitis C patients because of its good effect
.
This makes the revenue of Gilead's follow-up hepatitis C business continue to decline due to the continuous decrease in the number of patients, although the drugs are very useful
.

But even so, Gilead achieved a leap in market value with the success of the "hepatitis C magic drug" Sovaldi, which soared from about $20.
7 billion in early 2012 to $102.
5 billion at the end of 2015, becoming a hot pharmaceutical company on Wall Street
.

The success of successive mergers and acquisitions has greatly increased Gilead's confidence.
In order to further develop, Gilead held high a diversification strategy in 2017 and began to re-enter the oncology business that it had given up before.

.

In 2017, Gilead spent $11.
9 billion to acquire CAR-T giant Kite Pharmaceuticals, and in 2020, it spent $21 billion to acquire Immunomedics.
These two acquisitions alone are as high as $32.
9 billion
.

Although Kite Pharmaceuticals and Immunomedics are one of the most popular core companies in CAR-T therapy and ADC therapy, respectively, there are still doubts in the industry that Gilead's acquisition premium is too high
.

However, for Gilead, it entered the oncology track through the acquisition of these two companies, and it has become a star enterprise in oncology
.

In reviewing the development path of Gilead, every transformation is achieved by heavy mergers and acquisitions
.
From this point of view, CAR-T therapy and ADC therapy will be the direction of Gilead's key layout in the tumor field in the future
.

/ 03 /

Innovation is an attitude

As of the close on April 19, Regeneron and Gilead had market capitalizations of $77.
7 billion and $78.
8 billion, respectively, almost at the same level
.

The development paths of the two companies are very different, but both have harvested a "bright future"
.
As the saying goes, all roads lead to Rome.
For innovative pharmaceutical companies, as long as the management has an attitude of dedication to innovation, whether it is self-research or acquisition, there is actually a chance to succeed
.

Of course, there are many debates about mergers and acquisitions of pharmaceutical companies in the market.
Many investors believe that mergers and acquisitions can only be regarded as speculation, which is very random and cannot be replicated continuously
.
But in fact, with the continuous expansion of the scale of pharmaceutical companies, there are very few cases that completely rely on self-developed research like Regeneron
.
Many large international pharmaceutical companies also generally use the method of purchasing clinical pipelines to quickly deploy, thereby increasing the speed of research and development
.

In today's pharmaceutical industry, acquisition and license in have become a very common phenomenon
.
There is no right or wrong in the acquisition itself, but whether the acquirer has the willingness to continue to invest in innovation after acquiring the target
.

Valeant Pharmaceuticals is the opposite of growth through acquisitions
.
It was originally a US company but moved to Canada to reduce taxes
.
The company's core development method is to find a drug with monopoly potential, then buy it, and then make a profit by sharply increasing the price
.

Under the operation of Valante Pharmaceuticals, a drug for Wilson's disease, syprine, was originally priced at only $30 a month, but was finally fired for $21,000 a month
.
Such acquisitions that are not for research and development will only increase the burden on patients, which is obviously contrary to the development of the pharmaceutical industry
.

In the end, Valeant Pharmaceuticals, which made a fortune through monopoly, provoked public anger and was delisted in the scolding of the American people
.

Innovation is an attitude, not only the way of self-research is innovation, and acquisitions like Gilead that focus on R&D are also innovations
.
For investors, companies with strong R&D capabilities such as Regeneron are hard to come by, and companies that can turn mergers and acquisitions into innovative services like Gilead, are also worthy of cherishment
.

On April 20, 2022, Regeneron, which focuses on independent research and development, also began to make mergers and acquisitions, acquiring immunotherapy company Checkmate at a premium of 335%
.
Although this is only a small acquisition costing 250 million US dollars, it is enough to show that there may not be such a big generation gap between self-research and mergers and acquisitions
.

Gilead, which has frequent mergers and acquisitions, also has good R&D capabilities.
Regeneron, which focuses on self-research, does not exclude acquisitions to enhance its product pipeline lineup.
Innovation is a matter of different paths
.
Especially now that the global pharmaceutical industry has entered a bear market, but this is a risk and an opportunity.
As the valuation of pharmaceutical companies continues to fall, perhaps more mergers and acquisitions are about to surface
.