Axial — Millennium Pharmaceuticals
Tags: Venture Capital, Biotechnology, Investing, Healthcare, Medicine

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Millennium Pharmaceuticals is a case study on the business power of a platform in drug development. Founded in 1993 by Mark Levin (a legend), Eric Lander (a leader in genomics who named the company), Jeffrey Friedman (Rockefeller), Daniel Cohen (Genset, a genomics leader in Europe), and Raju Kucherlapati (Albert Einstein College of Medicine), the company was premised on bringing the power of genomics to medicine. Mark Levin was leading the life sciences investment practice at Mayfield where he formed and invested in companies like Tularik, Cyto Therapeutics, and Cell Genesys. Through this work with scientists and founders, he became aware about the emerging field of genomics, its role in human disease, and the projection that the human genome would be sequenced around the turn of the millennium. Mark started work in 1991 to get what would become Millennium off the ground: bringing the other founders on board, building the early team, and laying out the vision for the company.

Millennium was one of the leaders of the genomics revolution/bubble in the 1990s reaching a market capitalization of over $14B by 2000. With the leading genomics platform in an era where the human genome was being sequenced and the promise of using genetic information to make new medicines, Millennium had the market power to execute over 20 partnerships and generate $100Ms in revenue. A 2001 interview in the Technology Review of Mark Levin does a great job to frame Millennium’s position during the 1990s:

“Everybody was excited about the genome, but as you might imagine, people thought about it differently. Some formed diagnostic companies by identifying mistakes or [diversity] in genes. Some built companies by compiling genomic information and selling the databases that arose from the information. Others realized that there were going to be important technologies to develop and you could sell these tools and form alliances around them. Millennium was focused from day one on building the biopharmaceutical company for the future by developing personalized therapeutic products.”

After the genomics bubble burst in 2001 coinciding with the dotcom bubble, Millennium pivoted toward their internal pipeline. This was accelerated because their platform lowered the company’s cost-of-capital and enabled Millennium to acquire promising assets. This business model shift led to the approval of Velcade in 2003 as a first-line treatment for multiple myeloma. Ultimately, Takeda acquired Millennium in 2008 for $8.8B: this is the presentation from Takeda on their reasoning to acquire the company. Millennium is one of the iconic genomics companies of the 1990s and showed the power of a drug development platform.

Key findings

Millennium built a platform that consolidated genomics IP and talent. During this era, companies were working to beat public human sequencing efforts to patent genes. In this backdrop, the value of Millennium’s platform was to help their partners not infringe on others’ patents. This theme is similar for Adimab, Regenxbio among others whose platforms really solve legal problems for partners not only technical ones. This enabled Millennium to fund the scaling and development of their genomics platform through strategic alliances where they sold new genetic targets to large companies. The market opportunity for Millennium was pretty self-evident — any disease driven by genetics. There are around 30,000 human genes; however, when Millennium was founded, some estimates put that number at well over 100,000 genes. This number was the market opportunity for Millennium: a land grab for disease causing genes. The core logic of Millennium’s deal making capability was centered around a gift model: “find someone willing to give you large gifts of money with no strings attached: no stock, no repayment, no marketing/profit participation rights.” This gift model is powered by the idea that partnerships need to be based on a new biological hypothesis not just products.

Technology

Millennium’s platform was built around the work from the Human Genome Project (a 15 year project initiated by the NIH and DoE that was completed in 13 years) that had started off in 1990. The idea was that as the human genome was sequenced, Millennium would be able to discover new disease targets and develop drugs for them. Their platform was anchored around the motto: “right drug, for the right person, at the right time.” The dream of Millennium was that drug development and use would become personalized. A dream that took a few decades to get to now and one that Millennium played a pivotal role in making a reality.

Millennium’s technology relied on bioinformatics, genomics, and proteomics to discover and validate new drug targets. A large part of drug development before this era was driven by phenotypic information. The founders of Millennium recognized the increasingly powerful genomics toolkit emerging would allow them to combine genotypic information with phenotypes. The technical premise was that Millennium would be able to develop new medicines that treat the causes of disease rather than just the symptoms.

The sequencing efforts in humans made genetic research and target identification more valuable in drug development. This entirely new field of research was not within the purview of large incumbents, which enabled new entrants like Millennium to build valuable technology platforms. Millennium built a platform that consolidated genomics IP and talent. During this era, companies were working to beat public human sequencing efforts to patent genes. For businesses, the genomics era was a race to gather up as much genetic intellectual property as possible. At the time, a gene and the corresponding protein expressed could be patented but IP could also be captured for developing drugs to target the gene, cloning the gene to produce the protein, and using the gene to diagnose a patient. In this backdrop, the value of Millennium’s platform was to help their partners not infringe on others’ patents by building a platform to generate their own IP, which was narrowly licensed out to partners. This theme is similar for Adimab, Regenxbio among others whose platforms really solve legal problems for partners not only technical ones. This enabled Millennium to fund the scaling and development of their genomics platform through strategic alliances where they sold new genetic targets to large companies.

At the start of the genomics revolution, Millennium worked to build a scalable platform that would ultimately shorten the timespan from the discovery of a disease-causing mutation to a drug on the market:

Genomics — the most important part of Millennium’s technology was its database of human genes from internal efforts and collaborations that were ideally linked to a phenotype. The first patent the company filed was related to a new gene, Fomy030, that is overexpressed in non-metastatic tumor cells — https://patents.justia.com/patent/563316 Millennium would strike up collaborations with large medical centers to gain access to patient samples in order to identify genes correlated with certain diseases.

Proteomics — Millennium also used proteomics, mainly LC/MS, to identify and characterize the proteins that the genes they discovered encoded. They built custom microchips to study these proteins and how they interacted with other proteins and small molecules — https://pubmed.ncbi.nlm.nih.gov/10652507/ Overtime, the company was able to build out a tool to identify which genes were druggable.

Bioinformatics — the company built out one of the best software teams in drug development at the time. Millennium built out internal software to analyze their genomics, proteomics, and chemoinformatics datasets even licensing out their mass spec software, SpectrumMill, to Agilent. A major distinction between Millennium and other genomics companies of the era was that many were focused on large-scale sequencing of genes to build up databases that were classified according to biochemical features. On the other hand, Millennium and a few others were focused on sequencing genes involved in a disease’s phenotype. This technical point is a major reason why Millennium was able to strike up so many partnerships — they had gene targets for multiple diseases that could support individual deals for everything from oncology to CNS and cardiovascular.

High-throughput screening — after discovering and validating new genetic targets, Millennium later built out screening capabilities to discover their own drugs

Medicinal chemistry — after acquiring ChemGenics in 1997 in an all-stock deal, Millennium added lead optimization capabilities to their platform

By aggregating and commoditizing target discovery, Millennium built an invaluable genomics platform by 2000 that gave the company the capital and know-how to move downstream in the drug development value chain: an internal pipeline of medicines. In short, Millennium spent a ~decade collecting knowledge about new genes and proteins in disease and using that work to generate large amounts of non-dilutive capital. The latter allowed the company to begin developing their own medicines; work that ultimately led to Velcade for multiple myeloma. This is the inspiring story of Velcade — https://youtu.be/1M03etCu-OE

Market

The market opportunity for Millennium was pretty self-evident — any disease driven by genetics. There are around 30,000 human genes; however, when Millennium was founded, some estimates put that number at well over 100,000 genes. This number was the market opportunity for Millennium: a land grab for disease causing genes.

Millennium helped pioneer and lead the genomics era and used this emerging market to build out a unique business. This is a common motif in life sciences with machine learning and synthetic biology in similar phases right now.

In the 1980s and 1990s, most drug development companies would compete against each other on the power of their screening or medicinal chemistry. For a given target, it would not be uncommon for several me-too drugs to emerge quickly. Interestly, as target discovery has become commoditized, the drug development industry might be revisiting an era full of fast followers led by a EQRx, a company with deep connections to Mark Levin.

Whereas Millennium used genomics to gain the power to find their own drug targets. This allowed them to avoid the fierce competition that incumbents were in for existing targets and build a business to help these larger companies have new targets to point their engines toward. Not only had Millennium cornered target discovery but genomics talent: Mark Levin found inspiration from Genentech, where he was a process engineer in the mid-1980s, to build the largest genomics team just as much as Genentech built the largest molecular biology lab in the world. This market positioning provided Millennium with the capital to gain scale.

Business model

Millennium’s business model makes it one of the most unique life sciences companies ever. Relying on a new genomics platform and a large opportunity, the company was able to generate a large amount of non-dilutive capital to scale and ultimately acquire its own pipeline.

Deals

Since its founding, a key part of Millennium’s business was R&D deals with large life sciences companies. Most of Millennium’s peers also building genomics platforms executed blanket and exclusive agreements with one partner. However, Millennium was able to build a more scalable business model by striking up deals focused on specific diseases or classes of biology giving the company the ability to execute over 20 partnerships:

Deal with Roche in 1994 — Millennium received $70M in a five-year deal to develop new medicines for type 2 diabetes (T2D) and obesity. From this partnership, the company identified a gene related to T2D and invented a genetic screening tool for obesity drug candidates. Deal with Eli Lilly in 1995 (and 1997) — Millennium formed a $50M joint venture with Eli Lilly to discover new targets for atherosclerosis. Overtime, Millennium formed a subsidiary, Millennium BioTherapeutics (MBio), to identify new genetic targets and develop monoclonal antibodies (mAb) against cell surface targets. The parent company retained all rights for the use of non-mAbs against new targets discovered. In 1997, Eli Lilly provided half the funding, $70M, for MBio’s work (with a focus in oncology and cardiovascular) with the other half funded by Millennium using Lilly’s equity investment. Deal with Astra AB in 1995 — two months after the Eli Lilly deal in 1995, Millennium closed a $60M deal with Astra AB over five years to develop new targets for inflammatory disease with a focus on asthma. Deal with Bayer in 1997 — in October 1997, Millennium executed the largest drug discovery partnership ever done before with Bayer: a $465M deal where Millennium would deliver 255 new drug targets for oncology, cardiovascular, osteoporosis, pain, liver fibrosis, hematology, and viral infections. Bayer felt it was falling behind in the genomics revolution starting up, and Millennium had been scaling up MBio’s sequencing work (partly funded by Lilly) and was looking for a small molecule partner for the targets identified; Bayer was the perfect fit (pretty similar to the Recursion/Bayer deal this year). Deal with Monsanto in 1997 — Millennium also completed a $218M 5-year deal with Monsanto to use its genomics technology for crops and traits. Given that this deal was in agriculture, Millennium transferred its technology to a new Monsanto subsidiary, Cereon Genomics, that was set up next door to Millennium. Deal with Bristol-Myers Squibb in 1999 — through another subsidiary, Millennium Predictive Medicine (MPMx), the company executed a $32M 5-year deal with Bristol-Myers Squibb to develop new oncology diagnostic tests Deal with Becton Dickinson in 1999 — MPMx also did a similar deal, $70M over five years, with Becton Dickison for cancer diagnostics and what Millennium called Diagnomics: “gene-based diagnostic tests to determine a patient’s medical status and facilitate cost-effective treatment” Deal with Aventis in 2000 — Millennium executed a deal in Europe with Aventis. For $450M over five years, Millennium would discover new targets for inflammatory diseases such as rheumatoid arthritis, asthma, and some allergies. Aventis had been formed through a merger of Hoechst and Rhone-Poulenc in 1999, and the new company was set on revitalizing its pipeline and image. Similar to the Lilly deal in 1997, Millennium slowly did deals creeping downstream in the drug development value chain; this time sharing profits equally in the US from drugs discovered in the deal and getting a royalty on drugs sold outside the US. In order to fulfill their obligations for the deal, Millennium then acquired Cambridge Cancer Discovery for ~$53M mainly for the latter’s European chemistry team.

Through these deals, Millennium was able to generate $100Ms in revenue and before Velcade’s approval in 2003, the company earned over $1.2B from these partnerships. The key reason behind this success was Millennium’s insight to do deals exclusive for specific diseases.

Gift model

This business model was led by Mark Levin but one of the masterminds and key negotiator was Steve Holtzman, the chief business officer who was trained as a Rhodes Scholar studying philosophy. It’s important to understand the logic behind the deals Millennium completed over its lifespan. The team’s thinking around deal structuring evolved over time as Millennium executed more partnerships and its platform developed — the company seemed to slightly reinvent itself every 12 months or so. The core logic of Millennium’s deal making capability was centered around a gift model: “find someone willing to give you large gifts of money with no strings attached: no stock, no repayment, no marketing/profit participation rights.”

This gift model is powered by the idea that partnerships need to be based on a new biological hypothesis not just products. To create Millennium-like deals, one has to have a unique hypothesis given the era and the positioning of potential partners. For example, Millennium built a genomics platform when the field was getting started and a few years after founding, the company was able to get Bayer on board for a foundational deal driven by the incumbents’ fear that they were falling behind in the genomics revolution. The tricky part of the model is structuring deals where the platform company narrows down the exclusivity of the deals to retain as much IP that will be generated. Another example was Millennium focusing its MBio deal with Eli Lilly to antibodies, which enabled the company to execute a non-antibody deal with Bayer using the same technology.

I would recommend you read Steve Holtzman’s post that goes more in depth on Millennium’s deal making logic — http://leadershipandbiotechnology.blogspot.com/2018/08/early-stage-biotech-value-creation_15.html

Acquisitions

After ~10 years of building a leading genomics platform, Millennium moved to become vertically integrated by acquiring other companies and their assets. Their platform gave the company such a low cost-of-capital that acquiring others’ assets was the most logical step after the genomics bubble ended:

ChemGenics in 1997 — Millennium bought ChemGenics for $89M in stock to gain medicinal chemistry capabilities and gain access to the company’s anti-bacterial drug candidates Leukosite in 1999 — as Millennium made its pivot to an internal pipeline, the company bought Leukosite for $750M in stock. Millennium gained access to Campath, a mAb targeting CD52 that was approved for CLL whose rights were ultimately acquired by Genzyme. Leukosite also provided Millennium with Velcade, a chemotherapy that was approved for multiple myeloma in 2003. Ten years after its founding, Velcade became Millennium’s first wholly-owned approved product. Cambridge Discovery Chemistry in 2000 — Millennium then bought Cambridge Discovery Chemistry for ~$53M to bring on board their chemistry team and establish a presence in Europe COR Therapeutics in 2001 — Millennium bought COR Therapeutics for $2B in stock to gain access to the company’s cardiovascular pipeline and sales/marketing team. Millennium was able to acquire Integrilin, an approved intravenous antiplatelet medicine for patients with severe cardiovascular diseases whose rights were ultimately sold off to Schering-Plough in 2005.

As genomics became commoditized by the end of the 1990s, Millennium moved downstream and worked to build its own pipeline of medicines. With a high stock price and a lot of cash, the company was able to build off several transformative acquisitions. This pivot is a real lesson in the drug development industry: there are periods of time where new technologies or discoveries are highly valued but become less valuable with most of the value in the drug given to a patient.

Millennium built one of the most sophisticated business models in drug development history. Starting off as a genomics platform, the company generated large amounts of non-dilutive capital that was used to buy a pipeline that led to Velcade, which saved the lives of many multiple myeloma patients. Millennium is a case study on the importance of how you get to a successful drug is just as important as getting an approved medicine:

Coupling a company’s capitalization strategy with the platform and product development. Raising too much equity capital early-on can lower the price per share until clinical data is generated. Whereas, forming partnerships within the first few years of a company’s founding can lower the burden of dilution raising the share price steadily over time.

These strategies essentially figure out unique ways to finance breakthroughs — understanding the interplay between financing and scientific research.

Other levers are retaining exclusivity on the platform through narrowly focused deals as well as staging deals (i.e. the Lilly/Bayer example) to get better terms over time

Millennium spawned Third Rock (i.e. Mark Levin institutionalized), Infinity, and so many other companies that have transformed life sciences, saved countless lives, and inspired more people to work on scientific and medical translation. Millennium also inspired the business models of Foundation Medicine, MyoKardia as well as every Third Rock company. Millennium’s success could be tied together by the observation that it was a founder-driven company. In a 2001 interview in the Technology Review, Mark Levin was clear about his ambitions:

“Over the next five to 10 years, our goal is to become a company that’s leading the world in personalized medicines, a company that is leading the world in productivity, a company with a value of over $100 billion, a company that has five to 10 products on the market that are making a big difference in people’s lives, a company with the strongest pipeline in the entire industry.”

Mark Levin was extremely generous with his time when I was in college and helped sponsor events for our biotechnology club. When I first met him, he was wearing a really crazy shirt with nice shoes and had a desk stacked with research articles. Like most iconic companies, Millennium activated a new talent pool that is still transforming medicine.

Source: http://leadershipandbiotechnology.blogspot.com/2018/08/early-stage-biotech-value-creation_15.html

Source: http://leadershipandbiotechnology.blogspot.com/2018/08/early-stage-biotech-value-creation_15.html