Europe’s Rise in Biotech Innovation

A lot has been written recently about Chinese biotech companies becoming the supplier of pipeline assets for biopharma companies and for newly founded US biotech companies.

Chinese licensing deals have been increasing and it is clear that any biotech or pharma needs to be acutely aware what is going on in China in terms of competitive intelligence. However, what does not get enough airtime is the gradual rise of European biotech companies. The acquisition of Dutch biotech Merus by Danish Genmab illustrates this trend. It’s a clear win for Utrecht in Holland given the R&D footprint of both companies in the town.

Genmab is a Copenhagen-headquartered, Danish/Dutch biotech company. It’s a company we had successfully invested into in the past when things were a lot more challenging for the company.

Indeed, the history of Genmab is a great illustration of how challenging and multifaceted drug development is. There are dark days when management teams have to make difficult decisions. For Genmab it was divesting manufacturing and cutting itself loose from Medarex, the US biotech that spun out Genmab.

Management needed to focus and rebuild its team while out-licensing one of its assets to Johnson & Johnson. This particular asset, a CD38 antibody, was in development for treatments for multiple myeloma (blood cancer) but was mostly off competitors’ and investors’ radar screens given the success of Celgene’s competing Revlimid.

Developing assets in multiple myeloma takes great clinical development expertise, something Johnson & Johnson added and, in the end, allowed for the phenomenal success of what is now called daratumumab – a US$13 billion per annum drug. At the time we researched multiple myeloma and the potential of a new mechanism of action therapy. We also reached out to Jan van de Winkel (co-founder and CEO since 2010) to understand his plan to rebuild this antibody company.

Genmab has been smart in entering partnerships and over time the structure of those partnerships has been changing, with Genmab retaining more commercial control. Recently, the company has evolved further and is thoughtfully building out its antibody moat with purchases such as Profound earlier this year and with Merus more recently.

Merus has been in our portfolio since its IPO in 2016 (at $10 a share). The attraction for us was the company’s multiclonic technology given next-generation antibodies were trending to be multi-targeted and Merus had an edge in how to make them. As is always the case, development took longer than expected. Merus’ first bispecific antibody was recently approved for NRG1 fusion-positive tumors. This is a small commercial opportunity.

It was the follow-on pipeline asset, petosemtamab, for head and neck cancer that really added value and allowed the company to raise a significant amount of capital. Under Genmab’s guidance, Merus should be able to exploit its technology further and further support the Dutch R&D base. This quarter the company’s share price was up over 70%.

There are a number of very interesting antibody technology companies in Europe. Scancell, a UK biotech the Fund is invested in, develops antibodies that target sugar moieties specific for cancer rather than the whole protein. In December last year Genmab exercised its option to license one of the antibodies the companies had been working on together.

Tubulis, a Munich-based biotech, is developing next-generation ADCs and recently raised US$300 million in new financing. This is a private company we are keeping an eye on. Tubulis has alliances and a clinical-stage pipeline.

In short, China may be the country that draws the biggest headlines, but Europe – and maybe one day Australia – should still be able to compete given capital, research strength and good management.