16 years ago, a much younger me had the chance to work an...

16 years ago, a much younger me had the chance to work an internship at the largest French Big Pharma R&D business unit. A few learning points from that experience on the subject, if I may:

1) Big Pharma have a large list of candidate molecules in discovery phase at any point in time (50's if not 100's), but most won’t make it beyond discovery phase (not even pre-clinical research). Most of these molecules we will never hear about.

2) Big Pharma historically used to developing their own drugs, but a couple of things happened in the early-00’s that changed the nature of the game:

a. The market opportunity in traditional therapeutic areas was drying up. Increase international competition challenges from emerging countries, end of patents etc. Novel scientific fields (as well as protecting own IP) became the hot stuff.

b. BP’s trying to catch up with emerging fields. Field specialists and executives, if any were present in the company, tend to leave and work in small biotech for more exciting opportunities.

c. 2000’s a golden age for biotech companies, with > USD 1b valuations sprouting. Basically, biotech companies became the hot stuff following dotcom crash at the time.

d. Increasing risk due to increasing regulations (e.g. focus on ethics, difficulties proving added therapeutic benefits vs. adverse effect) and complexity of development reduced appetite for in-house development. Anecdote, the company I worked for had just experienced a massive failure with their lead anti-obesity drug, Acomplia (Rimonabant) [0].

3) This reinforced the M&A trend across all BP. BP leveraged their treasury as well as skills in marketing & regulatory to put drugs to market, while acquiring IP from biotech companies. Most acquisitions happening mid-stage (phase 1 or 2).

Back to RAC, here are some takeaways:

1) Assume some BP already has candidates in Zantrene's field, possibly even an FTO inhibitor.

2) If BP are developing a new candidate rather than screening existing molecules, chances are a better FTO inhibitor than Zantrene (CS1) will eventually be found.

3) There are no guarantee such candidate will proceed to clinical unless BP sees it is seen as a low hanging fruit (refer to the Keytruda vs Opdivo story). RAC’s weaknesses (little resources) could present an opportunity to them.

4) We will never hear about these candidates unless they are planning a clinical trial (at this point, their existence must be revealed to the public). This gives RAC a head start of maybe 1 year, maybe more.

5) The main risk is that BP could stun a small cap like RAC with an accelerated clinical program and more aggressive go-to-market strategy.

[0] https://www.drugs.com/acomplia.html