Generics model not sustainable with price erosion, consolidation: Glenmark's Kurt Stoeckli

Last October, Indian drug maker Glenmark Pharmaceuticals hired Dr. Kurt Stoeckli, a high-profile scientist at Sanofi’s global biopharmaceutical division.
Stoeckli led several discovery research projects for the French drug maker including close involvement in the development of dupilumab, a monoclonal antibody approved recently for the treatment of moderate-to-severe atopic dermatitis.
Stoeckli spoke to CNBC TV18’s Vikas Dandekar on the side lines of the annual meeting of the USAIC at Boston last month and shared his plans to power Glenmark’s R&D engine.
Q. How has it been to lead Glenmark’s research programs?
Stoeckli: I was approached to lead Glenmark’s research which was looking at transforming from a pure generics to a mixed generics play. I saw the pipeline and I realised that there is a huge potential but we needed to do it in the right way.
For Glenmark, the challenge is that we cannot mix generics with innovation too much and there are very different priorities and the way we manage issues. So Glenn, had to be sure that he had the right people on both sides. The way he was approaching and the way he has articulated his vision is very convincing.
He is a very visionary entrepreneur and we need to make sure that the teams in India, US and Switzerland can together make this journey. We have good people and now they are taking leadership and driving the portfolio for approvals in the next few years. Also we are looking to develop partnerships because some money has to come where we would like to de-risk the innovative side.
There is no innovation without risks but we also want to develop the products to such level where we can control the risks, we have distinct milestones and with partners we can eventually share the risks. We realise we cannot implement all the products and that’s going to be too much. Right now we have a very interesting mix of biologics and small molecules.
Also our focus on three major areas – oncology, respiratory and dermatology – is a very important aspect. We need to develop core expertise where we have domain knowledge that goes deep and is profound. We will develop end-to-end capabilities, meaning from discovery all the way up to manufacturing.
Q. What are the key advantages that can give an edge to Glenmark in its research ambitions?
Stoeckli: What is unique, is we have to realize that there is something in India that we need to learn on doing in the right way. The big advantage in my view is that companies in India like Glenmark explore the power and speed of translational medicines.
There are excellent medical centres in Mumbai, Bengaluru or Hyderabad or Delhi that have patients from where we can get a lot of material like blots or biopsies that can be tested early on for the discovery. That is something that is very complicated here where there is a lot of regulations that pose hurdles.
The advantage for Glenmark is that we are based in India and work to have a collaborative network with centres that can help in speeding up the discovery process and translational science. By doing this we de-risk the early portfolio because we have the data that is based on patient-derived material which is clinical as opposed to preclinical material like tests on a mouse or a rat.
For example, what you see in mouse in immunology is not translatable into clinical setting in humans. So this is one big advantage. I am basically also seeing that a lot of work on small molecule profiling or synthesizing work is done out of India. That has not happened in biologics yet but I feel there is a lot to come as the entire industry is shifting towards biologics and a lot of US FDA approved drugs are biologics.
So, my vision is to strengthen the collaborative network with select companies in India that have the capacity to really scale up our biologics plans. Strategically, this is very important but we need to establish the right quality mindset, culture and that comes with compliance or with regulatory standards in EU, US and the rest of the world. Only with that we will be able to produce biologics.
Q. The journey of Glenmark has been full of successes and some major setbacks. How do you want to move from there?
Stoeckli: As we clarified we want to go into the innovation side, but not everyone is on board. This is clearly for us to communicate much more into the future. We need to convince investor communities outside of India that now Glenmark is clearly focused on generics, but we are doing discovery in the best possible way with experienced people. We don’t really jump into a risky place and do it in a way that is professional.
We are staring with biologics production outside of India. Our most advanced antibodies will be produced outside of India. I cannot share with you the exact details on the contract partners, but the ultimate goal for us is to produce internally but right now we don’t have the capacity as it takes a while to build all this.
For the small molecules, everything is coming out of India or eventually will come from other countries where generics are also sold like in the US. Look at the story of Glenmark, between 2000 and now, it has been fantastic. I have not seen this before in any other companies. It is a good role model.
Q. What are your thoughts on the challenges for the generics industry?
Stoeckli: What I can say is that the generics model is not sustainable. At this level of price erosion and the challenges from the consolidation of the distribution channels what we will see is further consolidation and stuff like M&As. Then we will have a finite number of major players but that may not help much. It will just be a lot of hard work for a few pennies.
Q. When do you think will Glenmark be able to get its first compound out in the market?
Stoeckli: I don’t think we can cross the entire value chain with all our research products. What we have seen in biotech, is that typically companies have chosen a Phase I exit strategy. So, they have done a lot of drug discovery and then basically looked for partnerships to give away their assets. Glenmark has also done the same thing with companies like Forest Labs, Eli Lilly or Sanofi.
Generally Phase I exit strategies are now over and the reason is if you want to go ahead and really convince people that you have something in hand, you need to be able to tell partners how this is going to be done in Phase I and II. That’s why Glenmark had to change its research strategy.
We are today more convinced that we can do this again because we have fundamentally prioritized and streamlined our portfolio that are now based on an end-to-end planning after putting in quality and rigor in science that linked with the research centres and discovery and the clinical science mostly based in the US.
In the US, we have recruited outstanding people in clinical science from companies like BMS and Roche. There is a substantial addition of knowhow. Likewise, if you see in the last couple of months, we got IND files submitted that are active now. In October, my team based in Switzerland and in US have been able to file three compounds. One is going into Phase I, another one we will initiate Phase I very soon, so you see by the outcome, in the short period of time this company is going into the clinical programs.
We plan to communicate strategically at major conferences like ASCO and others on our vision for the projects. We are already seeing more partner interest coming back. The most critical point will be when we show for the first time that Glenmark has moved up to the clinical proof of concept. I fully understand that people do not trust everything. We can claim a lot, but we have to show that it can be done. This is our duty to demonstrate that we will tell you it will work. But when will it be is your question!
We believe we have the most advanced project in Phase IIA which is GBR830, for atopic dermatitis which is an OX40 antagonist in autoimmune diseases. This is the most advanced project for us. The next will be bispecific antibodies in the area of immune-oncology projects. There we have two drugs in Phase I which is also highly exciting and we feel like this is very competitive and potent from what we see. Now we are working very hard to move fast.
By 2019, we think will be the time when we are aiming at proof-of-concepts for some of these projects, may be for GBR 830 it could be earlier. At the moment we are looking at approval of biologics is around 2021. Its still a long way to go I admit but think of the robustness of a pipeline that has three clinical stage projects and there is another coming up which is a biosimilar of Xolair for a clinical study.
We have met the criteria for the biosimilar in the US. This is where we want to go fast. So we are in atopic dermatitis, respiratory with Xolair and in immune-oncology with bispecific antibodies. We are reasonably well set. This is a balanced portfolio and we have a bunch of small molecule driven projects which Glenmark can do in a good way as we know what we have there.  In my experience, even if we have the best people if we don’t prioritize, we cannot implement an innovation business.
Q: Glenmark invests roughly 11 percent of sales in R&D. Do you think that may go up as your pipeline matures?
Stoeckli: That is really a challenge. You must admit that clinical studies cost a lot. If there is any partnerships that we look at, it will have to be on top of this 11 percent or 12 percent. If that is not enough, we would have to further streamline that is to say Glenn has given a clear guidance that 11 percent to 12 percent is the upper limit.
We don’t want to put the generics business at risk as that is a stable business. Also, we need to count on the revenues from generics for the next 4-5 years and need to continue to invest there in the future. This is a balancing act that Glenn and his team has to manage.
Q: Where is your hint for new leads headed beyond what you have in the pipeline?
Stoeckli: Most of the stuff came from internal research on the innovation side. On the next, our number one priority is to make sure that the early development pipeline is implemented. A significant part of research has to support scientifically development projects. But we are also opening up on discovery by embarking on a few highly innovative projects that fulfils criteria of competitiveness.
That’s why I myself have taken the effort to do a deep dive into the quality of the earliest discovery portfolio which we don’t disclose but I can tell you that two things are important: a. we have recruited top notch people and b. we have gone through a priority decision. We have to make sure that our discovery biology has to be rapidly tested in the clinical settings and not in only preclinical animal models. Connecting early discovery with clinical and medical centres in India is important and I would like to be sure to start with high quality and to do that the risk is not that high. The de-risking comes from a very clear translational part of it.
The risk should come down to only technical feasibility. A lot of biotech in the last ten or fifteen years has jumped just on early signs and that may be just exciting but a significant risk. In terms of commercial or large-scale bio-manufacturing, we still have to do this by contract manufacturers. It may not be in India at present, but personally and this is not a Glenmark statement, if I go and talk to people in India for bio-manufacturing, in five years a lot of that will come from India.
Q: You said a lot of interest is coming from potential partners in India. Will Glenmark explore such opportunities where some of its compounds may be out-licensed?
Stoeckli: What we really want is, and this is different from the past, we don’t give it away without a control. We want to be partners and not really do an out-licensing deal in the classical definition. We want strategic partnership. This will mean we want to co-develop and co-commercialise, may be want to split into indications or we have arrangements on regional responsibilities.
Q: On immuno-oncology drugs, where do you think Glenmark is headed because between gene therapy and IO drugs there are mixed results and the science is evolving?

Stoeckli: Glenmark is looking at three bispecific antibodies that are useful in immuno-oncology. We may have to consider one or two to get into the partnering side. This may not go the same way as Roche did or like the way GSK did. We are realistic enough about what we can do on our own and sometimes if we do it in partnerships, it adds value to healthcare.
I can say gene or cell therapy are platforms that are still developing. Nobody can tell you what it is really going to lead into. In the area that we are currently in bispecific antibodies, we are amongst the leading platforms and we know how to develop or scale it up.
Cell therapy like CAR-T holds promise, however, it is a couple of years down the road. There are several unknowns like the logistics, the business model, the supply and there are lot of open questions to which nobody has a good answer. What has happened with MAbs many years ago, for the new technologies, they will also have to go through a couple of years to make it routine and robust.
I don’t see this as a mutually exclusive development and it may be just a little bit long term for gene or cell therapy. I want to say that we will begin to utilise our small molecule capabilities in India and combine small molecules with antibodies. If small molecules can be combined with antibodies, we can sensitise the tumour.
Basically, we have initiated a few oncology programs in Mumbai that are coordinated with our biologics scientists in Switzerland. This is a unique setting where we have competitive small molecule programs in India and we combine it with clinical stage biologics that we are running in Europe and US.
Q: When we talk of research, Glenmark is still small as compared to its larger peers in the global setting. Will this company be able to sustain issues such as financial challenges of research?
Stoeckli: I have worked in Big Pharma. I have handled people in several sites. Perhaps very typical of very large organizations is that we have a lot of committees and they are there to support decision making, but guess what is happening. At the end of the day, decision making gets slower and slower and becomes complex because everybody has something to say. Here it is different.
We talk to the leadership team and Glenn and we move. Today it is important that we move fast and this also means that we have to stop early where we must. My learning is that if we have a drug we know its effect early on very clearly. But if we don’t have this quality, we should stop. It is critically important to have early information from the clinical settings and this is what we are focusing on.
Q: What two points would you would want Glenmark to do and what not?

Stoeckli: We would want to demonstrate with one or two projects, the clinical proof-of-concept and end Phase III successfully in the next 3 to 4 years. What I don’t want Glenmark to do is to mix things that is management of generics and innovation.
There should be justification to be in generics and there should be appetite to be an innovator company. Our blueprint has said that by mid-twenties we expect a third of the revenues would come from innovation stream.
Q: Why did you not pursue a broad presence in biosimilars?
Stoeckli: That is because the reallocation of resources, the upfront investments for manufacturing of biosimilars would be too much and this would not fit in. That is the reason we are focused on the innovation side so that we can control the cost management but also we can come up with partnerships.
Q: With that in mind, will you look at separation of the research arm from the generics business?
Stoeckli: That is an interesting question. What we realized that internally we cannot mix up things too much whether or not it is favourable to come up with separate legal entities or business units for generics or innovative drugs. I could, speaking personally, imagine that a model like this can offer investors options. Because then the investor can choose to invest in a mixed portfolio, purely generics or purely innovative drugs but this is the discussion that Glenn or the board has to decide. Right now we are not in discussions for that.
Q: With escalating costs, will Glenmark shrink its pipeline research drugs further?
Stoeckli: We already decided to deprioritise or consider for out-licensing projects that are in the chronic pain area and chronic gastrointestinal disease.
We have stopped some projects. Our focus is on and that I have described to you before are GBR 830, GBR 310 which is a biosimilar respiratory and GBR1302 which is an oncology bispecific antibody in Phase I and there are a few other bispecific antibodies coming up.



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